A time for further belt-tightening?

Oil prices have already begun to surge due to the escalating instability which has spread across the oil-producing Arab states. As oil prices rise, inflation can be expected to follow suit. As transportation and energy prices rise, the implied higher cost of production will be passed onto consumers in the form of raised prices. Although this impending inflationary pressure will be global in nature, its impact on countries like Pakistan may be particularly severe.

Recent analysis of inflationary trends reveals that besides fuel, food prices account for the major proportion of inflation in Pakistan. Despite being a major agricultural producer, we have not built adequate food distribution and storage facilities, which are vital for assuring food security.

Questions are also being raised about the monetary policy stance of the current government. It is being said that inflation in Pakistan cannot be blamed on rising global commodity prices alone. Many other Asian countries have mitigated the impact of global price rises, especially since 2008, through currency appreciation. In Pakistan, however, the impact of higher global food and fuel prices has been further worsened by the sharp depreciation of the exchange rate. Development economists note that even when commodity prices witnessed a sharp decline, the depreciation of the exchange rate neutralised the benefits for Pakistani consumers. As food and fuel prices are on the rise again, any further depreciation of the rupee may be catastrophic for the already struggling poor people in Pakistan.

Although political pundits are undermining the threat of social upheaval in Pakistan, the diminishing affordability of food could very well ignite mass unrest. Sluggish economic growth, increasing insecurity and persistent unemployment have already broken the back of ordinary people. There is a limit to tolerance of adversity, and hunger is something which no human being can tolerate.

The World Food Programme, and other local entities like the Sustainable Development Policy Institute, have undertaken survey work to show that food insecurity has become a prevalent phenomenon, afflicting millions of people across our country. Unfortunately, districts with the worst food security were also badly hit by the devastating flood this past year. Malnourishment and chronic hunger remain a serious problem which aid and relief agencies are still grappling with.

Poverty and hunger may not be the sole cause of militancy, but they do lead to violence and also reduce the resilience and coping power of societies against any external or internal shock.

The government has recently formed a high-powered National Price Monitoring Committee and it claims to be actively monitoring prices of edibles. There has also been talk of putting in place a mechanism to respond to food emergency in any part of the country. The emerging global trends indicate that such claims are now about to be put to a test.

Published in The Express Tribune, February 27^th, 2011.