June Issue 2008

By | Business | News & Politics | Published 10 years ago

Bushra kisses her son, Zubair, and daughter, Saima, for the last time. They are five and three, respectively. Then she covers their innocent eyes and leaps in front of a speeding train hurtling towards her on Lahore’s railway tracks. She has not been able to buy food for her children for days and can no longer bear to hear them cry.

Approximately 150 kilometres west of Lahore, in a small town near Faisalabad, Abdul Shakoor murders two of his daughters. Aliza Noor is just three months old; Kainat is four years old. A third sister is saved by the frantic intervention of Shakoor’s mother and wife. However, Shakoor’s mother is unable to save her own son. Like Bushra, he throws himself at the mercy of an oncoming train, and is killed. Shakoor had often complained of the hike in prices and was unable to properly provide for or feed his five children. His wife says he had often contemplated selling his little girls.

In Khanewal, Khursheed Bibi forces her six children, aged between six months and 10 years, to jump into the city’s waterway. After watching all of them do so, she leaps in after them. Khursheed is rescued by onlookers, along with four of her brood. Her other two kids perish. She tells a similar story — of abject poverty and suffering.

Then there is a 37-year-old farmer from Charoona, called Mohammed Shafiq. He goes to Topi market to buy foodstuff for his family. A few minutes later, he douses himself in kerosene oil and sets himself ablaze. He does not have enough money to feed himself, let alone the dependents he now leaves behind.

Hunger in Pakistan is no longer a silent killer. Rising food prices and the highest inflation rates in recent history are forcing many sane, able-bodied men and women to choose to end their lives rather than continuing to live in quiet desperation.

Those who they leave behind scarcely fare much better.

Families in Pakistan’s northern belt, which underwent some of the worst periods of deprivation after the October 2005 earthquake, are among the worst hit. According to a report by the Integrated Regional Information Network (IRIN), many families who suffered the loss of loved ones now have to rely on just one wage, averaging Rs.3,000 a month. No longer able to cultivate crops and rear livestock to supplement their earnings, as cultivated land was largely destroyed, they are now completely at the mercy of the market. With the real food inflation rate conservatively estimated at 20% (according to official sources) and with unofficial estimates hitting 35%, they speak of severe cutbacks in food consumption

Says 13-year-old Saima, “I now make really thin, small chapattis for my family. We eat these with achar or daal and on special occasions, with a cheap vegetable. It doesn’t do much to satisfy our hunger, but at least my family has food to eat. Not everyone is so lucky.”

The real pathos here is that the areas worst affected by the quake, and now the rise in food prices, were already the poorest in Pakistan. According to the UN’s Food and Agriculture Organisation (FAO), 43% of the people in Pakistan-administered Kashmir, and 34% in the North West Frontier Province lived below the poverty line. “We can hardly afford to eat roti now, let alone meat, when the cheapest wheat price available is Rs.30 a kilo!” says Ghulam, a casual worker from Dir.

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Food security has always been a problem for Pakistan. However, shortages of staples such as wheat, oil, rice and sugar, which were experienced last year and which continue to this day, combined with a hike in global food prices that looks set to stay at least for a couple of years, hint at the threat of imminent food riots.

In Peshawar, hundreds of people still line up outside government-supported utility stores, attempting to buy cheaper wheat flour than that available in the local shops. Despite waiting for hours under the hot sun, in queues that run like snakes, many are forced to return home disappointed, as stocks are insufficient to meet everyone’s needs.

In some parts of Balochistan, a 100-kg bag of wheat flour has shot up to Rs.5,000, compared with Rs.1,300 last year, making it impossible for many to afford this staple. In districts such as Zhob and Noshki bordering Afghanistan, the price has shot up to Rs.4,000 per 100-kg bag. “We get only 200, 20-kilo bags daily,” says a local shopkeeper, “which is not enough to feed everyone.” A recent media report from Mianwali, of two young girls aged four and six, abducted by a local landlord for their father’s inability to pay back a high-interest loan, inadvertently revealed the value of food today. The girls were housed within the landlord’s property and made to work as unpaid domestic servants. When contacted by the media, the landlord’s wife defended her husband’s actions. “At least they are being fed,” she said.

Prices of nihari and biryani, popular, and until recently, relatively cheap local dishes, are now up 50% from January. Says the owner of Sabri hotel, a popular food outlet famous for its nihari, “Labourers, rather than beggars or drug addicts, are now the dominant element in our charity food queues. They come to us numbering in the hundreds — at least 600-700 a day.” Many are migrant workers from up-country, and some have now become redundant as factories downsize as a consequence of the economic crunch Pakistan finds itself facing.

The new acting minister of finance, Syed Naveed Qamar, who replaced PML-N’s Ishaq Dar, has announced that “food is a growing crisis at present.”

But how far can his government go to stem the tide?

As sales of sumptuous grapes, targeted at the rich and the beautiful in a boutique supermarket in Karachi, priced at Rs.600 a kilo, continue to rise, are staple foods such as bread and butter becoming a luxury for the lower-income masses?

According to a report by the UN’s World Food Programme (WFP) released in April this year, a colossal 77 million people — half of Pakistan’s population — are going hungry due to a surge in food prices. Those deemed food insecure have risen 28% from an already high 60 million in March 2007. The WFP claims the rise in food prices threatens to wipe out seven years of improvements in poverty reduction. In its section on global impact, ‘Where inflation bites deepest,’ it puts Pakistan ninth on its list. In Pakistan, the WFP supports around four million food insecure people, including those in the quake zone, but it has warned that spiralling food prices are affecting its performance. “This could mean further suffering for the vulnerable in the country,” it says. In April, at a press conference in Islamabad, Anthony Bandury, its regional director, said: “Rising food prices will pull more people into poverty and deepen food insecurity among already vulnerable groups.” The WFP is not the only international agency urging Pakistan to come up with a sustainable food policy.

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Pakistan is one of 35 countries that have been put on a critical list by the World Bank, which points out that the rise in food prices has affected most of the country’s citizens. It has also advised Pakistan to reform its policies to avert an economic crunch from the impact of high global prices for petroleum and food. The FAO has also voiced its concerns over the impending onslaught of food insecurity, as has the International Labour Organisation (ILO) and the UNICEF. And according to Frederic Mousseau, a humanitarian policy adviser at Oxfam, “The main concern is for the poorest countries and the net food buyers. For the poorest populations, 50% to 80% of the income goes on food purchases. We are concerned now about an immediate increase in malnutrition… among the landless, the farmworkers… all those who are living on the edge.”

“There will be a big crisis,” warns Sahib Haq of WFP’s Vulnerability Analysis and Mapping Unit. “Food inflation over the past year stands at 35% compared with an 18% rise in minimum wages. The purchasing power of the poor, therefore, has gone down enormously.”

The market will not distribute food to people who do not have jobs and, therefore, no ability to pay. In Pakistan, these include women, who have traditionally transferred portions of food during economic crunches to male family members; children, who are taken out of school to supplement a family’s daily wages; and rural peasants, who have no say in the decisions made by their landlords. According to a recent UNICEF report, both child literacy and health in Pakistan has suffered enormously as families apportion almost all their household budgets on food. “Four hundred and twenty thousand children under the age of five die every year in Pakistan. These deaths may be prevented with good nutrition (among others) for their mothers,” it says. The report also warns that this figure will surge unless the government tackles the rise in prices. Poor nutrition also contributes to about 50% of the child deaths in the country, it says. “The children are in danger and we need to devise ways to respond to the crisis and save them,” David Toole, UNICEF’s regional director for South Asia, told reporters. In addition, the ILO estimates that “some 3.3 million children, aged five to 14 years, are engaged in child labour.” It says this number will invariably increase as food prices rise.

Headlines on the food crisis surged in the local papers last year, when policy makers in Pakistan woke up to the reality of a global rise in food prices, fuelled by the incessant spiral of oil price increases (now at $130 a barrel), debilitating weather conditions in some countries, and a transfer of farmland from food grains toward bio-fuels. The World Bank warned that food inflation in staples such as rice and wheat would stabilise, but remain at much higher levels for at least three years. Matters came to a head when Shaukat Aziz sanctioned the export of wheat, citing a bumper record-breaking harvest of 22 million tons. Whether the figures were purposely fudged to meet GDP growth figures, or mistakenly calculated, remains a matter of debate. Realised procurement, however, stood at much less than what was needed to meet local requirements. The government was later forced to re-import 1.7 million tons of wheat from the international market at a much higher rate of $450 per ton, than that at which it sold ($200). Meanwhile, wheat was traded in the black market at rates beyond people’s purchasing power. Hoarding by profiteers who anticipated the windfall gains of rising prices, and smuggling across the borders to India and Afghanistan, exacerbated the shortages. The result was a massive increase in the prices of basic staples such as rice, wheat, oil and sugar. President Pervez Musharraf was forced to announce the re-implemetation of a ration card system, scrapped since the 1980s, which was to help the poor buy subsidised flour, wheat, sugar, pulses and cooking fat from state-owned outlets.

Summarising the failures of the previous government, Shafi Niaz, former advisor to the chief executive of Pakistan on food and agriculture and founder-chairman, Agricultural Prices Commission, writes, “Due to shortages in supplies, and non-accessibility in many areas of the country, the prices reached a level where the poor and even the middle-income groups found it extremely difficult to buy the commodity even if it was available. The government fixed, at intervals, atta prices, raising it every time, but failed to ease the situation because of imbalance in the supply-demand situation. The government even tried to help the public, particularly the poor, by supplying atta at cheap rates through the utility stores network, but it was to a very limited extent. With acute shortage of the commodity, accessibility turned out to be the next problem. The government had to take measures like banning movement of the commodity from one province to the other, and even restricting inter-district movement. Such restrictions not only badly limited supplies to deficient areas but also caused the prices to escalate. Atta shortage was seriously felt, which created unrest in such areas and even led to riots, something we have never experienced before.”

Analysts also point to the poor management of the economy, which allowed the fiscal deficit to continue unchecked, thus triggering the double-digit inflation rates prevalent today. Even former State Bank of Pakistan governor, Ishrat Hussain, questions if the figures of government borrowing were fudged and vastly out of line. “The only serious reservation I have pertains to the motive for the understatement of domestic interest payments in the original budget estimates. Whether it was a deliberate attempt to put a lower number to contain the fiscal deficit can be investigated.” And according to a senior banker, “Loose lending and a negative real rate of interest meant that food growers and manufacturers had much to gain by holding onto their stocks, instead of selling them in the market. It cost nothing for the hoarders to fund their practices and this is why this malicious practice continued unchecked.”

What happened next was perhaps inevitable. The Musharraf government suffered a landslide defeat in the parliamentary elections in February at the hands of a populace voting with their stomachs for ‘roti, kapra and makan.’ Campaigns of the opposition promised the masses a pro-poor agenda and a reduction in inflation and daily miseries.

But with the new government coalition comfortably ensconced in the seat of power, these promises proved difficult to keep.

Although measures to put an end to food hoarding, smuggling into Afghanistan and India, and under-invoicing were immediately announced, they remained largely ineffective. The support price of wheat was raised to discourage local farmers from selling wheat to middlemen and smugglers, the Frontier Constabulary was given authority to control smuggling, and fact-finding commissions to look into the case of missing wheat were established, but wheat procurement remains low and profiteering practices continue.

“The food shortage is still so severe it can endanger our sovereignty and the unity of our federation,” Hari Ram Lohano, a leading food economist at the Social Policy and Development Center (SPDC) tells Newsline.

Wheat flour supply has remained erratic, partly due to continued smuggling and hoarding. Angry consumers point to these incidents reported almost daily by the press. “Smuggling and withholding food cannot continue without the connivance or support of government officials,” they say.

It is alleged that the latest shortages to hit Karachi and Lahore have been created by speculative millers and retailers hoarding stocks in the hope that they can maximise profits by selling at a higher price in the near future.

According to a prominent sugar industrialist in Karachi, sugar is released in the market in increments every year. However, when the price of sugar went down to Rs.22, from last year’s high of Rs.40, his mill decided to hold. “We stockpiled sugar until the rate reached 28 rupees per kilo, after which we decided to sell. We were confident that prices would rise further, but we had already made a killing this year. Most other mills, however, are not satisfied with their returns and are still hoarding.”

Leading economists and development experts warn that policies such as raising the support price of wheat to discourage smuggling will only serve to raise its price in the local market. According to Sahib Haq, “The price of wheat flour is forecast to shoot up by 40% or more in the coming months by grain industry officials. The coalition raised the support price it pays farmers to buy wheat to ensure adequate supplies, but this move will result in sharply rising flour prices in the months ahead.”

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The new government has also, so far, been unable to trace the wheat tradeable surplus. Increased surveillance by law enforcement agencies and raids on farmers and middlemen’s stocks failed to deliver the desired results. The worst problem centres in the Punjab, where arrivals have recently dropped to 50,000 tons, despite the announcement of rate rises of Rs.10 per 40 kilos. The expectation for the province was 4.3 million tons, a figure that was subsequently revised downward. The food department maintains that the reluctance to sell wheat to the government stems from the farmers unhappiness with its support price. Farmers from Mianwali, for example, say a large portion of their crop has been destroyed due to rains and complain of a 300% increase in the price of fertiliser, which they say has made farming unprofitable. They urge the government to fix the support price of wheat at Rs.1,250 per 40 kilos, as against the Rs.625 being offered today. Grain market brokers, meanwhile, offer up to Rs.800 per 40 kg. Politics has also played a role in the crisis. Islamabad edged towards a renewed flour shortage last month as the Wheat Flour Mills Association turned down permits to buy grain from the food department. “The department should seal borders and set up checkposts in the NWFP instead of in the Punjab if it is determined to check the smuggling of wheat into Afghanistan,” said a leading flour mill owner. It is being alleged that Pakistan is losing US$2billion every year as a result of wheat smuggling to Afghanistan.

Analysts also question whether the government’s announcement that it will import 2.5 million tons of wheat is self-defeating. While prices were driven down temporarily by the news, they warn that by announcing a greater amount than is locally needed, “By the time orders are placed, the price will have been driven up substantially, as food commodities are now in a tight market. This means that we will have to spend more money on importing the same quantity of wheat.” At present, the wheat shortfall in the country has been calculated at one million tons. According to a leading analyst, “The wheat that was available at Rs.350 a ton rose to Rs.400 over the announcement and is likely to shoot up to Rs.450.” Once it reaches Pakistan, it will either need to be subsidised, or the price increase will once again be passed on to the consumer.

Says Najma Sadeque of Shirkat Gah, “So far the government has done only damage control. It has announced it is importing wheat as there is a shortage of the local crop, but that is not the answer. It is also only concerned with feeding people in cities, as this is where riots take place, but landless peasants will still go hungry.”

Many also question why the price of rice, which Pakistan is still exporting, is rising in the local market at a time of excess production. A couple of weeks ago, the price of Sela Basmati rose from Rs.30 to Rs.100 a kilo, its highest level ever, before falling to Rs.90 against Rs.42 a year ago.

Experts suggest that the commodity’s short supply was the main driver in the price hike as the surplus had already been shipped to various foreign countries.

India, one of the largest exporters of rice, has placed an export duty of Rs.8000 per ton of rice, which Indian analysts predict gives a huge boost to Pakistan, the fifth largest exporter. Pakistan is one of only three countries exporting the staple, apart from the United States and Thailand, which boast huge supplies.

The question now is, if Pakistan can place the right export policies to take advantage of this space, or if it needs to be prudent and build up its own rice reserves to provide a buffer for its people and drive down its price.

According to economic journalist Ashfaq Bokhari, “Every rice-growing country is building up reserves to meet global needs first and for this purpose has placed a ban or curbs on exports. Pakistan’s current rice production is estimated at 5.5 million tons, of which two million can be exported, but exporters are already determined to make a killing by selling at least 2.8 million tons.”

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There have also been reports of forward trading in food commodities, which has resulted in huge profits for the speculators, at the cost of the general populace. The hoarders and speculators have access to cheap credit and the means to clandestinely store hoarded stocks to create artificial shortages and keep prices high.” Says an analyst, “Rice is in short supply as the commodity has slipped into the hands of speculative traders, who are not inclined to loosen their grip over the selling prices, and are regulating them in line with profit margins.”

Pre-budget shocks have also resulted in higher prices of sugar, onions and pulses in the Karachi wholesale market. Prices of cooking oil and ghee as well as flour are rising every week in utility stores across the city. The wheat price has fallen as a result of the import announcement, but is still high compared with prices of the corresponding year. Flour, meanwhile, has remained unaffected by the fall in wheat price.

With no real rebate in food inflation in sight, many analysts have started to ask if the government has the will or the expertise to tackle the problem.

“The government is pre-occupied with matters related to the judiciary and their own political survival,” says an analyst, “and not much serious thought or energy has yet been put into the food issue. They’re still preoccupied with pointing fingers at the Musharraf government and reiterating what a bad shape the economy was in when they inherited it, but these statements are simply compounding the problem. It is not enough to point to the global rise in food prices and simply shrug one’s shoulders, as the previous government has done. Concrete measures need to be taken, and they need to be taken now. These include continuously raising the support price of wheat and cracking down on profit-seeking activities.”

When markets cease to function equitably, how should the government respond?

After being conferred the “Central Banker of the Year in Asia” award by an international magazine, The Banker, State Bank Governor Shamshad Akhtar increased interest rates to 12% to curb inflation and stabilise the rupee, and said that the pressure would ease in June when US$3 billion are expected to enter Pakistan. She recommends that the government pass through the price increase of wheat and oil and tighten its belt on non-priority development expenditures. Writing in an advertisement supplement, she advises, “Pass through of more and more global commodity prices is warranted given that inflation has crossed double-digits. Improving availability of products, using utility stores to provide goods and proper prices, and ensuring availability through involvement of provincial and district administration are some of the measures being taken.”

Akhtar also recommends that “as Pakistan is blessed with abundant agricultural potential, efforts to unleash this and raise yields are critical to bringing the country to self-sufficiency given the population size.” Other analysts agree that there is space for strategic gains to be made by investing in its agricultural sector and then prudently exporting its surplus. The World Bank, which has recently reprimanded Pakistan for tightening its food exports to Afghanistan, urges the government to take immediate steps to attract investment in agriculture. High energy prices and increased water scarcity are at present squeezing the farmers, it notes.

Whether Prime Minister Gillani and Finance Minister Qamar will be successful in courting such investment remains to be seen. Abraj Capital, a Dubai-based firm, is working with the UAE government on agribusiness investment and is rumoured to have bought agricultural land in Pakistan. Reports of Saudi interest in farming have also been trickling in the media. However, it is believed that this investment will be export-oriented as Saudi Arabia also suffers from food insecurity. It is also questionable if the benefits of an export-oriented policy will trickle down to the masses, or if they will continue to bear the brunt of high prices?

With the emphasis of policy makers remaining on the balance of payments and fiscal deficits of the economy, “The government can do little in the short run except devise a mechanism of targeted food subsidies,” says Asad Sayeed of the Collective for Social Science Research. “In the medium run what is needed is a reshaping of policies that allows the rich to benefit from economic growth but does not leave the poor behind.”

Whether targeted food subsidies will work well, or be enough to meet the demands of the people, given the cash-strapped position of the government, is also questionable. Phasing out of general subsidies is already in place and there is also talk of keeping targeted subsidies at a minimum. Asif Zardari’s recently announced Benazir card scheme may just be an exercise in populist PR, and planned direct cash disbursements to “deserving families” are at a paltry level. So far the government has not appointed a minister in charge of the food portfolio. As of May 15, 2008, Nazar Muhammad Gondal was given the additional charge of the Ministry of Food, Agriculture and Livestock (MinFAL), but even its government-sponsored website does not list Gondal’s contact details.

Will the poor, once again, be forced to bear the brunt of the rise in prices, fuelled in part due to the small minority of the rich that can afford to pay, as Nobel prize-winning economist, Amartya Sen, in a recent report, suggests? Also, will we continue to see a proliferation of imports of luxury goods, the hummers and other four-wheelers, the vehicles of choice of the feudal MNAs, and the Mercedes and BMWs favoured by the banking sector, while the rural population and urban daily-wagers continue their march towards starvation? Notable is the fact that the subsidy on high octane fuel, used only to power such cars, has stayed firmly in place.

“In the last two decades, countries like China, Cuba, Sri Lanka, Costa Rica and Jamaica embarked on expanded programmes of health services, food subsidies, employment generation, land distribution, income supplementation and social assistance,” writes Allah Nawaz Samo, a development professional. “All have impressive records of achievements in removing malnutrition and deprivation. It is time for us to concede that neither the poverty-reduction strategy nor the second-generation of reforms have succeeded in promoting our people’s entitlements to food health and education. We, therefore, need a major shift in strategy.”

The sobering question now is: what needs to happen before our indifferent policy-makers have the will and courage to implement it?