Food inflation

Published August 30, 2022

TORRENTIAL rains, which have triggered unprecedented flooding in most parts of the country, are also causing food price inflation to swell further, exacerbating fears of food insecurity. The weekly PBS data shows that the prices of perishable food items — especially vegetables such as tomatoes and onions — have driven up SPI inflation by a record 45pc during the week ending Aug 25. SPI inflation monitors changes in the prices of 51 essential food and non-food items that are mostly consumed by low- to middle-income households in the country. This jump in weekly inflation comes in the wake of an approximately 25pc increase, also pushed by surging food prices, in July’s headline CPI inflation, amid projections that the monthly prices would spiral by at least 30pc in the coming months. With the deluge ravaging the length and breadth of the country, the upsurge in food prices was not unexpected given the disruptions in supply chain due to the floods and extensive damage to roads in the two southern provinces. But this is just the beginning.

The impact of crop and livestock losses — which are feared to lead to widespread shortages of staples, vegetables, milk and meat — on food prices will be felt after a lag of a few weeks as the current spike in inflation owes largely to raised power and fuel rates. Before the floods had hit the economy, the pace of price increase was expected to become more moderate over the next couple of months. Not anymore. The new inflationary pressures will now keep piling up over the near term on crop and livestock, compounding the sufferings of the common people who have been trying to cope with the consistently rising cost of living for the last three years. The new economic woes, resulting from the massive floods at a time when the nation is struggling to navigate its way out of a liquidity crisis of unprecedented proportions and in the midst of elevated global commodity prices, demand that immediate measures be taken to mitigate the effects inflation. One way of improving the supply of essential food items to ease pressure on prices would be to reopen trade with India to allow the import of vegetables and staples through surface routes. That may not tackle the problem completely, but it will provide some relief to inflation-stricken households and allow the authorities to focus on rehabilitating the millions who have been affected by the deluge.

Published in Dawn, August 30th, 2022

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