The demonising dollar

Pakistan’s economic base is agricultural and it remains largest producers of cotton in the world and exports food

This is what the media and ‘analysts’ tell us about the current economic situation: it’s the end of times! The demonising dollar is all set to gulp down the common man.

Hold on. Let’s break it down and see what textbooks tell us about Pakistan’s economic base: it’s agriculture based, is among the largest producers of cotton in the world and exports food items such as rice and wheat, and mangoes and oranges, and non-food items including textile and apparel.

To put this in context, agriculture sector still contributes around 18% to the GDP, employs 42% of the total labour force, and constitutes 75% of total exports revenue. Pakistan is the fourth largest producer of cotton in the world, following only China, India and US. Approximately 1.5 million smallholder farmers rely on cotton for a living.

Sounds good, right? It’s time to take away some myths — currency depreciation isn’t the best economic indicator. Sure. Dollar isn’t the biggest demon. Sure.

Basic economics states that with a fall in a currency’s value, imports become costlier, affecting the cost of production (assuming that raw materials are imported), leading to a rise in market prices and therefore, adversely affecting the consumer. It’s a chain process. The end user only gets affected indirectly.

Here’s another perspective: The contribution of the agriculture sector to the GDP has dropped from 21% in a decade. The yield per hectare of major crops has also been on a decline over the years: wheat yield is only 38% of what France produces, rice crop is merely 29% of yield per hectare of the US and cotton produce is just 52% of what China grows per hectare.

Remember, Pakistan is the fourth largest world producer of cotton? Yet, its total produce has dipped almost 7% — as compared to same period last year — and is less than even half of China, the top producer. The country now imports cotton, consisting almost 2% of total imports, growing at a rate of roughly 33%. Around 1.5 million smallholder farmers who rely on cotton produce for a living are directly affected by the quality of produce, which in most cases is determined by avoidable factors like the impact of a natural disaster. It is then institutional and infrastructural systemic loopholes that affect the common men. Fix them and you improve the life of a smallholder farmer.

Where macroeconomic indicators are being worked on, including the value of the rupee, policy efforts are spot on. For the small farmer, a common man, it is in fact smaller policy actions such as support of the entrepreneurial ecosystem, promotion of innovation and adoption of global best practices that’ll save him.

Simultaneously, the government easing Pakistan’s visa policy thereby attracting tourism, signing technical support MoU for agriculture with China and is finalising details of overseas labour opportunities in the Middle East. This is exactly what will improve the life of a common Pakistani more than the adverse indirect effect of the drop in the rupees value.

Taking away a myth: it is not the demonising dollar that will gulp down the common man. Food imports value more than 10% of total imports — half of this is spent on edible oil and tea, and the other half on milk related products and other consumer items such as spices and pulses. Don’t forget, Pakistan ranks among the top milk-producing countries in the world.

Thought provoking? Next time you head out for grocery, do check the food label to see if it’s Made in Pakistan because the ‘dollar is demonising’, right?

As the state fulfils its duty of brining sustainable and impactful structural reforms, and nurturing and facilitating the local industry, the common men too have a duty — support and believe in Pakistan. It is definitely not the end of times!

Published in The Express Tribune, June 9^th, 2019.

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