WHEN the lockdown across the country had yet not turned “smart” in April, Pakistan’s food import bill increased to $519 million, up 27.5 per cent from $407m in March, data released by the Pakistan Bureau of Statistics (PBS) shows.
Import volumes of sugar, soybean oil, milk, milk cream and milk food for kids, pulses, spices, dry fruits and tea went up as federal and provincial governments and NGOs started delivering rations to deserving people. Larger import volumes can also be partly attributed to an anticipated pre-Ramazan spike in demand. Even in March when lockdowns began, the country’s food import bill had recorded a 3.6pc year-on-year increase. The cumulative food import bill for the first 10 months of this fiscal year, however, slipped 4.7pc year-on-year to $4.48 billion in line with a general declining trend in overall imports. Pakistan’s total imports fell 16.24pc to $38bn in the ten months from about $45.4bn a year ago.
At a time when the country is determined to let the falling trend in imports continue amidst declining exports and stalled growth in remittances, it is important to examine whether it can cut the food import bill. But the composition of food imports is such and the prospects of domestic agriculture so unpromising that it seems too difficult to slash spending on agricultural and food imports.
Instead of trying to contain food imports, the government should direct part of the economic stimulus package towards food import substitution
Every year, Pakistan imports about 3m tonnes of palm oil. International palm oil prices are down 28pc from October last year. The country also imports less than 100,000 tonnes of soybean oil whose average price is down 23pc from December 2019. But the prices of both palm and soybean oils are expected to rise owing to the lower production in Indonesia and Malaysia amidst strict lockdowns. In fact, palm oil futures have already started inching up.
Pakistan also spends hundreds of millions of dollars every year on imports of pulses, tea and spices and the prices of all these items are showing a rising trend in the global market.
The local consumption of the food industry’s imported raw materials like palm oil and soybean or consumer food items like milk, tea, pulses and spices cannot be expected to slip even amidst the ongoing economic recession. The reason is edible oil, ghee and others are essential food items and a fall in income levels has little impact on their demand. Besides, federal and provincial governments continue to expand the scope of social safety nets by offering free rations. NGOs, too, are doing this.
What is apparently more advisable is that instead of trying to contain food imports as part of a broader policy of reducing the overall import bill, the government should direct part of the economic stimulus package towards food import substitution. Farmers have already rejected the Rs50bn incentive package, terming it too meagre. There is obviously a case for increasing the size of this package through local resources and with the financial help of global institutions like the World Bank. But in so doing, food import substitution must be paid extra attention even though the efforts made in this direction will not pay dividends in the near future.
The global economy is already undergoing some shifts amidst Covid-19 and in the post-pandemic world, food security and international food trade will acquire new dimensions. Countries with strong agriculture will naturally like to redirect food trade, augment food storages and make food processing more yielding and less costly.
The problem with our export sector is that the value-added exports base is too shallow, diversification is scant and the brand power is too weak
We also will have to do these things. And, given the fact that we have the fifth largest population of the world growing at a high rate of about 2pc, ensuring food security will not be an easy thing. Minimising imports of consumer food items and promoting their local production seem a viable solution.
No country can acquire all the resources to produce all food items consumed by its people. But wiser countries make big efforts to maintain a surplus in foreign food trade. That is what Pakistan must aim for. If the country cannot start producing tea, it can enhance production of dry fruits and honey to make up for the foreign exchange spent on tea imports. Similarly, it can accelerate efforts to increase average yields of pulses to reduce their imports. It can also increase value-added food exports like edible oil and ghee as well as food items made with sugar, milk and flour to earn additional foreign exchange.
The government’s agricultural package does not cover dairy and livestock, meat processing and fisheries. This has disappointed people associated with these sub-sectors of agriculture and their contribution to overall agricultural growth may now fall below potential. Besides, this would upset any efforts made for achieving a food trade surplus.
Pakistan’s food trade balance remained negative by $747bn in the first 10 months 2019-20 as exports totalled $3.735bn against the imports of $4.48bn. Every year, the country experiences a food trade deficit of $1bn or more. This must come to a stop now. Agricultural and food policies should aim at not only ensuring food security, but also achieving a food trade balance through import substitution and value-added food exports.
Containing imports via higher trade tariffs is not practical. Commerce Adviser Abdul Razak Dawood has admitted that Pakistan’s import tariffs are way higher than the regional and international averages. The only way out is import substitution and an increase in exports. Pakistan’s merchandise exports in April nosedived owing to the disruption in international trade and lockdowns across the country. But even before that, exports were not growing. The problem with our export sector is that the value-added exports base is too shallow, diversification is scant and the brand power is too weak. This also applies to food exports.
Published in Dawn, The Business and Finance Weekly, May 25th , 2020