ESCAP report: UN urges Pakistan to subsidise agriculture

Published: May 11, 2012

AGAINST ODDS: 4% is Escap’s projected growth for Pakistan this year, based on last year’s provisional growth figure of 2.4%. DESIGN: ALI DARAB

ISLAMABAD: 

The United Nations (UN), in its latest report on Asia, has advised Pakistan to provide agricultural subsidies and introduce modern technologies to increase per acre yield, arrest rising food prices and alleviate hunger.

The Economic and Social Survey for Asia and Pacific (Escap) – launched by the UN Economic and Social Commission for Asia and the Pacific in 32 countries across the region – has said in its flagship report that Pakistan faces increasing risk from rising food prices that directly affect the most vulnerable sections of the population.

The report suggests that the best way to bring food prices under control in the long term is to increase agricultural productivity.

“The country should continue to support rural development; a green revolution based on modern technology and new seed varieties; subsidised supplies of inputs such as fertilisers; and provision of credit to farmers,” it says.

Escap’s recommendations are in contrast to the advice given by the International Monetary Fund and other lending agencies as well as the US to Pakistan, who call for greater fiscal consolidation.

The report also lists Pakistan as one of the two South Asian countries where growth will accelerate in the current financial year; although this growth will not create more jobs.

“China remains the powerhouse of the region, despite slowdown of growth from 9.2% to 8.6% – but India and Pakistan are two countries where growth has accelerated this year,” said Clovis Freire, an official of the Development Policy section of Escap, while speaking at a launching ceremony here in a local hotel.

He said that in Pakistan, 4% growth is expected this year; against 2.4% growth in the previous fiscal year.

The Escap report launching coincides with the release of provisional growth estimates by Pakistani authorities. This year, the economy grew by 3.67% against revised growth figures of 3.04% last year, according to provisional estimates from the National Accounts Committee. The UN’s projection of 4% growth is based on last year’s provisional growth figure of 2.4%.

Freire said inflation will remain stubborn, and according to Escap’s assessment, is expected to hover at 12% this year. He said the biggest challenge faced by Pakistan was a resolution to the energy crisis.

To address energy shortages, Pakistan needs to urgently setup viable energy projects, minimise transmission and distribution losses, increase oil and gas exploration, and incentivise renewable energy resources, Escap has suggested.

The Escap report also says that: “A major share of the fiscal deficit is being financed by domestic sources; resulting in rapid rise in domestic public debt; which in turn is fuelling concerns about macroeconomic stability and monetary management.”

The Escap report confirms that the world has entered a second phase of recession – this time due to the European debt crisis. “Amid global turbulence, the Asian region’s growth will slow down to 6.5% against last year’s growth of 7%,” said Dr Noeleen Heyzer, Under Secretary General of the UN.

Commenting on Escap’s findings on Pakistan, NUST Business School Dean Dr Ashfaque Hasan Khan said that inflation remained high due to higher food and energy prices and high government borrowing for financing the budget deficit. Dr Ashfaque said large budget and current account deficits were expected this year, and financing of the twin deficits was the biggest challenge for the government.

He said sharp fluctuations in commodity prices were raising concerns about increasing hunger and poverty. He said Pakistan should focus more on increasing per acre agricultural productivity instead of fixing a wheat support price, which is inflationary.

Published in The Express Tribune, May 11th, 2012.

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Reader Comments (5)

  • May 11, 2012 - 10:32AM

    Pakistan is heavily but indirectly subsidizing agriculture through total tax exemption of farm income and by setting high crop procurement prices that are transferring over Rs. 300 billion a year from urban to rural economy. Recent Gallup survey on well-being shows that rural economy in Pakistan is doing well and putting Pakistan ahead of its neighbors. Gallup 2012 Wellbeing survey reports that 20% of Pakistanis say they are “thriving”, down from 32% last year. However, the report shows that more of them are still better off than their neighbors in Bangladesh (16% thriving) and India (11% thriving). The number of those “thriving” increased in Bangladesh by 3% and declined in India by 6%.

    http://www.riazhaq.com/2012/05/pakistanis-rank-above-neighbors-on.html

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  • Falcon
    May 11, 2012 - 4:55PM

    I think that might not be a good idea since just like Riaz Haq said we are already subsidizing agriculture significantly. In fact, there is a good possibility that might be the very reason contributing to inefficiency in the agricultural sector; who wants to fix operational inefficiencies, when you can make reasonable profits in their presence.

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  • Meekal Ahmed
    May 11, 2012 - 5:03PM

    I agree that the shift in the domestic terms of trade has brought prosperity to the rural areas but we don’t know how well that is distributed. Is the benefit accruing mostly to the large farmers?

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  • May 11, 2012 - 6:09PM

    Pakistan should open up food sector by eliminating tariff and non-tariff barriers.Only the foreign food companies have the capital to invest in the food production and services. GOP is broke.

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  • Cautious
    May 11, 2012 - 8:11PM

    Pakistan is broke and the days of subsidizing anything are over.

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