Umair Jalali looks at a very
difficult situation
The unprecedented and devastating Floods impact crops in Pakistan have wreaked havoc and now the real horrors of this tragedy are unfolding. This devastation has badly battered Pakistan and its entire socio-economic fabric. The already halting economy has taken a severe battering and the people are struggling to cope up with the widespread devastation. The flooding has affected over 33 million people — some 15% of the Pakistan’s population and has submerged a third of the country. The deaths are now calculated in thousands and the rains have caused damage worth billions of dollars, compounding the woes of an economy already beset by a raft of problems, ranging from a heavy debt burden and ballooning current account deficit to a tumbling currency and skyrocketing inflation, particularly food prices. The most problematic aspect of the flooding is the tremendous damage caused to vast areas where agricultural crops were at the point of ripening creating a shortage of edibles.
The destruction caused by the recent floods is of a much higher magnitude than any previous flooding and they have put the agriculture sector to extreme distress that already suffered from climate change to low mechanization that resulted in the decreasing crop yields and farm incomes along with rising rural poverty and food shortages. The floods seriously disrupted transportation linkages rendering roads and bridges inaccessible particularly the ones wherefrom edible items came from. This inaccessibility added to inflation that has already reached high levels and procuring daily items of consumption has becomes excruciatingly expensive.
The floods have also badly ruptured agricultural cycle in the country including the crucial southern breadbasket of the country where the crops were virtually on the edge on being picked up and this disruption has resulted in extremely short supplies of edible items. At the moment, the edible merchandise from the cold-storages of the country is being brought to the market, off course, on higher prices but the danger is that once this stock is exhausted it will be difficult to obtain such items even on atrociously high prices. It is also well known that crops like cotton wheat and rice have been seriously damaged.
It is widely acknowledged that the damage to the agriculture sector is likely to widen Pakistan’s trade deficit from the current 2.4% of GDP to more than 3.5%, as the country is forced to import more food stuffs and other goods from abroad. This shortfall will also put the Pakistani people to intense discomfiture particularly as it there is little chance of outside assistance coming in to offset the current problem. The people in the remote areas of the country are reported facing scarcity of food items already and this scarcity may increase in content.
Just to give an example of the problems faced by the country, the premier Pakistani agriculture produce, cotton is in dire straits as it is reported that cotton production remained 40.28 percent less than the last year’s harvest and that is rated to be an alarming drop of 2.9 million bales. Last year, Pakistan produced over 7.168 million bales against 4.28 million bales this year. During this period, the export of cotton was 4,900 bales, which remained 11,100 bales or 69.38 percent less than the export of 16,000 bales in the same period last year. Textile mills bought over 3.568 million bales against 3.19 million bales or 46.56 percent less than last year’s purchases of around 6.7 million bales.
Moreover, the rice harvest is projected to be at least 10 percent less than last year’s crop and, since, rice is also a major export item therefore its shortfall will decrease the foreign exchange for the country. Flood-damaged crops will force Pakistan to increase its food and cotton imports to make up for harvest losses at home. The impact will also be felt on rice and textile exports. Most crucially the floods have affected soil conditions to such an extent that wheat plantation has become difficult in many places and it is projected that the next wheat harvest could see a considerable drop in cereal production.
More imports and fewer exports are hardly something Pakistan’s economy badly affected by lack of foreign currency faced by the economy can afford and it will put tremendous pressure on the current account. For the moment the State Bank of Pakistan is trying to assuage the fear of Pakistanis by stating that the pressure on the declining foreign currency reserves will largely be offset by the falling international oil and commodity prices but the fact remains that the current account deficit will exceed the initial estimates of $10 billion.
Another most worrying aspect of this situation is that the current disaster turned Pakistan into a net importer of food thereby reversing decade long autarky the country was widely lauded for. Pakistan is now forced to import wheat and rice along with many other food condiments. The country is now importing 70 percent of pulses along with many other staples. This is an extremely worrying scenario and has put tremendous pressure on the official finance managers who feel themselves unable to mitigate the situation. TW
Floods impact crops
ByUmair Jalali
Teaches in The Royal Colosseum and is an avid sports fan
Dated
December 24, 2022
Umair Jalali looks at a very
difficult situation
The unprecedented and devastating Floods impact crops in Pakistan have wreaked havoc and now the real horrors of this tragedy are unfolding. This devastation has badly battered Pakistan and its entire socio-economic fabric. The already halting economy has taken a severe battering and the people are struggling to cope up with the widespread devastation. The flooding has affected over 33 million people — some 15% of the Pakistan’s population and has submerged a third of the country. The deaths are now calculated in thousands and the rains have caused damage worth billions of dollars, compounding the woes of an economy already beset by a raft of problems, ranging from a heavy debt burden and ballooning current account deficit to a tumbling currency and skyrocketing inflation, particularly food prices. The most problematic aspect of the flooding is the tremendous damage caused to vast areas where agricultural crops were at the point of ripening creating a shortage of edibles.
The destruction caused by the recent floods is of a much higher magnitude than any previous flooding and they have put the agriculture sector to extreme distress that already suffered from climate change to low mechanization that resulted in the decreasing crop yields and farm incomes along with rising rural poverty and food shortages. The floods seriously disrupted transportation linkages rendering roads and bridges inaccessible particularly the ones wherefrom edible items came from. This inaccessibility added to inflation that has already reached high levels and procuring daily items of consumption has becomes excruciatingly expensive.
The floods have also badly ruptured agricultural cycle in the country including the crucial southern breadbasket of the country where the crops were virtually on the edge on being picked up and this disruption has resulted in extremely short supplies of edible items. At the moment, the edible merchandise from the cold-storages of the country is being brought to the market, off course, on higher prices but the danger is that once this stock is exhausted it will be difficult to obtain such items even on atrociously high prices. It is also well known that crops like cotton wheat and rice have been seriously damaged.
It is widely acknowledged that the damage to the agriculture sector is likely to widen Pakistan’s trade deficit from the current 2.4% of GDP to more than 3.5%, as the country is forced to import more food stuffs and other goods from abroad. This shortfall will also put the Pakistani people to intense discomfiture particularly as it there is little chance of outside assistance coming in to offset the current problem. The people in the remote areas of the country are reported facing scarcity of food items already and this scarcity may increase in content.
Just to give an example of the problems faced by the country, the premier Pakistani agriculture produce, cotton is in dire straits as it is reported that cotton production remained 40.28 percent less than the last year’s harvest and that is rated to be an alarming drop of 2.9 million bales. Last year, Pakistan produced over 7.168 million bales against 4.28 million bales this year. During this period, the export of cotton was 4,900 bales, which remained 11,100 bales or 69.38 percent less than the export of 16,000 bales in the same period last year. Textile mills bought over 3.568 million bales against 3.19 million bales or 46.56 percent less than last year’s purchases of around 6.7 million bales.
Moreover, the rice harvest is projected to be at least 10 percent less than last year’s crop and, since, rice is also a major export item therefore its shortfall will decrease the foreign exchange for the country. Flood-damaged crops will force Pakistan to increase its food and cotton imports to make up for harvest losses at home. The impact will also be felt on rice and textile exports. Most crucially the floods have affected soil conditions to such an extent that wheat plantation has become difficult in many places and it is projected that the next wheat harvest could see a considerable drop in cereal production.
More imports and fewer exports are hardly something Pakistan’s economy badly affected by lack of foreign currency faced by the economy can afford and it will put tremendous pressure on the current account. For the moment the State Bank of Pakistan is trying to assuage the fear of Pakistanis by stating that the pressure on the declining foreign currency reserves will largely be offset by the falling international oil and commodity prices but the fact remains that the current account deficit will exceed the initial estimates of $10 billion.
Another most worrying aspect of this situation is that the current disaster turned Pakistan into a net importer of food thereby reversing decade long autarky the country was widely lauded for. Pakistan is now forced to import wheat and rice along with many other food condiments. The country is now importing 70 percent of pulses along with many other staples. This is an extremely worrying scenario and has put tremendous pressure on the official finance managers who feel themselves unable to mitigate the situation. TW
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