RAWALPINDI, May 6: The Asian Development Bank has said the impact of soaring food prices will be severe in Pakistan and a 10 per cent increase in prices will add another 7.05 million to the number of poor people.

And in the event of food prices increasing by 20 and 30 per cent, the increase in the number of poor people would be 14.67 million and 21.96 million, respectively, said an ADB report entitled ‘Soaring food prices: response to the crisis”.

Categorising Pakistan as a low-income country, it said the increase in food prices had aggravated income inequality and about half the expenditure of the average Pakistani was on food.

The impact on inequality had become much sharper because of the 18.3 per cent rise in food prices during the first quarter of 2008, it said.

The report estimated that if food prices went up by 10 per cent, the average standard of living of different income groups would decline by 4.84 per cent.

It said fertiliser prices had shot up over the past 18 months, although the prices of wheat and rice had not risen proportionately to their rise in international markets.

Unless distortions were corrected and divergence between economic and financial returns was narrowed, farmers would continue to operate in a sub-optimal manner and the country would not be able to get full benefits from investments in the sector, it warned.