Food costs

20 Aug 2020

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The writer is a senior fellow at The Atlantic Council and host of the podcast Pakistonomy.
The writer is a senior fellow at The Atlantic Council and host of the podcast Pakistonomy.

IN his first speech to the nation as prime minister, Imran Khan offered a vision of inclusion and progress for those at the bottom of the pyramid. He drew attention to a silent crisis hollowing out the country’s future generations, highlighting that Pakistan was among the top five countries when it came to stunting and malnutrition. While his government has taken bold steps to provide a wider social security net under the Ehsaas programme, inflation has exacerbated the food security crisis facing millions of households.

According to Pakistan Bureau of Statistics (PBS) data, prices of essential food items have skyrocketed since the PTI came to power. From August 2018 to June 2020, the price of chicken rose by 54 per cent, sugar by 46pc, vegetable ghee by 37pc, wheat flour by 27pc, drugs and medicines by 16pc, rice by 14pc, and fresh milk by 12pc.

PBS data also shows that the average monthly purchasing power of households has either declined or remained flat between 2016 and 2019. The poorest urban households — those in the first quintile — earned Rs24,365 a month on average in 2019, while the richest households — those in the fifth quintile — earned Rs75,194. Urban households between the first and fourth quintiles have seen their purchasing power remain flat from 2016 to 2019; households in the fifth quintile have seen their purchasing power erode by 5pc.

The rural economy paints an even more depressing picture. The poorest rural households earned Rs22,819 on average in 2019, while the richest earned Rs56,244. All households except those in the second quintile (income of Rs29,743 per month) have seen a decline in their purchasing power, with the fifth quintile witnessing a decline of almost 11pc in their purchasing power. Households in the second quintile are the only households whose purchasing power has increased during this period.

The government must go beyond announcing special packages.

Containing food inflation is especially important because 50pc of a household’s food expenditure goes towards purchasing wheat, milk, vegetable ghee, vegetables, and sugar.

Both rural and urban households are under duress, with skyrocketing food inflation eating into their incomes, eroding their ability to put food on the table, and pushing millions below the poverty line. The crisis is especially dire for poorer households, both in the urban and rural economy, as they have higher average household sizes and lower incomes. The average household size in the first quintile hovers around eight in Pakistan, while those in the fifth quintile average 4.72 members.

From a near-term policy perspective, the government needs to do more with the Ehsaas programme and increase the monthly payments paid under it. This is essential to ensure that millions of poor households have the cash they need to continue feeding their families. Secondly, the government needs to be more proactive in terms of stopping hoarding and smuggling of essential food items, including wheat flour, which is frequently smuggled to Afghanistan.

But these near-term fixes alone will not solve the issue. Pakistan’s agricultural yields have lagged its peer economies for years. The country’s agriculture sector, which employs nearly 40pc of the workforce, has stagnated, with growth declining to 0.6pc in 2019; the sector grew by 4.4pc per year during the 1990s. This growth is not only essential for solving the food inflation challenges, but also for growing the rural economy and boosting incomes. Without a vibrant and robust agricultural sector, Pakistan’s economy cannot grow sustainably because the sector is the largest employer of labour in the country.

To reform agriculture, the government must go beyond announcing special packages, such as the Rs277 billion under the Prime Minister Agriculture Emer­gency Programme. Efforts must be made to educate farmers about proper use of fertilisers, new seed technologies, water management, etc. These programmes must be developed with an eye towards the climate change crisis confronting the country.

Additionally, efforts must be made to strengthen property rights enforcement in rural areas and break the monopoly of power held by influential landlords. Without this, investors looking to modernise the agriculture sector will shy away from the rural economy. Finally, the government must eliminate wasteful subsidies — these can be redirected to Ehsaas — push for deregulation of the sugar and wheat markets, and attract private-sector investment to build a modern and efficient food supply chain.

In an interview, Asad Umar accepted that the government’s inability to control food inflation was a shortcoming. One hopes that both he and the prime minister recognise the seriousness of this issue and take immediate steps to ensure that Pakistani households of all incomes can afford a decent meal for themselves and their families.

The writer is a senior fellow at The Atlantic Council and host of the podcast Pakistonomy.

Twitter: @uzairyounus

Published in Dawn, August 20th, 2020