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“Wheat Crisis: Belling the Cat May Not Be So Easy”

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Islamabad (Imran Y. CHOUDHRY) :- Former Press Secretary to the President, Former Press Minister to the Embassy of Pakistan to France, Former MD, SRBC Mr. Qamar Bashir analysis :
There has been significant controversy and public outcry over the continued import of wheat in May 2024, despite the government’s target to halt imports in February 2024. This decision comes at a time when the country’s own wheat crop has flooded the market. The middlemen, flour mills, and hoarders are more inclined to store and hoard imported wheat compared to domestic wheat due to the price difference.

The average landed price of imported wheat is around US$290/mt (AU$450/mt), significantly lower than the government’s domestic intervention price of approximately US$350/mt (AU$545/mt). As a result, the burden of purchasing and storing wheat has fallen on the government, which lacks the financial resources and capacity for adequate maintenance and management of warehouses. Moreover, with the government’s warehouses already full of wheat and farmers expecting to sell no more than 50 percent of their crop, losses are estimated to be nearly 380 billion rupees ($1.4 billion).

Various reasons and theories have been proposed to explain this glut, but no one has been able to provide credible data to support these claims. This lack of transparency may be due to either naivety or an attempt to conceal certain facts.

According to credible data from the United States Department of Agriculture, there was no wheat import from 2015 to 2019. However, there was a staggering 361,600% increase in 2020. This increase coincided with the weakening of the USA’s hold on Afghanistan and the rise to power of the Taliban. During this time, some ambitious elements began to consider Afghanistan as part of Pakistan’s sphere of influence, leading to more fluid borders that facilitated smuggling of essential commodities to Afghanistan to earn goodwill and strengthen relations with the new government there.

More interestingly, this import and its smuggling was made at the expense of our national exchequer which had to pay for import of wheat in foreign exchange, which heavily burdened our meager foreign exchange resources when the domestic production of wheat was sufficient to meet the domestic demand.

The data on wheat production in Pakistan is indeed intriguing. There has been a consistent increase in wheat production since the inception of Pakistan. For example, the total wheat production in 1960 was 3,909 (thousand metric tons). This increased to 10,857 (thousand metric tons) in 1980, 21,079 (thousand metric tons) in 2000. This upward trend continued, reaching 25,247 (thousand metric tons) in 2020 and 26,801 (thousand metric tons) in 2023. The projected production for 2024 is expected to be around 32,100 (thousand metric tons).

Let’s compare this production with our domestic consumption for the same years. For example, the total wheat consumption in 1960 was 5,454 (thousand metric tons). This increased to 11,200 (thousand metric tons) in 1980, 22,500 (thousand metric tons) in 2000. This increase continued, reaching 26,300 (thousand metric tons) in 2020 and 29,600 (thousand metric tons) in 2023. According to fair estimates, wheat production in 2024 is expected to be around 32,000 (thousand metric tons), sufficient to meet the entire year’s domestic requirement. Additionally, if we factor in the over 2 million metric tons of wheat exported to Afghanistan, the production outweighs the domestic consumption.

In 2024, the sowing of wheat was a popular choice for farmers due to higher flour prices and perceived shortages. As a result, almost 40 percent of the cultivated area, or 9.12 million hectares, was dedicated to wheat in October, November, and December of the previous year for the 2024 harvest. This was an increase from the 8.86 million hectares planted in 2022 for the 2023 harvest and slightly higher than the 9 million-hectare crop a year earlier.

All was going well. There was equilibrium between supply and demand. The surplus of wheat and flour of around 1.8 million tons according to US government estimates was smuggled to Afghanistan, and any forecast of wheat, as a rule of thumb was reached after including the domestic demand of Afghanistan.

This practice required inflating the demand figures while avoiding direct mention of Afghanistan, as most exports to Afghanistan were facilitated through state-aided smuggling. Smuggling to Afghanistan was further incentivized as smugglers were doubling their money with each transaction, evading taxes, and being paid in U.S. dollars. Moreover, the depreciating rupee also motivated smuggling, as the exchange rate reached a record low with the PKR plummeting to 287.29 against the U.S. dollar, while 86.3 afghanis fetched a dollar.

However, the situation changed when the government made a sudden policy U-turn in July 2023 to repatriate Afghan undocumented and illegal aliens, and to curb smuggling and hoarding of wheat as a punitive measure against Afghanistan for failing to stop cross-border terrorist attacks into Pakistan.

The then caretaker Prime Minister, Anwaar-ul-Haq Kakar, defended the July 2023 policy, stating that Pakistan has adopted a “zero tolerance” approach towards smuggled goods and foreign currency to Afghanistan.

In response, the Frontier Corps intensified vehicle checks and seized multiple large consignments of wheat flour attempting to cross illegally. The government also began monitoring wheat supply movements from Punjab to Khyber Pakhtunkhwa, requiring official documentation for wheat transportation and establishing additional checkposts to control food item smuggling. It tightened control over the Afghan Transit Trade. These stringent measures and crackdowns had a significant impact on curbing illegal wheat smuggling to Afghanistan.

However, in his hasty, thoughtless, and knee-jerk policy U-turn, the government utterly failed to comprehend the long-term impact of this skewed policy decision. It also failed to put in place adequate checks and balances to protect Pakistani farmers and consumers from the consequences of this short-sighted policy.

As PML(N)’s leader, Mr. Nawaz Sharif, known for his confrontational stance with the establishment, is determined to identify those responsible for the wheat import crisis, he may soon realize that the elements behind this crisis are beyond the power and reach of the weak and fragile incumbent government, as well as beyond his own reach.

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