From 2007-08 through February 2011, food prices in Pakistan have increased by 81 percent, according to the official estimates. At the same time, the Food and Agriculture Organisation’s (FAO) Food Price Index, which measures international food price inflation, averaged 228 points in 2011. This present index value is 23 percent (42 points) more than in 2010, exceeding the previous high of 200 points in 2008, the highest level since the FAO started measuring international food prices in 1990.
In an interesting paper, scholars have linked the most-recent social unrest (the Arab Spring) in the Middle East and North Africa to sudden and steep increases in food prices. The authors of the paper further provide a threshold value of 210 of the Food Price Index, beyond which persistent and increasing food riots become a foregone conclusion. In many developing countries, political organisations are perceived to have a critical role in providing food security. The failure to provide this security, the paper argues, undermines the very reason for the existence of the political system. Once that happens, the ensuing protests can reflect a broad range of reasons for dissatisfaction while masking the actual trigger behind social unrest.
Another major negative impact of rising food prices is the precipitous rise in poverty in Pakistan. In a recent report, the Asian Development Bank (ADB) calculates that a 20 percent rise in food prices increases the number of the poor by 4.5 percent through pushing an additional seven million people below the $ 1.25-a-day poverty line in Pakistan. By this calculation alone, the number of poor people in Pakistan has increased by about 30 million in the last four years.
The immediate upshot of this is that just like WWI Germany, persistently high inflation — food inflation in particular — if left unchecked holds the potential to destroy this country’s social fabric and political system. Where it is becoming increasingly hard for the poor to buy food, the life savings of the salaried classes are evaporating. The exponential increase in the number of strikes, protests, processions, go-slows and crime rates are the early rumblings of the not-so-distant storm: full-scale social unrest.
Pakistani policymakers must take heed and devise plans for food production and distribution today to cope with this impending social unrest lest the storm destroys Pakistan’s social fabric and political system. In the immediate term, policymakers must focus on increasing the production of food in Pakistan by removing market imperfections to increase incentives for the small farmers — our key to food security. Pakistan is the seventh largest producer of wheat in the world; however, our yields are significantly below the world average.
Innovative microcredit programmes for small farmers have shown that agriculture production has been negatively affected by the small farmers’ inability to access credit for procuring inputs. Moreover, small famers, in the absence of risk mitigation options like crop insurance, become risk-averse and grow less as they cannot cope with the high risk of producing extra crops. In short, the upfront investment for inputs is high, whereas returns are uncertain. To avoid this, small farmers often retreat into subsistence growing or look for alternative livelihoods.
Policymakers must ensure that farmers have access to quality inputs like seeds, fertilizers, tools, training as well as credit. Coaxing insurers to offer crop insurance to small farmers will also go a long way towards increasing total agricultural production in Pakistan. Priority must also be placed on improving rural infrastructure such as roads, irrigation systems and storage facilities.
In the medium term, Pakistani policymakers must also come up with innovative ways to ensure a more equitable distribution of food. Rationing of the most basic commodities like flour, sugar, ghee, milk powder and tea is one such option. If that is not possible then a new food-support programme — that provides food and thus insulates the poor against food inflation — must be instituted for the deserving. Moreover, the government can also pass legislation that requires those making less than a certain threshold be provided free meals at their places of work.
Finally, in order to check runaway inflation, the government must bring its fiscal house in order. Reducing unnecessary expenditures — Public Sector Enterprises (PSEs) like Pakistan Steel Mills, Pakistan International Airlines, etc, for instance — and collecting more direct taxes is now crucial for weaning the government away from inflation-inducing money printing.
In sum, unchecked inflation, especially in food prices, has placed Pakistan on a very dangerous trajectory. Evidence from other nations shows that in the presence of increasing food prices there is a very strong likelihood of massive social unrest. These domestically created stresses, more than anything else, may lead to a complete and utter implosion: the entire social fabric and political system might crumble. This country may never be able to go back from the ensuing violence, ballooning crime rates and full-scale social unrest. Policymakers must take stock of these alarming developments and focus their energies on ways to increase food production by assisting small farmers — the key to our food security. At the same time, policymakers must devise innovative solutions for making food distribution more equitable — rationing and food-support programmes are some options. Finally, the most effective remedy for checking runaway inflation in this country is to have the government put its fiscal house in order. Wasteful expenditures on the PSEs must be stopped and more people must be brought into the income tax net.
(Concluded)
The writer has taught economics at Lahore University of Management Sciences and presently works for the development sector in Islamabad. He can be reached at: [email protected]