Country Report Pakistan April 2011

Economic policy: Government policy is pushing up food prices

The World Food Programme (WFP, a UN agency) has criticised government policies that have contributed to high food prices in Pakistan: the WFP's director for Pakistan, Wolfgang Herbinger, noted in March that malnutrition levels are rising despite the country recording decent harvests. One reason for this is that the government increased the wheat support price by 120%, in a move that benefited big landlords but harmed poor Pakistanis.

This policy has also faced criticism within Pakistan. A former advisor to the Ministry of Finance, Ashfaque Hasan Khan, called the government's decision to increase the wheat support price, from PRs425 (around US$5) per 40 kg in early 2008 to PRs950 at present, "criminal". According to Mr Khan, a 10% increase in the wheat support price raises the retail price level by 3%-a 120% price rise would have increased the price of wheat by 32%. Domestic wheat prices in Pakistan are now higher than international prices.

Given that parliament is dominated by feudal landlords, the increase in the wheat support price appears wholly self-serving. Wheat is the main staple food input Pakistan. The increase in its price means that fewer Pakistanis can afford two proper meals a day. However, the government claims that increasing the farm gate price of wheat encourages farmers to grow more of the crop, and also helps to prevent smuggling of wheat to Afghanistan. Officials argue that they are attempting to help poorer Pakistanis. Around 4.6m families receive PRs1,000 per month under the Benazir Income Support Programme, a scheme that has been in effect across the country since 2008/09. However, millions of Pakistanis who are slightly better off than that do not benefit from the scheme (only families earning less than PRs6,000 per month are eligible to receive cash grants under the programme). According to the WFP, levels of malnutrition in Sindh province are now 21-23% of people living there; Mr Herbinger noted that the rate at which it is considered an emergency is 15%, and called the incidence of malnutrition in Sindh "well above African standards".

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
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