Another perfect storm

Almost a decade and a half after the global food crisis, a less famous sibling of the global financial crisis of 2008-09, the world once again entered a phase of food price hike in 2020.

The impact of the Covid-19 pandemic in instigating a food crisis is disproportionately higher for developing countries, reversing the years of development. Many interlocutors referred to the 2007-08 crisis as a perfect storm; the current food woes seems like a more perfect storm with Covid-induced supply bottlenecks, surge in oil prices and higher shipment costs.

Like many developing countries, the unanticipated global crisis once again left Pakistan vulnerable to the shocks of high fuel and food prices as prices at the commodity level in the country are largely driven by global food and oil prices. However, the food price hike in Pakistan has come on the back of already rising inflation, worsening fiscal constraints, depreciating currency along with extreme weather conditions, prolonged episodes of drought as well as desert locust incursions.

The pandemic has put additional stress on these development challenges in a country already dealing with persistent poverty and food insecurity. As it happens, Pakistan is listed at 94th among 117 qualifying countries – making it second highest in all of Asia by the latest ranking on the Global Hunger Index (2019). In the meantime, the uncontrollable food price inflation coupled with low earning potentials has led to a basic meal becoming out of reach for thousands of people who are vulnerable to economic meltdown.

People in countries like Pakistan spend as much as half of their expenditure on food and, thus, a rise in food price inflation with the same income levels has forced vulnerable households to compromise on their caloric intake. This may affect the long-term physical and mental health of an individual, especially children.

The global food insecurity situation, particularly in Emerging markets and Developing Economies (EMDEs), has been further aggravated following the conflict in Ukraine in February 2022. As Russia and Ukraine jointly account for almost 30 per cent of the total global wheat export, the conflict predominantly affects the global supply of this primary grain followed by corn and edible oil. According to the FAO, the Food Price Index reached an all-time high record in March 2022, averaging 160 index points, up almost 13 per cent from the previous month and around 63 per cent higher than two years ago. In addition, the war has led to a surge in the prices of some other commodities, most importantly fertilizers that could crash yields for the next season across crops given farmers’ affordability.

While Pakistan used to be one of the largest wheat exporters, the agriculture sector of the country is finding it difficult to keep pace between increase in wheat production and population growth. Sufficient supply of grain due to unfavourable climate conditions is one factor; administrative inadequacies, and lack of timely decisions to address the issue on the government side can’t be ignored. Drop in the domestic production of wheat yield has been leading the country to rely on imported grain for the past few years.

The Ukraine crisis has made the situation worse. This may not only cause serious disruptions in supply of wheat but a rise in food import bill with the difficult foreign exchange position is another challenge for the incumbent government. Over 20 per cent of the food import bill has been escalated during the current FY2021-22.

The role of the price of wheat in the overall food inflation in Pakistan can be realized by the fact that almost 50 per cent of the country’s population consumes wheat as a primary source of nutrient. Consequently, any increase in the price of wheat steers food prices to rise across the board given its importance in the overall food security of the country.

While inflation has affected all countries across the world as soon as governments lifted lockdowns post-Covid, it has had a far larger effect on fragile economies, especially those that borrow heavily to make it through such crises. The rising burden of debt crowds out productive investment and makes it difficult for governments to maintain subsidies on public goods such as food and fuel, under the guise of austerity. Pakistan is no exception.

As an agro-based economy, it is very peculiar for Pakistan to be a food insecure country. But the question is: in which dimension is it said to be food insecure? Is it in terms of food availability, access to food or utilization of sufficient nutritious food? The answer does not lie in singling out one or the other option. However, unequal access of food between countries around the world as well as within Pakistan is an underlying issue in the wake of an economic recession and high inflation teetering on the brink of a dire hunger crisis.

Various research studies on Pakistan found that income or wealth status of households make a significant difference, with poorer households more likely to be food insecure and to have undernourished children. To circumvent a looming hunger crisis, the government must bridge the disparity between individuals to have access to sufficient food regardless of class, gender, and region. In this regard, social safety net programmes must be continued by the government without any disruption.

The writer is a research fellow at the Lahore School of Economics. She can be reached at: samqk11@gmail.com