Pakistan set to be increasingly dependent on imported food
Rising food imports could soon become a major contributor to Pakistan’s future trade deficit. During the 10 months of fiscal year 2020-21, the food import bill has grown by 54 percent, standing at $7 billion. The new finance minister has said that importing food remains the only short-term solution for stabilizing local food prices and that he will be open to importing further, in fact in his own words, “flooding the local market with imported supplies” so that food prices come down.
But the new finance team will certainly recognize that wheat and sugar – the two key priorities for the PTI government are not the only imported items. The challenge here is a bit more structural. The share of food in Pakistan’s total imports of the past 10 months is now 16 percent, compared to 12 percent during the same period last year indicating how quickly Pakistan’s food security is now import dependent.
Apart from wheat and sugar, the country’s imports of pulses, spices, palm oil, soya bean oil, tea, milk, dried fruits, and several other items are on the rise. This increase is coming at a time when official data informs us of record high crop output in the country. The production of wheat, rice, maize, potato, onion and groundnut has posted an increase which unfortunately is still not sufficient to meet demand or stabilize prices.
We have also seen that even after imported food arrivals, the prices of key food items have remained stubbornly high. Even a large subsidy program during Ramadan could not bring them down. Despite record high imports of edible oil, the country has witnessed an increase in prices of cooking oil and vegetable ghee. In the case of both these commodities, local production remained in decline this year.
Imports per se are never bad if the country has the need, capacity to finance, and availability of forex reserves to sustain the payments to foreigners. If this is not the case, the same imports become a threat to the current account’s stability. For a country with a relatively large share of food in household consumption, a higher dependence on imports will also expose the households to commodity price volatilities, in turn resulting in possible local food price inflation and implications for poverty and widening inequalities.
Despite a large proven demand since the past several decades, organic food supplies continue to suffer at the hands of weak credibility of data on consumption, lack of accreditation facilities, and inadequate protection of crop zones.
Dr. Vaqar Ahmed
This also brings to doubt the effectiveness of decades of public investment which the country continues to do in expanding varieties of staple and other food, and ensuring its timely and economical availability for the poorest of the poor. Somehow, the outcomes of such investment remain weak and new products are rarely added to agriculture output and the exports’ basket. Despite a large proven demand since the past several decades, organic food supplies continue to suffer at the hands of weak credibility of data on consumption, lack of accreditation facilities, and inadequate protection of crop zones.
One is also not clear if tax policy changes in the wake of COVID-19 helped agriculture and food sector productivity. Despite the availability of imported inputs during the pandemic and subsidies for the use of locally produced inputs, the share of the food sector in Pakistan’s export hasn’t shown a marked uptick. Being able to export remains a key indicator of enterprise-level competitiveness. In fact, pulses are expected to post a negative 14 percent growth in gross output during the fiscal year 2020-21.
Experts inform us that the only solution to the situation lies in improving per acre yields but are less confident to answer why all past schemes to improve yields haven’t delivered. Such evaluations are the need of the hour and will better inform and guide the PTI so that past mistakes are not repeated.
In a recent study by Sustainable Development Policy Institute (SDPI), agro and food sector representatives said that farmers have become increasingly weary of market outcomes. They are not confident about future returns if investments in seed, fertilizer and farm technology are undertaken. In fact, the use of fertilizer is one-fourth in comparison to neighboring India.
Reversing the above mentioned has quick potential gains for Pakistan. Given the success of the China Pakistan Free Trade Agreement, any improvements in agriculture and food sector productivity could lead to improved prospects of exports to China — a major grain importer and home to 22 percent of the world’s population... but only 7 percent of arable land. China was expected to import 24 million tons of corn, 10 million tons of wheat and 100 million tons of soybeans in 2020-21. PTI government’s promises on the environmental and climate change front will also be better delivered if sustainable agriculture production is prioritized during the upcoming and future government budgets.
*Dr. Vaqar Ahmed is joint executive director at the Sustainable Development Policy Institute (SDPI). He has served as an adviser to the UN Development Programme (UNDP) and has undertaken assignments with the Asian Development Bank, the World Bank, and the Finance, Planning, and Commerce Ministries in Pakistan.