Amongst a plethora of problems resulting as an aftermath of Covid-19, food insecurity is the most concerning due to its potential to influence multiple aspects of our daily lives and international relations. This issue has been exacerbated as the world experiences unusual weather, affecting crop yields, disturbing global food supply chains and increasing food prices. A recent USDA (United States Department of Agriculture) report calls for concern for over 1.2 billion people in 76 countries with Pakistan among the list that will be impacted very seriously.
In Pakistan, food prices have experienced an exorbitant rise with food price inflation 31 per cent higher in July as compared to last year, while the price for non-perishable items rose by 9.45pc in July 2021 compared to June 2021. The recent Consumer Price Index (CPI) figures may show a fall from 9.7pc in June 2021 to 8.4pc in July 2021 however, once we consider the Wholesale Price Index (WPI), it increased from 16.6pc in April 2021 to 17.3pc in July 2021. Simple logic tells us that it is only a matter of time until this will be passed on to the consumers therefore, CPI may rise again.
Housing societies capture fertile patches creating a paucity of land directly impacting food production and subsequently prices
Also, according to the Food and Agriculture Organisation, sugar prices increased another 1.7pc in July, rising for four consecutive months. Although food prices registered a minor decrease in July, it still remains significantly higher than last year. This situation has been worsened by Covid-19 that dragged an additional 291m people towards food insecurity, increasing the number of food-insecure people by a third.
Similarly, the Agricultural Commodity Price Index touched its highest in July 2021 since 2013 with prices of wheat, maize and rice rising 12pc, 43pc and 10pc from January 2020 levels. Surveys by World Bank show people reducing down their consumption or facing a dearth of food in 48 countries.
Pakistan recently decided to import more sugar and wheat both at record high prices, 106 per kg and 61 per kg respectively, in order to meet the recent shortage. According to an estimate, Pakistan imported $708m worth of pulses in 2020-21 compared to $608m last year. Due to higher commodity prices on an international level, the overall import bill for food also registered a rise as both palm and soybean oil increased to $2.7 billion — amounting to one-third of the total food import bill. The same import stood at $1.899 billion in 2019-20.
With the global economy arrested in an inflationary spiral and with South Korea becoming the first country to increase interest rates, we can expect further interest rate hikes across the board. Container rates are on the rise too, global business inventories are low, and this bolsters the case for continued inflation. Under such circumstances, Pakistan, part of this globally integrated economy, can also face headwinds with these inflationary pressures spilling over to perishables. However, there are some other domestic issues as well that needs attention.
Member District Council and a seasoned Progressive farmer, Aamer Hayat Bandhara, said that “the biggest issue in Pakistan is the lack of data collection in real-time regarding production, requirement and its impact. The recent hike in wheat rate is because of the price hike in international markets but we should also acknowledge the structural impact of climate change due to which yields are decreasing while production costs (and challenges) are increasing.”
He further added that “the element of hoarding exacerbates the situation where there are individuals that invest in the whole value chain and can manipulate prices at every stage.”
Rising food prices, amongst other consequences, can significantly deplete any party’s political capital. With general inflation also on the rise, this increase in perishable items can be a serious challenge for the current government to overcome. While there are some frameworks and mechanisms that may be implemented, the political economy of these initiatives makes it difficult to act upon.
Published in Dawn, The Business and Finance Weekly, September 20th, 2021