THAT the lowest price the Trading Corporation of Pakistan, which is out to purchase half a million tonnes of wheat from the international market to partially plug the supply-demand gap, has been quoted at $515.49 a tonne (including cost and freight) confirms fears that wheat imports will burn a large hole in our widening trade deficit. Already, during the first 10 months of the current fiscal, the deficit has jumped by 65pc to $39.3bn, on the back of a 46.5pc increase in imports to $65.5bn from a year ago. The price offered to TCP is almost 45pc higher than the October 2021 rates. It is billed to spike further due to lower output in most wheat-growing regions, supply chain disruptions on account of the Russia-Ukraine war, and export restrictions imposed by major exporters like India. Even at current prices, Pakistan requires over $1.5bn to cover its supply shortfall. The TCP is reported to still not have made purchases. But how long can Pakistan delay imports? Even though the authorities have decided to buy 2m tonnes from Russia on a government-to-government basis, the plan faces many hitches due to the Western sanctions against Moscow, with the exclusion of that country from the global payment system being the biggest issue. So much for that plan for now.

The estimated supply gap for the current marketing year is 3m tonnes, owing to a lower targeted wheat harvest of 26.9m tonnes this season as against the annual demand of 30.8m tonnes. The shortfall is due to warmer than usual weather, water scarcity, and the high price of fertiliser that is in short supply. The situation is said to have been complicated by speculators who are likely to hoard their wheat stocks to rig profits when and if domestic shortages become pronounced. The unchecked flour smuggling into Afghanistan, because of the massive gap between local and international prices, means that imports may surpass earlier estimates, exacerbating the problems of a dollar-starved government. The looming wheat shortages had become visible as early as February, when the government confirmed that the area under wheat cultivation had dropped by 2.2pc from the previous year and existing stocks had declined. The government announced at that time that it would import 2m tonnes of grain from Russia to shore up strategic stocks in anticipation of a lower output. However, no time frame was defined and the country will have to pay a higher price for that.

Published in Dawn, May 30th, 2022