Surplus food, not to eat
By Khaleeq Kiani
for more than a 40 per cent share in the consumer price
index, the higher food prices have driven the overall
inflation for quite some time to the detriment of the people
despite a tight monetary policy.
The government’s food policies, tilted in favour of growers
and other influential supply chain stakeholders without
adequate safeguards for consumers, have as a result become a
target of international criticism.
The World Food Programme (WFP) of the United Nations last
week held the government responsible for pushing food prices
‘too high for an impoverished population, as malnutrition
levels rise’ despite sufficient production and stocks.
Later in a statement issued from Islamabad, WFP director,
Pakistan, Wolfgang Herbinger,clarified that in his press
briefing in Geneva “although I sought to explain the many
factors causing the food price rise, my statements
unfortunately did not do full justice to the many efforts by
the government to ensure food security. Please accept my
“You may have the country full with food but people are too
poor to buy it, said the WFP representative,. “The crop
outlook is not bad but food security situation remains
difficult because prices remain so high.”
Now ordinary consumers pay double the price for wheat
compared to three years ago, according to the UN agency as
malnutrition levels in Sindh reached 21 – 23 per cent, well
above African standards. Emergency standards are at 15 per
Earlier the WFP had sounded warnings of food shortages about
two months ago but was reminded by the then food minister
Nazar Mohammad Gondal that the country had sufficient stocks
of all food commodities and was in fact the most food secure
He had, however, expressed government’s inability to control
food prices, ignoring the fact that it was under his
government’s first year in office that the guaranteed
minimum price (GMP) for wheat was increased by 46 per cent
in one go triggering the price spiral in subsequent years.
A week ago, the World Bank also said the present
government’s public procurement price, particularly of
wheat, had failed to yield positive results and advised to
improve its agricultural policymaking capacity.
It said the wheat procurement prices since 2008, giving
farmers an incentive to grow more wheat for the domestic
market instead of smuggling and hoarding, had failed.
The fiscal costs of the government’s intervention in the
wheat market are very high, mainly because it provides an
untargeted subsidy to the entire population. The efficiency
of the government’s wheat policies is low with most of the
benefits of the wheat procurement and distribution scheme
accruing to wheat flour millers and some traders, the Bank
said. The current scheme has also created significant excess
capacity in the wheat milling industry while crowding out
private sector participation in wheat marketing, it added.
With between 17 and 38 per cent of households classified as
poor, 91 and 56 per cent of the total population classified
as vulnerable, the food crisis had a direct and significant
impact on poor and vulnerable people.
Food price inflation raised the share of total income spent
on food to 70 per cent or more for the poorest families,
severely constraining their ability to meet other essential
needs such as health and education. Poor households also
tend to change their diets away from protein and
micro-nutrient rich foods in an effort to keep up their
Many rural households in wheat-deficit provinces in the
western part of Pakistan have also been adversely affected.
In all provinces, wage increases have been considerably
below the increases in wheat prices.
The fiscal constraints have been resulting in slower uplift
of wheat stocks by the provincial governments and other
government and non-government agencies. During the current
year, almost all government and non-government organisations
have failed to lift stocks according to their allocations.
All such agencies lifted only 856,000 tons of wheat till
end-February against their allocated share of 1.24 million
tons, as the produce from fresh crop has already started to
reach the market.
As of February 28, the World Food Programme lifted only 927
tons of wheat against its allocated share of 40,000 tons for
Afghanistan. In addition, the WFP was allocated 400,000 tons
of wheat for the current season but it was able to lift only
Against an allocation of 50,000 tons, Balochistan has not
lifted any quantity by end-February. More or less the same
performance has been shown by other government agencies
including the Army, Navy, AJK and Gilgit-Baltistan. As a
result, total stocks in the public sector have stood at more
than five million tons as of February 28. This comes at a
time the first wheat forecast puts the production estimate
at 24 million tons, almost at the same level achieved last
year. Still having exportable surplus of about 2.5 million
tons, Punjab – the biggest official player – is struggling
to clear last year’s stocks before the arrival of next crop.
The problem arises mainly because of a guaranteed minimum
price for growers and similar protected issue prices for
millers in the absence of similar fixed prices for the end
consumers. Even the intervention price through offloading of
government stocks has remained effective.
Last week, the government fixed the minimum guaranteed price
of Rs950 per 40 kg for growers for official procurement of
6.57 million tons of wheat but cut the size of strategic
reserves to one million tons from previous reserve level of
three million tons.
The federal government has also decided in principle not to
put an abrupt ban on wheat exports and promised to introduce
a procedure that the policy of export was not terminated
abruptly at the expense of exporters. It also decided that
there would be no restrictions on the movement of wheat
across the provinces and districts.
With current year’s closing stock of 3.37 million tons, the
federal government has committed to guarantee bank loans to
the extent of Rs165 billion next season to enable provincial
governments to procure 6.57 million tons of wheat. As a
result, Punjab would procure 3.5 million tons, followed by
Passco and Sindh with 1.3 million tons each, Khyber
Pakhtunkhwa 400,000 tons and Balochistan 70,000 tons.
For this target to achieve, the guarantees for raising
commercial loans from banks would be available to the extent
of Rs83.5 billion for Punjab, Rs37 billion for Passco, Rs30
billion for Sindh and Rs10.5 billion and Rs3.5 billion for
KPK and Balochistan respectively.
But the provincial governments are showing concerns
regarding commodity financing while the State Bank of
Pakistan is worried over the issue of circular debt and
possibility of liquidity shortages because of procurement
The central bank and the government are under extreme
pressure from international lenders to pull out of commodity
operations because they think it leads to quasi-fiscal
deficits, with long term impact on the country’s economic
Courtesy: The DAWN