The fault in our food prices

Several factors, including climate change impacts on crops, have impacted food basket insecurities

The fault in our food prices


nflation has always challenged societies. Governments try to control it using several tools until a cheap supply-end mechanism is developed. In some cases, it is difficult to curtail the demand, for instance, for essential items.

Currently, inflation is a challenge faced by not just developing countries like Pakistan but also developed economies such as the United Kingdom and the United States. Adverse climate change impacts on crop productivity have increased food basket insecurity globally. The war between Ukraine and Russia has added fuel to the fire as both are among the top ten wheat-producing countries of the world. The war has adversely affected Ukraine’s crops and it has been unable to export significant quantities of wheat. This is just one example of how inflation is impacting the world. The UK has witnessed historic food inflation and a similar pattern is emerging in several European countries.

Pakistan is relatively isolated in terms of agricultural produce trade. However, climate change has affected agriculture in the country. Last year, floods wiped out standing crops in parts of the Punjab, Sindh and Balochistan. Flood water has still not receded from some districts of Sindh. In some places where water has receded, the fields are not ready for cultivation.

Aamir Hayat Bhandara, a progressive farmer from Pakpattan, says that the ongoing climate change impact on Pakistan, including the recent climate abnormalities can result in increases in crop losses and input costs. The recent rains and hail in wheat growing areas damaged the crops and forced some farmers to opt for combined harvesting. This increased the cost of production.

Besides the climate challenge, Pakistan is witnessing one of the worst periods of political instability and a foreign exchange crisis.

Irfan Iqbal Sheikh, the Federation of Pakistan Chambers of Commerce and Industry president, says that “Pakistan is passing through its worst ever political instability; there is no economic policy in place.”

“Inflation is deep-rooted. It stems mainly from substantial exchange rate depreciation, unprecedented hike in international commodity prices, multiple hikes in energy tariffs and certain measures prescribed by the IMF. Despite the policy rate hikes by 1,125 basis points – from 9.75 percent to 21 percent between February 2022 to April 2023 – inflation has remained stubbornly high. In fact, it has surged further, manifesting the utter failure of monetary policy,” says Sheikh.

Almost six months ago, sugar price was fixed at Rs 90 per kg. Currently, it is being sold at Rs 120 to 130 per kg.

Kashif Anwar, the Lahore Chamber of Commerce and Industry president, agrees. Despite the high inflation, he says, interest rates have been lowered in all the major economies of the world. However, the State Bank of Pakistan has continued the tightening of the economy.

Bhandara says that the devaluation of the rupee has played havoc with the farming sector. “Many agricultural inputs – from seed to fuel and pesticides to basic fertilisers – are imported. Pakistan is an importing country. The rapid rupee depreciation has put a huge pressure on the import bill. This has raised the prices by directly raising the cost of production,” he says.

He says the the recent measures taken by the government, including withdrawal of subsidies for tube wells, too, will have an adverse impact.

Another factor in rising prices is weak administration, especially price control. The federal secretary for industries is the controller general of prices in Pakistan. The provincial secretaries have a similar role in their respective provinces. Deputy commissioners head the enforcement. However, these officers have not performed well. Currently, there is no official sugar price in the country. Almost six months ago the price was fixed at Rs 90 per kg. Currently, it is being sold at Rs 120 to 130 per kg.

Bhandara says that the administrative failure has a high cost for the consumers. “This year, the government may find it hard to procure wheat from the farmers.” Such a failure could result in steep rises in flour prices over the coming months.

He says the support price for wheat should have been announced earlier than the fuel price hike which has impacted the cost of production. In the end, all increase in the cost of production will be passed to the consumers. He warns that the government might fail to achieve the wheat procurement targets.

The government, he says, must take some serious steps to help the common man. This should include the farmers. “We have to pay our farmers now; else, we will have to pay more for imports,” he warns.

The writer is an economic correspondent for The News. He tweets at @Jawwadrizvi

The fault in our food prices