Appetite for food imports grows

March 12, 2018

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Source: Pakistan Bureau of Statistics
Source: Pakistan Bureau of Statistics

PAKISTAN’S food imports have been growing fast with an increase in economic growth rate and a consequent rise in consumer spending.

The country imports basic raw materials for food industries like palm and soya bean oil and consumer items like tea, powdered milk and pulses. Moreover, we now also import beef, mutton, chicken, eggs, butter cheese, curd, coffee, biscuits, chocolates, pickles, juices, jams, soft drinks, flavoured water, spices, dry fruit, nuts, honey — and even fish.

All this is coming at a price though. Our food imports have long beaten exports. Pakistan posted a small food trade surplus in 2012-13 and 2013-14 fiscal years, but food imports have continued to surge since from 2014-15.

In addition to the above-mentioned items, Pakistanis consumed imported vegetables and fruits worth hundreds of millions of dollars during the first half of the current fiscal year.

Imports of hundreds of finished and semi-finished food items surged to $3.1bn in the previous fiscal year from $1.9bn in 2012-13

The veggies and fruits imported during the period included: potatoes, tomatoes, onions, shallots, garlic, leeks, cabbage, cauliflower, kohlrabi, kale, lettuce, chicory, carrots, turnips, cucumbers, gherkins, coconuts, bananas, avocados, dates, figs, pineapples, grapes, apples, pears, apricots, cherries, peaches, plumes and citrus fruits.

With an increase in incoming levels on the back of higher GDP growth in recent years, demand for both agro-based products used in our food industries and finished food products has gone up.

Besides, as markets are becoming freer, governments cannot effectively control imports of a certain range of products. The imposition of higher import duties on hundreds of import items a few months ago have so far not yielded any positive result and our import bill keeps growing.

However, a two-pronged strategy can perhaps be more effective in dealing with the problem of an unsustainable growth in food imports. “Whereas one part of the strategy should focus on containing imports through tariff hikes, the other part should promote import substitution,” says a senior official of the Ministry of National Food Security and Research.

“In addition, we also must examine why output of our smaller food crops (oilseeds, pulses, vegetables, etc) remains insufficient to meet domestic demand,” he says.

While examining the sources of food imports, it is important to understand that these are sub-divided into two major groups: food and live animals, and animal and vegetable oils and fats.

Palm oil, soya bean oil and other oils used as raw materials of cooking oil, ghee, animal feed and fertiliser industries fall in the second group and all other food imports including crop seeds fall in the first.

So, when the import bill of animal and vegetable oils and fats increases, there is not much reason for concern as finished food products are not included in this group and their imports lead to higher output of our major industries.

“We must, however, keep an eye on unusual growth in the food and live animal group (of food imports) because that is where lots of finished food products, besides pulses and vegetables, are accounted for,” explains a senior official of the Trade Development Authority of Pakistan.

In the 2012-13 fiscal year, Pakistan spent about $1.9 billion on imports of hundreds of those finished and semi-finished food items that fall in the category of food and live animals group. In 2016-17, the import bill of this group gradually soared close to $3.1bn. On the other hand, imports of animal and vegetable oils and fats — which had consumed a little less than $2.1bn in 2012-13 — remained almost unchanged in 2016-17.

However, based on the dissected data of the first quarter of this fiscal year, officials hope that the full-year import bill of the first category in which all consumer food items fall will remain close to last year’s level.

Separate sets of the two groups of food imports data are compiled with a six-monthly lag which means that the full-year data would not be available before December. In the first quarter (July-September), imports of all finished food products (in addition to live animals that form a tiny percentage of the total) consumed around $724 million, whereas imports of animal and vegetable oils and fats cost Pakistan about $610m.

One basic thing in managing imports of finished food items is ensuring higher growth rate of our food crops but that is where we are not getting enough success. Over the years, crops output have grown but not fast and strong enough to match growing needs of local supplies without disturbing export revenue growth.

Similarly, little development of value-chains and distorted pricing mechanism make it difficult for domestic food industries to produce tailor-made quality products at home — products that can cater to fast-changing tastes of consumers.

If our meat and poultry processing industries remain wanting on various counts, hotels and high-end restaurants and branded chains of food outlets would continue to import beef and poultry to satisfy the tastes of their customers.

Moreover, if progress on hydroponic cultivation of vegetables remains frustratingly slow as it is now, we will continue to spend hundreds of millions of dollars each year on importing even veggies.

Published in Dawn, The Business and Finance Weekly, March 12th, 2018