New challenges in food security, agriculture

Updated March 23, 2020

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The recent cut in the benchmark interest rate can hardly do any good to the farm sector. — APP/File
The recent cut in the benchmark interest rate can hardly do any good to the farm sector. — APP/File

Agriculture plays a motherly role in the economy. It feeds people. Policymakers need to protect this role of agriculture aggressively as feeding people looks like a challenge amidst the spread of the coronavirus — Covid-19.

Sadly, the State Bank of Pakistan (SBP) apparently overlooked this need when it announced its monetary policy for two months on March 17.

The central bank cut its policy rate by 75 basis points to 12.50 per cent. It did not offer any special incentive package for food and agriculture, although it did for health and medical centres to combat the spread of coronavirus.

Now all eyes are set on the federal government. They must come up with targeted input incentives, tailor-made schemes to boost farm production and a specific package for enhancing food exports at a time when a global recession is looming.

Creating fiscal room for this purpose has become difficult after a smaller-than-expected rate cut that may still keep the government’s domestic debt servicing cost high. But by not passing on the full benefit of a steep decline in international oil prices to consumers, the government has already opened an avenue to ensure some increase in its revenue. But that will work only if authorities succeed in containing the spread of the deadly virus and the consequent flattening of economic growth.

The recent cut in the benchmark interest rate can hardly do any good to the farm sector

The central bank has lowered its economic growth projection for this fiscal year from 3.5pc to 3pc. In the last fiscal year, the PTI government claimed 3.3pc growth but that remains widely disputed to date.

The impact of the coronavirus on our food and agriculture can be telling. Supplies of fresh vegetables and fruits from farms to big city markets have already started falling. Scarcity has hit many places in Karachi and prices have skyrocketed. Grocery shops and medical stories have not been closed amidst a general 15-day closure of other markets and shopping malls in Karachi. In various localities, complaints about the unavailability of rice, wheat flour, cooking oil and sugar have started pouring in.

Hoarders and profiteers are active, ignoring warnings of “stern action of the state” in Prime Minister Imran Khan’s televised address to the nation. Many well-to-do panicked people are also overstocking groceries.

Our food trade via land routes with Afghanistan, Iran, China and India remain partly or completely closed as of March 18. The inter-provincial movement of trucks loaded with grains and groceries is also coming to a gradual halt in case of Sindh and Balochistan. Depending upon the rate of the spread of coronavirus, the entire country may experience this situation with varying degrees of intensity.

The recent cut in the central bank’s policy rate can hardly do any good to the agriculture sector. It is too little and the agriculture sector’s challenges are unprecedentedly enormous and complex. The challenge is not just to lower the cost of borrowing for farmers and thus help them grow more food for us. The challenge is to ensure food security amidst supply chain disruptions.

The challenge is to ensure the availability of rural workforce, uninterrupted supply of inputs from factories to farms, smooth transportation of farm produce to markets, enough storage of food at provincial and district levels and its orderly release for consumption while keeping hoarders, profiteers and panic-stricken people at arm’s length. By the time this write-up is published, the government may have come up with a food security plan as promised on March 15 by the prime minister’s special assistant on national health, Dr Zafar Mirza.

Provincial departments dealing with agriculture had not chalked out their own food security plans until March 17. One can only hope that they do this immediately. Failure on this count may create a big chaos. Only time will tell how harmoniously federal and provincial governments can work and how efficiently our National Disaster Management Authority (NDMA) lends its support to respond to food security challenges in coming days and weeks.

Wheat harvesting is due to start at some places and is expected to pick up pace in April-May. People from rural areas who work on daily wages in adjoining towns and cities usually return to their villages at the time of crop harvesting. It will be a challenge for provincial authorities to properly screen the labour returning from Karachi to rural areas.

Apart from the challenges posed to agricultural supply chains due to the outbreak of the coronavirus, agricultural growth remains a broader concern. It was a big concern even before the arrival of the virus — and has now become even bigger. The massive devaluation of 31.7pc in the last fiscal year coupled with high running inflation during this year is still having a lagged impact on agricultural growth.

To make matters worse, the rupee that had remained stable in the first eight months of this fiscal year has started faltering once again. But thanks to depressed international commodities markets, the rupee’s weakness this time — if it remains within limits — can be somewhat offset in the food imports bill due to depressed international commodities’ prices.

The scarcity of water, poor access to bank finance and unbearably high interest rates also have hit farmers. More recently, man-made sugar and wheat crises brought sugar and wheat barons overnight riches while making consumers suffer.

It will be a real test of the federal and provincial governments to rein in those powerful sugar and wheat mafias that resorted to large-scale hoarding in the recent past and now have more room for their dirty play amidst the coronavirus panic.

Making food security–related data available online and promoting online sale and purchase could be helpful. ---MA

Published in Dawn, The Business and Finance Weekly, March 23rd, 2020