Floods have had a debilitating effect on the agriculture economy, the farmer and the overall economic growth
ood inflation has beaten all past records. March 2023 witnessed a huge rise in food inflation. Pakistan Bureau of Statistics reported that year-on-year food inflation touched a new peak of 47 percent. This explains why people are swarming to free of cost flour distribution centres and risking their lives to grab a bag or two of the flour before the trucks are emptied by a jostling mob.
Although free food distribution has always tended to cause such behaviour, the situation has worsened following the massive losses to crops in the floods of 2022. Sindh endured a severe blow to its agriculture economy. Small farmers who survive on paltry returns in the form of their share in the harvest were on their knees. Chronic victims of penury, the farmers lost their crops, livestock, houses and meagre assets.
The post disaster need assessment report indicated that approximately nine million people were pushed below the poverty line in the flood-affected areas. The Labour Force Survey 2020–21 indicated that 43 percent of the employed population (around 9.4 million people) had worked in the agriculture sector in the disaster affected districts. No wonder most of these people lost their means of livelihood and their poverty was exacerbated.
A bumper wheat crop has brought some relief for growers and farmers in Sindh. Although several areas remained inundated for several months, the support price raise from Rs 2,200 to Rs 4,000/ 40 kg and a subsidy of Rs 5,000/ acre to small farmers spurred farmers to grow more wheat.
Sindh conservatively lowered the sowing target to 2.5 million acres due to the floods. However, the incentives helped the farmers surpass it by 3 million acres and a production of 3.5 million tonnes. Sindh has not only surpassed the lowered targets but also increased the acreage over the previous year.
Agriculture Department Secretary Aijaz Mahesar attributes this achievement to affirmative action by the government and the enthusiasm shown by farmers. According to the secretary, 185,928 farmers having land holding up to 12.5 acres were eligible for the incentives. He says 135,653 of them had received the wheat seed reimbursement through cash transfer by April 9. The remaining will also receive this support soon. Another 60,433 farmers having land holding of 12.5 to 25 acres have also been verified for the same subsidy.
After a good harvest, market manipulators have swung into action. Truckloads of grain are being smuggled to Balochistan for smuggling to Afghanistan, which fetches hefty profits and kickbacks to an array of interest-holders. Since the government has delayed procurement from growers, hoarders and agents of smugglers are filling the void. They are offering ten percent higher prices to the growers against direct buying.
This way the growers get higher than official price and the smugglers get the commodity to trade on bigger margins. This becomes even more lucrative because wheat in the Punjab is harvested after Sindh. This year the province has lost a significant amount of grain due to untimely rains and hail. Some estimates put the loss at around Rs 30 billion.
Almost the entire cotton crop in Badin, Mirpur Khas, Khairpur, Sukkur and Ghotki districts was damaged. Bananas, lemons, onions, chillis, tomatoes and other kharif vegetables were also damaged.
The shortfall in the Punjab has made the produce of Sindh more enticing for the black market. While growers and vested interests pocket some ephemeral gains, the phenomenon will further raise the prices of the staple commodity. Ordinary consumers will then be rattled by the escalating flour prices.
Malnutrition and stunting are already widespread, especially among the poor. The blatant and unbridled market tampering will play havoc with their already eroded purchasing power. Pakistan might then have to import wheat to bridge the gap due to the local shortfall and smuggling.
As the exchange rate is soaring, imported wheat will become even more expensive. Due to stringent credit regimes, the government will be unable to provide blanket subsidy. The IMF has already resented subsidised gasoline for even motorbike riders. A large number of lower middle class families are out of social safety net and badly squeezed. The spiralling flour price will heap more misery on them. Small farmers, battling for survival, will be at the mercy of the market forces. Ironically, the grain they grow has gone out of their purchasing capacity.
The ongoing and ominously projected commodity crisis is a consequence of the flood damage. The International Centre for Integrated Mountain Development (ICMOD) assessed crop losses in Sindh by using satellite data. A report by the organisation estimated that the major kharif crops: rice, cotton and sugarcane, had lost 80, 88, and 61 percent of the forecast yields, respectively. These three crops suffered a loss of $1.30 billion.
Almost the entire cotton crop in Badin, Mirpur Khas, Khairpur, Sukkur and Ghotki districts was damaged. Bananas, lemons, onions, chillies, tomatoes, and other kharif vegetables were also damaged. Three key vegetable crops: tomato, onion and chilli, face a loss of $374 million in the affected districts. Thatta, Badin and Mirpurkhas are the worst-hit.
The report has estimated a loss of around $13 million to livestock in the province. Overall, the province faced a loss of $1.7 billion in rice, cotton, sugarcane, tomato, onion, chilli and livestock. The loss to agriculture sector in Sindh has a direct bearing on the state of national economy as Sindh contributes 42 percent of the rice, 23 percent of the cotton and 31 percent of the sugarcane production. The report puts a caveat that unreported losses could also be significant and the economic losses in agriculture are way beyond the estimated direct losses.
The World Bank has already projected an ominous decline in the growth of Pakistan’s economy to a paltry 0.4 percent from 2 percent projected in October. The Pakistan Development Update released by the World Bank has also mentioned the predicament of the agriculture sector. Its lacklustre output has been attributed to devastating floods.
The loss of more than one million livestock and damage to cotton and rice has thrown the sector into a tailspin. The report paints a gloomy picture, mentioning that poverty measured at the lower middle-income poverty line ($3.65/ day per capita) is projected to increase to 37.2 percent in FY23. Hence, an additional 3.9 million people will be pushed into poverty as compared to FY22.
Unfortunately, the disaster happened when Pakistan was going through a political turmoil, a faltering economy and a new wave of terrorism. Protracted parleys with the IMF and a looming menace of default have engulfed the market with an unprecedented flux. Deflating economy, declining incomes and spiralling prices are perfect ingredients to generate violent social unrest. The disaster has caused a debilitating effect on the agriculture economy, overall economic growth and social fabric of the society.
The writer is a development sector professional. He can be reached at email@example.com