Jo Banain Gai Khain Gai

As our standard of living faces a collapse, the main focus of our economic policy should be efficient production of exportable goods and agricultural products

By Abdullah Niazi

Inflation has well and truly breached our walls. The beginning of the month marked an increase of 32.57 per cent on a year-on-year basis in weekly inflation due to a massive surge in prices of both food and nonfood items, especially vegetables like onions and items like cooking oil, according to the Pakistan Bureau of Statistics. The reasons behind this are plenty and have been discussed, screamed, analysed, and shared Ad Nauseam. Pakistan is at one of its most dire moments in its economic history. Reserves are dangerously low, imports are closing down with energy and fuel both on the brink, and the country is on the cusp of default. And with all this going on, for the first time, it seems that Pakistan is truly alone on the world stage. Friendly countries are not extending a helping hand and the International Monetary Fund (IMF) is throwing everything and the kitchen sink at Pakistan’s negotiators in terms of conditions.

All of this we know. But how do the effects of this manifest on the ground? It happens with the little things. Parents pulling their children out of school because they can no longer afford to pay the fees. Families selling their cars and buying motorbikes instead to get around. Labourers eat one meal a day instead of two. Companies are laying off employees that have been with them for decades because they cannot meet payroll. Working professionals with white collar jobs looking for side hustles like becoming Careem drivers or delivery riders.

In every possible way, as the Pakistani rupee loses its value and the purchasing power of our citizens somehow manages to fall to new lows with every passing day, there is a great drain on the quality of life that the people of this country are living. And it isn’t as if any of this is new. Pakistani fares abysmally on human development indicators as it is.

Pakistan’s Human Development Index (HDI) value for 2021 is 0.544 – which puts the country in the Low human development category – positioning it at 161 out of 191 countries and territories. Between 1990 and 2021, Pakistan’s HDI value changed from 0.400 to 0.544, a change of 36.0%. Meanwhile, the Gender Development Index (GDI), which measures gender gaps in achievements in three basic dimensions of human development: Health, education, and standard of living, shows a massive gap.

So what do we do? Immediately, there is little we can do but watch as over hapless negotiators plead with the IMF. But in the longer run there is an important milestone we must target: self-sustainability. For Pakistan to come out of this quagmire of difficulties it must focus its vision on one thing and one thing alone: growing its own food and making its own products.

A simple equation

For a very long time, Pakistan has been in a bad relationship with debt. And like all toxic relationships, it is a boom-and-bust cycle of taking a loan at a bad time, getting into bad habits, having a falling out, pretending to go through a period of change (symptoms may include political instability, jingoism, and reliance on religious symbolism), before finally becoming desperate enough to once again go back to the debt equation.

According to Raza Agha, a macroeconomist and sovereign debt strategist, Pakistan faces severe external financing challenges with rampant domestic political instability and higher rates in developed markets hitting capital inflows on the one side, while on the other rising commodity prices pump-up the import bill to unsustainable levels at a time when the country’s largest export markets in advanced economies are facing recession. “As a result, SBP reserves have declined rapidly while Pakistan’s dollar needs - projected at $120bn or so over FY23 to FY26 by the IMF - have never been higher. Although the government has been trying to arrange external financing via the IMF and “friendly countries”, the intervening period has led to severe foreign exchange shortages in the market with the rupee falling to unprecedented levels in the interbank and the kerb premium rising sharply,” he writes for Profit

What that means, essentially, is that as prices rise on the global market Pakistan is left vulnerable. Since we rely majorly on exports, we need more dollars at home to buy commodities. And since the American federal reserve is in Washington and not Karachi, the only way to get those dollars is to earn them by selling our products on the international market. Except, since our exports are low, Pakistan is left to deal with a constant double-whammy. Ideally, a major loan from a body like the IMF should be followed by introspection and serious structural reform that leads us to greener pastures. However, that has not been the case. But what would this scenario look like?

This is what it boils down to. The simple fact is that in the absence of borrowing all we are left with is what we as a nation can produce. This means that all the accountants, journalists, marketing professionals, video editors, HR managers and other members of the services industry are useless to what we can call the very basic core of what we as a nation must produce. So what does that leave

us with?

This is a very basic economic equation but at the end of the day, what we produce we consume ourselves and then send the excess of our production to the world to earn dollars and trade with other countries and get products we can’t produce as imports. Our manufacturing sector and our agricultural sector produce the goods that we can consume.

As things stand currently, we have been living beyond our means by consuming more than we produce. In an op-ed published back in June 2021 in Profit warned that we make up the difference between our imports and exports by external borrowing or by foreign exchange remittances from our workers from abroad. “The problem is that we have borrowed for decades. Our level of debt is so much that our net new borrowing ability is being diminished. At the same time our foreign exchange liabilities are increasing. This loss in new borrowing ability is the reason that we are worried about a GOP default for the first time. As a result it’s becoming more and more important that we live within our means. We have to balance our budget and trade deficits. The solution seems simple: increase your production of industries and agriculture and cut down on your imports.”

The agricultural part of the equation

This is where things get even more excessively obvious. Pakistan’s manufacturing industry has a long way to go to be competitive on the international market. But perhaps one of the fields in which Pakistan has the potential, the raw materials, the space, and the natural inclination to succeed is the agriculture sector. And more importantly than that, for a food insecure country like Pakistan, focusing on agriculture gives us the added advantage of regaining our food security and self-sufficiency.

In an international ranking of the Global Hunger Index (GHI) this year, the country ranked 92 out of 116 nations, with its hunger categorised as ‘serious.’ Pakistan currently faces a scenario in which it is largely food sufficient but not food secure. Despite Pakistan being ranked at 8th in producing wheat, 10th in rice, 5th in sugarcane, and 4th in milk production, a 2019 report of the State Bank of Pakistan (SBP) showed that nearly 37% of households in Pakistan are food insecure.

At the end of the day, this is what it essentially boils down to. In a country like Pakistan, food sufficiency is the most important thing there is and at its core is the agriculture issue. In the three years since the SBP’s report, matters have only worsened. Food price inflation in Pakistan has been in double digits since August 2019. The cost of food has been 10.4-

19.5% higher than the previous year in urban areas and 12.6-23.8% in rural areas, according to figures published by the Pakistan Bureau of Statistics. So how does a country with one of the largest agrarian economies in the world find itself unable to sufficiently provide food for nearly 40% of its population? For decades, agriculture has been neglected and people’s earnings have been hit by one economic crisis after another. On top of this, particularly in the past decade or so, climate change related disasters and changes in the environment have resulted in our already neglected agriculture becoming less competitive.

Just take a look at one crop to understand how bad the situation is. As things stand, there is a lot that needs to be covered. Just a few days ago, reports began to emerge indicating that at a time when the government is desperately trying to save dollars by curbing imports, cotton might also have to be imported into the country because there was not enough production.

The textile sector has raised concerns that the country was facing an alarming decrease in cotton production which is unlikely to cross the five million bales mark. The figures by Pakistan Cotton Ginners Association (PCGA) revealed the country produced over 4.76m bales by Jan 31, against over 7.42m bales produced by the same time last year — a dip of 35.8pc or 2.66m bales.

Before this, things had gotten so bad that left without sufficient locally produced cotton and unable to import the raw material due to LC restrictions placed by the central bank, Pakistan’s textile manufacturers turned to the United States Embassy, demanding that the ambassador take their case to the federal government.

As the letter to the ambassador explained, Pakistan’s domestic cotton production has declined to a historic low this year, dropping to 5 million bales for the current year mainly due to heavy rains and floods. The estimated cotton production losses have been worth more than $2 billion. “This domestic cotton production is significantly shorter than the textile sector requirements as the textile industry of Pakistan consumed nearly 15 million bales of cotton last year, and the current season anticipated demand indicates that about 10 million bales will need to be imported,” reads the letter.

And that is just one example. Take edible oil for example. According to a report of the central bank, Pakistan’s palm and soybean-related imports stood at US$ 4 billion in FY21, rising by 47% year-on-year, compared to compound average growth of 12.3% in the last 20 years. And in addition to edible oil, these seeds fulfil another crucial purpose: providing feed for livestock including for chickens. What the recent GMO oilseed saga has proven more than anything is that Pakistan needs to be able to grow its own oilseeds rather than being dependent on imports for such a basic caloric input.

To sum it up, Pakistan’s agriculture has suffered from a lack of attention for decades. The country’s natural resources, soil fertility, and robust rivers have kept Pakistan in the running as a solid agrarian economy for almost its entire existence. However, shortsightedness has meant that successive governments have been very comfortable allowing things to run as is without investing in the future. As the population has increased, climate change has dug in its claws, and water scarcity has started hitting farmers, it is quickly becoming apparent that we have fallen behind. Immediate attention is needed, but only time will tell whether decision makers realise the urgency before it is too late. After all, this is not a question of just our agriculture. It is a question of what we are willing to do to survive. n