Global Rice News

Pakistan Continues to Grapple with Food Inflation Amidst Surge in Raw Food Exports

Pakistan is currently facing the ongoing challenge of rising food inflation, which has been fueled by the consistent increase in the export of raw food products. This trend has persisted for the eighth consecutive month in the current fiscal year. According to the Pakistan Bureau of Statistics (PBS), the export of raw food products experienced a year-on-year increase of 16.35 percent to $685.03 million in March. As a result, food inflation reached an alarming rate of 16.6 percent for the month. The rising prices have made it difficult for economically disadvantaged populations to access staple food items such as rice, wheat flour, onions, meat, and vegetables.

There are several factors contributing to the persistent rise in the export of raw food products. Firstly, the considerable depreciation of the rupee has made Pakistani products more affordable in the international market, leading to higher demand. Additionally, disruptions in global supply chains and increased prices in the international market have further propelled the demand for food items. Notably, India’s ban on rice exports has created an opportunity for Pakistani exporters to fill the gap in the international market. As a result, rice exports from Pakistan have increased by 85.37 percent in the July-March period of the current fiscal year.

To address the pressing issue of food inflation, the government needs to focus on long-term measures and policies that aim to alleviate this strain. Over the years, the emphasis on exporting raw food items instead of value-added goods has negatively impacted the economy in various ways. This approach has resulted in missed economic opportunities, vulnerability to fluctuations in the international market, and dependence on imports of value-added products, which further strains the country’s foreign exchange reserves. The inadequate industrial base and challenges in foreign direct investment (FDI) have contributed to this problem.

While immediate action may involve reconsidering the unrestricted expansion of food exports, it is also crucial to strike a balance between capitalizing on gaps in the international food market and protecting Pakistani consumers from price hikes resulting from increased exports. Simultaneously, efforts should be made to broaden the country’s industrial base and attract more FDI. Historical inconsistencies in policies and their poor execution, as well as the volatile security situation over the decades, have discouraged both domestic and foreign investments in the production and export of value-added products.

India’s ability to ban rice exports and protect its population from rising food inflation highlights the benefits of a strong industrial base and healthy FDI. The country’s robust industrial base allowed it to adapt quickly to changes in the international market, resulting in significant savings on oil imports during the Russia-Ukraine war. Furthermore, India’s ability to process Russian crude oil and export it to Western countries boosted its exports and trade balance. This demonstrates the potential long-term benefits of expanding the industrial base and attracting more FDI, including controlling inflation, enhancing export performance, and strengthening forex reserves.

In conclusion, Pakistan must adopt a long-term perspective to address the challenges posed by rising food inflation. Short-term solutions may provide temporary relief, but the expansion of the industrial base and attracting FDI should be the primary focus. By doing so, Pakistan can reap long-term dividends, including better control of inflation, improved export performance, and increased forex reserves.

Source: [Business Recorder](https://www.brecorder.com){:target=”_blank” rel=”nofollow”}