Farm input prices going high: Economy faces problems as farmers lose earnings: ADB

ISLAMABAD: The rising input prices raise grave concerns as farmers have lost cash earnings during the Covid-19 pandemic, which may cause significant problems for Pakistan's economy, says the Asian Development Bank (ADB).

The ADB in its latest brief, "Covid-19 Impact on Farm Households in Punjab, Pakistan: Analysis of Data from a Cross-Sectional Survey," stated that before the coronavirus (Covid-19) outbreak, Pakistan's Gross Domestic Product (GDP) growth for 2019-20 was projected at 3.2 percent, with agriculture contributing 2.9 percent.

However, the Covid-19 outbreak affected various channels of Pakistan's economy, slowing it down; consequently, the provisional growth of the GDP for 2019-20 has been re-estimated at -0.4 percent, with agriculture as the only sector showing positive growth at 2.7 percent.

While the long-term consequences of the Covid-19 pandemic will become more apparent in the coming months, this brief presents the pandemic's initial impact on farm households in rural Punjab.

This brief focuses on Punjab because it is the largest province in Pakistan in terms of population and contributes about 57 percent to the value of national agricultural production.

The province produces more than 80 percent of the country's wheat and cotton, almost two-thirds of its sugarcane, and about half of its maize; and its horticultural output represents 67 percent of national production.

More than 400 farmers in Punjab, Pakistan, were surveyed on the impact of the nationwide lockdown in response to the coronavirus disease (Covid-19) pandemic and the locust invasion.

Due to the Covid-19 pandemic, about one-third of farm households reported loss of earnings, and 22 percent of the surveyed households had family members return home from urban areas.

The lockdown disrupted food supply chains of high-value agricultural products (vegetables, fruits, and milk) and farm inputs, but it had relatively less impact on the wheat harvest and marketing in Punjab.

Locust invasions were observed in the mix-cropping zone of central Punjab, causing crop damage in the area.

The government response is needed to offset the negative effects of Covid-19 and the locust attacks, it added.

The survey of farmers in Punjab revealed that wheat harvesting and marketing was spared the negative effects of the restricted movement of goods imposed because of Covid-19, except in the southern districts.

Restrictions on movement of goods upset the marketing of highly perishable products, such as vegetables, fruits, and milk as they are difficult to store, unlike grains.

Disruptions in the food supply chain result directly in income losses for producers and increased food prices, and therefore, need to be kept at a minimum under the Covid-19-induced movement restrictions.

The rising input prices raise grave concerns about the forthcoming rice growing season.

The results in this brief show that farmers have lost cash earnings during the Covid-19 pandemic.

Coupled with the higher input prices, farmers may not be able to buy the inputs they need for rice production.

Because rice is a major staple crop for domestic consumers and an important export product, increased input prices may cause significant problems for Pakistan's economy.

At the same time, locust swarms were reported in the two surveyed districts, with more severe cases observed in Balochistan and Sindh provinces than in Punjab.

The swarms have resulted in production losses for farmers who are already suffering the effects of the Covid-19 pandemic.

Immediate prevention and mitigation measures are required, in addition to midterm measures to prevent a future resurgence.

In late April 2020, the government of Punjab estimated near-term economic losses to the provincial GDP due to the Covid-19 pandemic at between $3 billion and $5 billion, based on the data available at the time.

In a worst-case scenario, due to an extended lockdown of a few months, the government predicted losses of about $20 billion.

Small and medium-sized enterprises, particularly in the manufacturing hubs of Sialkot and Lahore, will be affected.

Punjab will face limited export demand for its major sectors and incur unemployment losses of approximately $2.2 billion, with job losses in the near term estimated at $4 million-$7 million.

The Pakistan Institute of Development Economics estimates that about 58 percent of the Punjab's workforce is vulnerable to job loss.

It further stated that the outbreak of locust swarms originated from Saudi Arabia.

Undetected, they moved to Iran and Yemen, and swept from Iran to Pakistan.

The locusts hit Khyber-Pakhtunkhwa and Balochistan provinces in Pakistan first and then moved to Sindh and southern Punjab.

The Food and Agricultural Organization of the United Nations estimated that, without effective measures, locust infestations would cause up to Rs688.5 billion ($4.1 billion) damage of Kharif crops, and Rs705.8 billion ($4.2 billion) of Rabi crops, assuming 25 percent damage to crops.

A locust infestation of such magnitude has not occurred in Pakistan for more than 25 years and, with outdated infrastructure, the government is ill-equipped to fight the attacks.

The federal government declared a national locust emergency early in 2020, allowing multiple government agencies to collaborate for the effort.

While the locust threat to agriculture is not larger than that posed by Covid-19, their simultaneous occurrence will have a compounding effect with grave results.

The survey sought to determine the impact of the locust invasion, which has inevitably added to concerns about food security and whether the government had provided farmers with early warning about the swarms.

Copyright Business Recorder, 2020