ESCAP report: UN urges Pakistan to subsidise agriculture

Advice at cross purposes with anti-subsidy rhetoric of Bretton-Woods institutions and the US.

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 11^th, 2012.