‘A ban on corn exports in Argentina is fanning fear among farmers and traders that one of the world’s top food suppliers is returning to an era of brutal meddling in crop markets. The measure creates yet another driver for surging global grain futures, given Argentina is the third-largest shipper of corn, and stokes concern of an up-tick in food nationalism around the world as the pandemic disrupts trade.’ – ‘Return to food protectionism is riling farmers in Argentina’ by Jonathan Gilbert

In similar way as the world is witnessing ‘vaccine nationalism’ where rich countries are extremely domestic-oriented in terms of vaccine purchase decisions and not caring for an evenly rolled out supply of vaccine to meet the needs of a globally spread Covid food supply chains are under stress due to over-heightened national insecurities, and lack of a needed multilateral spirit coming to the fore, whereby stocks are being built domestically by many countries under the application of ‘food nationalism’.

This is indeed worrisome since according to a May 2020 article ‘The world’s food system has so far weathered the challenge of Covid-19’ in the Economist, the food supply chain depends heavily on connectivity, and in turn imports. It highlights, in this regard, that ‘Connectivity is what the world’s agro-industrial complex is all about. Four-fifths of the planet’s 8bn mouths are fed in part by imports; the $1.5trn that was paid for them last year was three times 2000’s bill.’

‘Food nationalism’ is perhaps one of the main reasons for rise in food prices recently. In this regard, a recent Bloomberg article ‘Global food prices at six-year high are set to keep on climbing’ points out: ‘Global food prices reached a six-year high in December and are likely to keep rising into 2021, adding to pressure on household budgets while hunger surges around the world. A United Nations gauge of food prices has jumped 18% since May, as adverse weather, government measures to safeguard supplies and robust demand helped fuel rallies across agricultural commodities from grains to palm oil. Prices will likely climb further, the UN’s Food & Agriculture Organization said. The spike threatens to push up broader inflation, making it harder for central banks to provide more stimulus to shore up economies, while stirring memories of food-price crises a decade ago. It’s bad news for consumers whose incomes have been hurt by the Covid-19 crisis, and adds to concerns about global food security that’s being affected by conflicts and weather shocks.’

According to a recently released ‘Global Economic Prospects’ report by World Bank Group, rising food prices have a strong influence in pushing the people below the poverty line, and in this regard, the report highlights the following: ‘Surges in food prices tend to depress incomes and consumption, and increase food insecurity, with the most severe impact felt by the poor. Economies with high food inflation rates tend to have a larger share of the global poor and higher rates of poverty.’

At the same time, the Covid pandemic has significantly impacted incomes of people, and in turn, their purchasing power. This would make it all the more difficult for people to save themselves from periods of hunger, and in turn, raising the probability of greater addition to the number of people falling below the poverty line as they struggle to manage their budgets. In fact, this situation would require of governments to ensure provision of greater food subsidies; in turn, adding to fiscal space management challenge facing governments of developing countries, who have already provided stimulus over many months during the pandemic, and with little multilateral support.

With commodities’ prices on the rise, whereby for net oil-importing countries like Pakistan, which also have to cater to a significant import bill for food items, and with most debt relief from creditor countries and multilateral agencies coming for the very poor countries – and there too in terms of bilateral debt relief, when a significant proportion of debt is owed to private creditors – and not for emerging economies like Pakistan, all mean that the country’s surplus situation in the balance of payments account would likely to come under severe pressure in the coming months.

With exports not likely to come to rescue with insignificant reforms in the energy sector – the main contributing factor behind exports growth – and with lack of demand at the back of deep global recession in motion currently, and likely to persist given the lackluster speed expected in vaccine rollout, the country could be facing a severe balance of payments crisis in the coming months, and with rising subsidy needs could mean an unsustainable fiscal deficit situation coming together. And all of this with rising food and fuel inflation would raise serious questions for policymakers trying to balance stimulus needs for growth enhancement, hunger prevention, and poverty reduction, with macro-stabilization requiring greater austerity.

That is why Nobel Laureate, Joseph Stiglitz, in his recent article ‘A global recovery’s leading variables’ underlines the importance of greater multilateralism in these testing times: According to him, ‘The question now is whether the US and Europe can double down on stimulus and come to the aid of the developing world.… The head of the International Monetary Fund, Kristalina Georgieva, has already called for another $500 billion issuance of Special Drawing Rights, which would be enormously helpful in restarting the global economy.... The hope now is that Biden will reverse the US approach, not just on SDRs but also on international cooperation more generally.… Similarly, there is an urgent need for more leadership on debt restructuring. The COVID-19 recession has put many developing countries and emerging markets in a precarious financial position. What began as a liquidity problem has morphed into a solvency problem: many countries simply do not have the resources to repay outstanding debts.’

While the country could hope for better outcomes on the multilateral front, domestic agricultural policy needs to be prioritized. Although years of neglect of the agricultural economy, resulting in weak institutions, organizations, and markets prevalent here, will remain as major impediments to bringing needed improvements at a fast pace, nevertheless a focused approach will need to be adopted to avert the highly likely coming food crisis with meaningful steps, including the likes of those taken during the ‘green revolution’ of the 1960s; along with seeking clearly defined and quick assistance from China in this regard.

(The writer holds PhD in Economics from the University of Barcelona; he previously worked at International Monetary Fund)

He tweets@omerjaved7

Copyright Business Recorder, 2021