EDITORIAL: It ought to be appreciated that, for once, the system has moved fast enough for the Economic Coordination Committee (ECC) of the cabinet to approve import of wheat in time to take advantage of favourable price swings in what has become a very volatile market.
Wheat futures indexes are down 30-40 percent from their abnormal February peak, almost back to pre-Ukraine war levels; making this the best time to go shopping for this commodity, also our staple food, in this climate.
The ECC approved the lowest bid of Cargill International/Cargill Agro Foods Pakistan at a rate of $439.4 per ton for 110,000 tons to the extent of a total of 5,000 tons, which is 15 percent cheaper than the last tender, yet the weak rupee means that the end benefit will only amount to around Rs10 per kg.
Still, in an environment like this, every penny counts. Plus, the Committee also directed the ministry of national food security to explore the possibility of wheat import on 3-month deferred payment, or some such scheme, considering the cramped external sector. So perhaps there’s also an outside chance of some wheat abundant country giving us some now and asking for the payment later.
There was also some discussion about the prospect of a wheat import deal being signed with Russia later this month, though of course not on deferred payments, but if it comes through it will be a very interesting development.
No doubt Foreign Minister Bilawal Bhutto would have to be on his toes because he’s sure to receive a phone call or two from his new friend heading the US State Department. American obsession with sanctioning Russian exports hasn’t yet reached too far beyond its oil and gas sector and also cutting it out of the international banking system. Regardless, it will be very important to sort everything out that can impact the fate of the Extended Fund Facility (EFF), which has already been hanging in the balance for far too long.
The ECC’s also surely aware that so far it’s only secured one million tons of the four million tons of shortage that’s staring it in the face, and the market’s recent gyrations leave very little room for uncertainty, if any at all.
Nobody can say for sure if the Ukraine war or India’s sudden export ban or even Covid’s surprise resurgence in some parts will be the last of the exogenous factors influencing wheat. We’re also making the appreciated gesture of letting the World Food Program (WFP) purchase and reserve 120,000 tons of the imported wheat stock of Passco at the latest import price for relief in Afghanistan, so the urgency of securing adequate supplies for the local market is that much enhanced.
Some things are beyond the ECC’s mandate but the finance minister, who heads it, is still well within his rights to get the ball rolling on agri reforms that will stop relentless reduction in wheat production.
The Pakistan Economic Survey (PES) 2021-22, released just a month ago, held reduction in cultivation area, less fertilizer off-take, droughts and issues with water availability responsible for it.
Now the bigger, longer-term problem is that even after identifying all that is wrong, we’re clearly not doing enough to even begin addressing it. Because every year, even when there’s a much-trumpeted bumper crop, we still need to import wheat; which we once used to export.
Things have now reached a point where it is no longer just about food insecurity, which is grim enough, but also about dollar-heavy imports that should never have been needed, the trade balance, and the current account, which is even more ominous.
That’s why the government must not only step up its efforts to meet this year’s shortfall, but also devise a programme to restore our natural comparative advantage; or at least come as close to it as possible.
Copyright Business Recorder, 2022