FeaturedNationalVOLUME 17 ISSUE # 41

Bracing for food shortages, high prices

Pakistan faces a serious food crisis after recent rains and floods, which have damaged vegetables and other crops in all provinces. Prices of food have already skyrocketed and it is feared that the next few months will be even tougher for the common people.

All vegetables are already selling at over Rs200/kg and their prices would increase further in the days to come as major vegetable-producing areas have been submerged by floodwaters. Rural Sindh and South Punjab, which provide vegetables to the whole country, have lost their crops to floods. A shortage of meat is also feared in the country after a large number of cattle have been killed in Balochistan and Sindh. According to an estimate, 80pc of cotton, 70pc of rice, 80pc of onions, tomatoes and chilies, and 80pc of dates were washed away in Sindh.

Inflation jumped to a record 44.58pc on a year-on-year (YoY) basis for the week that ended on August 25, according to data by the Pakistan Bureau of Statistics (PBS). The Sensitive Price Index (SPI) for the week recorded an increase of 1.83, bringing the YoY inflation to an all-time high. During the week, prices of 23 out of 51 items increased, seven decreased, while 21 remained stable. The SPI for the week for the combined consumption group was recorded at 219.97 points against 216.02 points in the previous week. The commodities, whose average prices increased, included tomatoes 43.09pc, onions 41.13pc, potatoes 6.32pc, eggs 3.43pc, garlic 2.23pc, powdered milk 1.53pc and pulse mash 1.12pc, non-food items 2.26pc and LPG 1.95pc.

According to the International Monetary Fund (IMF), the average inflation rate in Pakistan will peak to nearly 20pc by the end of the current fiscal year on the back of currency depreciation and higher commodity prices. Earlier, it had forecast the rate at 7.8pc for the year.

It is feared that flash floods would also impact Pakistan’s economic outlook. According to the Ministry of Finance, the floods have reduced the potential output of both main and minor Kharif crops, thereby tampering with the positive outlook of the agriculture sector. “Initially ignored by the government, the floods have become the third serious challenge after global and domestic uncertainties that are still surrounding the economic outlook,” it noted.

Pakistan’s Climate Change Division has warned that the sea level along the coast may rise by two to three feet by 2100, threatening the existence of cities like Thatta, Badin and Karachi. The country has lost 1.8 million acres of arable land to sea intrusion because of rise in sea levels in the wake of climate change. In a presentation, the Climate Change Division said the persistence of high intensity heat waves had increased to 41 days in a year and the country would face absolute water scarcity by 2025 while food insecurity would rise from 40pc to 60pc by 2050. The major reason is the increased frequency of low agricultural productivity in the backdrop of extreme climatic events. Pakistan has ranked amongst the most polluted countries and faces the highest projected annual economic loss to GDP (9.1pc) in Asia. It is also suffering a loss of 27,000 acres of forest cover every year. It has a high population growth rate of 2.1pc and there will be a threefold increase in the climate-induced migration from 0.7 million to 2 million by 2050. In the global context, Pakistan is at the frontline of climate risks, encountering disasters at multiple levels, and is at the eighth place amongst the most affected countries.

Pakistan may face absolute water scarcity by 2025 and a rise in food insecurity following increased frequency of low agricultural productivity due to extreme climatic events. Pakistan has faced 152 extreme events due to climate change over the last two decades and has seen a shift in rainfall patterns, intensity and frequency.

According to a recent study by McKinsey, “A reflection on global food security challenges amid the war in Ukraine and the early impact of climate change,” the war in Ukraine, climate change and the pandemic have caused logistical constraints that could cause a grain deficit of up to 60 million tons by the end of 2023. The price of grain has increased in 2020, when the pandemic affected global logistic chains. Since then, drought-induced harvests have increased prices even more. With the ongoing war in Ukraine, there is a risk of a food crisis, which may become the most serious so far in the 21st century.

The world’s grain mostly comes from six growing regions, including Ukraine and Russia, which together produce roughly 28pc of wheat and 15pc of corn exported globally. A decrease in exports can have far-reaching consequences, especially in countries with low resources and production capacity. “The grain deficit could reach up to 60 million tons by the end of 2023 – this corresponds to the annual nutritional intake of up to 250 million people, or 3pc of the global population. This year’s logistical problems have resulted in up to 18 million to 22 million fewer metric tons of grain being exported from Ukraine and Russia. If the war continues, exports may shrink even further in 2023,” it warned.

Fertilizer shortages and higher prices for fertilizer are also expected to reduce yields in countries that depend heavily on fertilizer imports, such as Brazil. This will likely further decrease the volume of grain on the world market. Availability is also limited by some countries’ efforts to protect their domestic markets by placing restrictions on trade. Historically, supply shocks within the food system have led to inflation, lower fiscal strength, and malnutrition – and in some cases, to periods of political instability and violence. For example, the food crisis in 2010–2011 contributed to the Arab Spring. The pandemic has left countries less economically resilient in the face of price hikes. Even a slight disruption in supply could substantially disturb global food prices and societies’ abilities to cope with them. More than 1.4 billion people live in countries that are highly vulnerable to increasing food prices and may be hit hard by price increases. Countries including Bangladesh, Ethiopia, Somalia, and Yemen rely heavily on grain imports, have limited stocks, and have low purchasing power. “According to our research, the worst outcomes could be avoided, for example, by unblocking and de-risking Black Sea logistic routes, reducing trade restrictions, utilizing existing grain reserves, and providing financial aid to the most impacted areas and populations,” it added.

The situation in Pakistan suggests inflation and prices will further increase in the days to come. However, the government can mitigate people’s sufferings by importing food from neighboring countries.