A double-digit crisis

Come April, food prices were sky-rocketing again, clocking in at 11.1 percent. Among the many reasons for this,the government’s administrative failures stand out

Lately, inflation has seen an upward trend with food prices having the greatest impact on the population. Pakistan’s inflation rate entered the double-digit level, reaching 11.1 per cent in April after almost a year. During this time people have seen the prices of chicken, cooking oil, sugar, wheat, pulses among other food items spiral out of control with no respite in sight.

No doubt, the non-food inflation has also been on the rise for the past few months due to higher energy prices; but the food inflation has been more noticeable and abrupt. Apart from becoming expensive, commodities like sugar and wheat literally disappeared from the market. Even when they are available, there are no fixed prices and thus they are being sold at different places at different rates. The prices of what flour, for example, vary significantly across provinces.

In April, food prices started sky-rocketing and one of the reasons was that the month of Ramazan had started and food consumption increased. There is a general perception that hoarders start hoarding food commodities before the advent of Ramazan, and it is quite likely that this happened this year as well. Amazingly, the prices of chicken doubled during the month which is unprecedented with several analysts commenting that it seemed that the government was nowhere to be found. In many parts of the country, both rural and urban, chicken was sold for Rs 500 and Rs 600 a kilo.

Apparently the government is cognizant of the situation and has talked about setting up a Pakistan Food Authority (PFA) on the pattern of some other countries that centrally control the food markets. The question is whether the current inflation is due to the fact that the government failed at the administrative level or the reasons for inflation were beyond the government’s control. Another question is whether there is a possibility of food prices going down or will these inflationary pressures continue.

Dr Abid Qayyum Suleri, the executive director of Sustainable Development Policy Institute (SDPI), Islamabad, believes that there is an overall trend of increase in commodity prices across the globe which has had an impact on Pakistan as well. He says this is because the world is slowly opening up and there is some recovery following vaccination drives. Hence, demand for commodities is increasing. He gives the example of crude oil which had become dirt cheap when the pandemic began and is now touching $70 per barrel.

On poultry prices, he says, the biggest reason is that the price of the main ingredient of poultry feed — soy beans – has increased by 70 percent and Pakistan imports this, thereby impacting prices. The Competition Commission of Pakistan (CCP) has sent a notice to 11 poultry feed manufacturing companies to inquire whether the soy bean stocks they used were purchased at old prices or new prices.

Suleri explains that when the price of maize increases, the cost of maintaining animals and dairy will increase, and the price of poultry and meat will also increase. At the same time, he says, the cotton crop failed once again in addition to the rising price of oil seed, fed to livestock for better milk yields. However, he says, in the case of mutton and beef, the impact was not as strong as it was in the case of chicken.

Yet, there are those as well who claim that poultry breeders did not breed in large numbers because of the ban on events like marriages, closure of banquet halls, suspension of dine-in and dine-out options at restaurants and so on. They say they feared that they would be unable to sell their excess supply.

Moeed Ahmed, a trader in Akbari Mandi grain market, says whatever we are importing is getting expensive because of higher commodity demand in the world and the cost of transportation due to increase in fuel cost. He says it is a pity that Pakistan is now importing the goods it used to export in the past including sugar, cotton and corn. He says when you get expensive corn, animal feed will also get expensive.

The increase of support price from Rs 1,450 to Rs 1,800 per 40kg raised wheat prices considerably and the traders and retailers added their margins. In Sindh, the wheat price was around Rs 2,000 per 40kg which well explains why flour prices have been increasing.

Mansoor Ahmed, a commerce reporter based in Lahore, sees administrative failure as a reason behind food inflation. He says the regulators are not functioning and it seems that they are afraid of taking action against profiteers and hoarders. Ahmed says the middlemen are still making fortunes and neither the farmers nor the end consumers are getting any benefit of government’s price control measures.

He says the government’s statements are often self-contradictory which also affects prices. For example, a few weeks ago, the government was saying there will be a shortage of wheat; but now, it says that there will be a bumper crop. He suggests that the government strengthen its information and monitoring mechanism because such statements lead to artificial shortages and crises. This time, the wheat prices increased during the harvest which suggests hoarding, he concludes.

The author is a staff reporter and can be reached at [email protected]

A double-digit crisis