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Agriculture: Food trade deficit rising again

Updated January 07, 2019

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Pakistan’s food trade deficit shrank to $1.4 billion in the last fiscal year from $2.43bn a year ago. ─ File photo
Pakistan’s food trade deficit shrank to $1.4 billion in the last fiscal year from $2.43bn a year ago. ─ File photo

Pakistan’s food trade deficit shrank to $1.4 billion in the last fiscal year from $2.43bn a year ago. But a reversal of the trend is clearly in sight during the current fiscal year.

In the first five months of 2018-19, the food trade deficit stands at $954 million. If no major initiatives are taken to boost food exports and contain imports, the full-year deficit may again end up close to $2bn. Even exports of 0.5m tonnes of wheat and wheat products, as suggested by the Ministry of National Food Security and Research, cannot enhance food export earnings to a level to avert this possibility.

In the past, we have seen the food trade deficit growing even in the midst of record wheat and sugar exports.

Import volumes of pulses in July-November went up about 65pc, which shows little attention is being paid to minor crops

A delay in the acceptance of some demands of the millers for sugar exports, availability of a smaller surplus of non-basmati rice and an extended ban on deep-sea fishing during this fiscal year, which reduced fish hauling in the first quarter, have diluted the gains in food exports.

As a result, our food export earnings totalled just $1.51bn in five months to November, up only 1.27pc from the year-ago earnings of $1.49bn, according to the Pakistan Bureau of Statistics (PBS).

Against this, food imports totalled $2.47bn, down 9.28pc mainly due to the imposition of higher tariffs from $2.72bn in the year-ago period, leaving a gap of $954m.

If sugar exports had begun earlier, production of non-basmati rice varieties in Sindh had not been affected by water scarcity and the authorities had resolved a controversy over the ban on deep-sea fishing on time, total food exports could have been higher.

These factors have actually belittled some gains in food exports so far this fiscal year, like larger basmati shipments and an increase in export earnings of fruits and vegetables.

The main problem with Pakistan’s food exports is that their growth rate is inconsistent. There are many reasons for it, but one of them relates to politics. In the absence of a peaceful political atmosphere, agriculture and food trade suffer a lot.

Take the example of sugar. Towards the end of the PML-N government, the traditional tiff between sugar cane growers and sugar mills acquired a new dimension and continued even after the installation of the new PTI government.

A proactive judiciary also entered the scene — and for quite right reasons. But the end result is that the millers’ stubborn attitude across Pakistan and too much politicising of the sugar mills’ affairs in Sindh led to delayed cane crushing. Then the millers’ demand that they should be allowed to export sugar regardless of whether they had previously defaulted on bank loans led to an impasse.

The PTI government at the centre was not in a mood to accept it. But finally it had to, and sugar exports began picking up pace quite late. As a result, sugar export earnings suffered.

Export earnings of non-basmati rice in five months of this fiscal year fell chiefly owing to fewer shipments. In most rice-growing areas of Sindh and in some areas of Punjab, paddy cultivation suffered in the previous year, reducing the exportable surplus. That Sindh continues to suffer from an acute water shortage this year too and rice growers say the output here can decline as much as 30 per cent mean that there is little scope for boosting non-basmati rice in coming months.

Seafood export volumes have declined in July-November mainly because of a controversial ban on deep-sea fishing on the issue of seaworthiness of fishing trawlers.

Government officials say that the issue has been resolved and hope that seafood exports will pick up now. But no one can say if overall seafood exports in the current year will surpass that of the last year.

Traditionally, we see a food trade deficit every year, thanks to unsustainable growth in exports and rising imports of food items, including palm and soybean oils, pulses, dry milk and tea — and a large number of finished food products ranging from formula milk and power diet to expensive brands of coffee, honey, confectionary products and whatnot.

At a time when the overall foreign trade deficit remains a big headache for foreign exchange–starved Pakistan, we can hardly afford such a large food trade deficit. Clearly, there is a need to slash it. But that is not possible if the federal and provincial authorities and the private sector involved in agriculture and agro-based food exports sit together with a single-point agenda of boosting agricultural productivity and promoting food exports.

On the import side, further revision in non-essential food items can also be considered keeping in view that the tariff hikes made so far have started making a dent in imports.

In addition, import substitution efforts must also be accelerated. Higher local output of oilseed crops has already started reducing its imports. The provincial governments of Punjab and Khyber Pakhtunkhwa have been working on olive plantation for several years. There is a need to expedite those projects along with continuing regular oilseed crops. The production of dried milk can be boosted with a little effort.

The cultivation of pulses on the fringes of major crop farm fields should be promoted to meet growing domestic needs and save foreign exchange. In the first five months of this fiscal year, import volumes of pulses have gone up by about 65pc, which shows how little attention is being paid to minor crops in general and pulses in particular.

Pakistan and China will soon finalise details of a plan on how Chinese public- and private-sector companies will help us enhance our agricultural output and food exports under the China-Pakistan Economic Corridor (CPEC).

Some other countries, including the United States, Germany and Japan, are already working closely with our provincial governments and helping us improve agricultural output. There is a need to integrate all these efforts, take all stakeholders on board and launch a big three-pronged strategy, officials and people associated with the food industry say.

Such a strategy should aim at improving per-hectare yields of food crops and promoting import substitutions with greater financial and knowledge investment, discouraging imports of finished food imports and encouraging more high-end, value-added food products.

Published in Dawn, The Business and Finance Weekly, January 7th, 2019