Huzaima Bukhari, Dr. Ikramul Haq & Abdul Rauf Shakoori
Agrarian economy of Pakistan employs a large workforce and considered vital from a social, livelihood and foreign exchange perspective. Agriculture’s share in total GDP in the fiscal year (FY) 2021-22, according to Pakistan Economic Survey (2021-22), was 22.7%. It provided employment to around 37.4% of the labour force, which increased from 65.5 million in FY 2017-18 to 71.76 million in FY2020-21 and the number of employed persons increased from 61.71 million to 67.25 million during the same period.
Our climatic conditions facilitate the production of a wide-ranging variety of crops, fruits, and vegetables. However, the growing population and using agricultural lands for other purposes (mainly housing societies) is reducing local produce that is insufficient to meet people’s increasing demand therefore, the federal government is forced to import agricultural products to avoid a food crisis. Administrative shortcomings coupled with challenges related to cultivable areas have fostered a supply chain crisis rapidly raising the prices of commodities.
This gap between demand and supply further increased due to catastrophic floods in Pakistan in August 2022 that not only adversely affected the country’s infrastructure but also destroyed crops including wheat, sugarcane, and vegetables causing the risk of food shortage in the country. People who are already struggling to meet basic needs due to the government’s aggressive economic policies are now confronted with inflation that in recent months, has reached historic high levels constricting the common citizen’s income to an unbearable extent.
Essential items are getting beyond the reach of the people who are finding difficulties in maintaining sustainable levels. The Sensitive Price Indicator (SPI) prepared by the Pakistan Bureau of Statistics (PBS), on weekly basis, measures price fluctuations of essential commodities in the country. SPI’s basket carries 51 essential items collecting data from 50 markets across 17 cities. The recent SPI publication provides some worrisome details and depicts a year-on-year increase of 31.75%; onions increased by 437.21%, chicken by 80.51%, tea by 65.41%, eggs by 61.63%, diesel by 60.63%, wheat flour by 56.11%, pulse moong by 52.97% and rice basmati by 51.05%.
Although after the Constitution (Eighteenth Amendment) Act, 2010 [commonly called “the 18th Amendment”], the prime responsibility of price management vests with provincial bodies but unless all government functionaries across jurisdictions improve their working coordination with the objective of a stable supply chain and price stability, controlling inflation will always remain a challenge. Recent political fragmentation has further increased the crisis where wheat flour (chakki atta) is now ranging between Rs. 140-160 per kilogram which can also be corroborated by recent statistics from PBS.
The provincial governments have been unable to crack down on wheat hoarders and been unable to beef up market supply with available stocks. Though the governments have made efforts to sell bags through dedicated sale points and utility stores, however, people’s reach, especially the poor to these marked places is limited due to long distances and heavy travelling costs that render the low prices unfeasible/unaviled.
The current wheat flour crisis is multidimensional requiring a combination of short-term, medium-term, and long-term policies. The federal government should develop and update the mechanisms for provincial crops reporting data at the provincial levels so that accurate and relevant information can be available for anticipated consumption to keep a balance between demand and supply.
In the past, we have observed that due to inaccurate data, wrong decisions for export were taken e.g., in the fiscal year 2019-20, which triggered a crisis on the domestic front. Respective provincial governments should timely and positively purchase their required wheat stocks once harvesting is completed. Delays provide opportunities for others to hoard wheat which leads to a crisis of supply and avoidable price hikes.
The federal government must scale up its warehousing capacity to meet future needs. Another important factor is the procurement price that must be reflective of ongoing market dynamics. If not at par with open market price rates, farmers would be encouraged to sell to private buyers. During these processes, governments must periodically monitor the availability of wheat in all sectors and should make informed decisions for import/export or alternate use in the domestic market.
Moving forward, there is a need to increase production of wheat and improve yield per acre by expanding the areas for cultivation and introducing modern techniques/processes for farmers. Statics show that during fiscal year 2020-21, total area for wheat production was around 9,168 (000 ha) whereas total production was around 27,464 (000 tons)—an average of 3 tons per/hectare. Pakistan’s wheat demand after five years i.e., by 2028 is estimated to be 34.50 million tons—hence more per acre yield will help to meet the growing demand. This can only be possible if the federal and provincial governments in collaboration with non-governmental bodies enable farmers to adopt efficient means by providing them with training, resources and access to modern technologies/processes. Availability of inputs like diesel and electricity at reasonable prices, certified seeds and other accessories besides ensuring realistic prices for the farmers’ produce can also play an important role to avoid future crises.
As per the media report, the federal government imported 6,000 tons of wheat and around 58,266 tons of grain from Russia to avert the wheat crisis in the country. The Russian delegation is visiting Pakistan to discuss oil and LNG deals along with Russian wheat during the 8th session of the Pakistan Inter-Governmental Commission (ICG), scheduled to be held on January 18-20, 2023. However, at this point, the federal government should ensure equal distribution of already imported wheat to all provinces and flour mills as per their assigned quota.
Moreover, as an immediate measure of relief, the federal government should utilize its social protection program like Benazir Income Support Programme (BISP) for the provision of subsidized bags of flour. BISP cardholders should be offered essentials at a rescued/affordable rate at their doorsteps to save their cost of commuting and standing in queues. This can help avoid an en-mass subsidy program. Additionally, this mechanism of targeted subsidy has already been vetted and supported by International Monetary Fund (IMF). The provision of essentials to needy people has already been practically tested by various countries during the Covid-19 endemic.
Unfortunately, both the federal and provincial governments have miserably failed to discharge their prime responsibility of providing affordable living to citizens in an honorable way. No one seems interested in addressing the core issues, rather all energies are directed toward political wrangling, mud-slinging, and making efforts to consolidate power.
Huzaima Bukhari & Dr. Ikram Haq, lawyers, and partners of Huzaima, Ikram & Ijaz, are Adjunct Faculty at the Lahore University of Management Sciences (LUMS), members of the Advisory Board and Visiting Senior Fellows of the Pakistan Institute of Development Economics (PIDE) and Abdul Rauf Shakoori is a corporate lawyer based in the USA and an expert in ‘White Collar Crimes and Sanctions Compliance’. They have recently co-authored a book, Pakistan Tackling FATF: Challenges and Solutions.