Wheat export barred
Thursday, May 21, 2009
Editorial, Dawn, Pakistan
Thursday, 21 May, 2009
IN a positive move, the Economic Coordination Committee has rejected the food ministry’s request to allow the export of wheat. For its part, the food ministry has argued that initial surveys have indicated a bumper wheat crop this year and that given the lack of storage facilities in the country it makes sense to export the surplus and earn some foreign exchange rather than see a part of the crop go to waste. There is also the suspicion that in a year when the GDP growth rate is expected to barely cross two per cent and with the next budget around the corner, the possibility of wheat export could bump up preliminary GDP estimates. If farmers fear that there is a significant wheat surplus, they may rush their crop to the market earlier than usual and thus allow the government to claim a higher crop estimate and hence higher GDP growth at the time of the budget.
Thankfully though the ECC has resisted the food ministry’s demand. Past experience suggests that the decision to allow the export of wheat on the basis of estimates has proved disastrous for the country’s food security. There are two problems here. The first is the estimate of how much wheat is needed for domestic consumption. Placed at between 22 and 24 million tonnes, the measure does not take into account wheat smuggling out of Pakistan. Depending on the price of wheat elsewhere, relatively cheaper Pakistani wheat is smuggled across the porous border with Afghanistan and Iran and even to Central Asia and Dubai. Since the practice has proved difficult to stop, the estimate of how much wheat is needed domestically must incorporate the smuggling factor. The second problem is the estimate of wheat output: history suggests it is more an art than a science. This year the signs are all positive and a bumper crop is expected — upwards of 24 million tonnes versus last year’s dismal 21.8 million tonnes — but they are still only estimates. So to allow the export of wheat on the basis of estimates that historically have pegged local requirements at lower than actual and production at higher than actual would be irresponsible.
Besides, it is necessary to point out who will be the only guaranteed winners if wheat exports were allowed at this point in time: the small group of wheat exporters. The government may benefit in the short run from an unexpected inflow of foreign revenue, but it would do so at the risk of having to import wheat later, and possibly at a higher price, if the estimates do not pan out. And with food inflation still hovering near historic highs, consumers could face the double whammy of having good quality local wheat sent abroad now and then later having to buy lower quality imported wheat at a higher price.
Source
Thursday, 21 May, 2009
IN a positive move, the Economic Coordination Committee has rejected the food ministry’s request to allow the export of wheat. For its part, the food ministry has argued that initial surveys have indicated a bumper wheat crop this year and that given the lack of storage facilities in the country it makes sense to export the surplus and earn some foreign exchange rather than see a part of the crop go to waste. There is also the suspicion that in a year when the GDP growth rate is expected to barely cross two per cent and with the next budget around the corner, the possibility of wheat export could bump up preliminary GDP estimates. If farmers fear that there is a significant wheat surplus, they may rush their crop to the market earlier than usual and thus allow the government to claim a higher crop estimate and hence higher GDP growth at the time of the budget.
Thankfully though the ECC has resisted the food ministry’s demand. Past experience suggests that the decision to allow the export of wheat on the basis of estimates has proved disastrous for the country’s food security. There are two problems here. The first is the estimate of how much wheat is needed for domestic consumption. Placed at between 22 and 24 million tonnes, the measure does not take into account wheat smuggling out of Pakistan. Depending on the price of wheat elsewhere, relatively cheaper Pakistani wheat is smuggled across the porous border with Afghanistan and Iran and even to Central Asia and Dubai. Since the practice has proved difficult to stop, the estimate of how much wheat is needed domestically must incorporate the smuggling factor. The second problem is the estimate of wheat output: history suggests it is more an art than a science. This year the signs are all positive and a bumper crop is expected — upwards of 24 million tonnes versus last year’s dismal 21.8 million tonnes — but they are still only estimates. So to allow the export of wheat on the basis of estimates that historically have pegged local requirements at lower than actual and production at higher than actual would be irresponsible.
Besides, it is necessary to point out who will be the only guaranteed winners if wheat exports were allowed at this point in time: the small group of wheat exporters. The government may benefit in the short run from an unexpected inflow of foreign revenue, but it would do so at the risk of having to import wheat later, and possibly at a higher price, if the estimates do not pan out. And with food inflation still hovering near historic highs, consumers could face the double whammy of having good quality local wheat sent abroad now and then later having to buy lower quality imported wheat at a higher price.
Source
Labels: Economy, Wheat Export
posted @ 11:33 AM,
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