Pakistan food crisis: Government looks to reduce prices amidst skyrocketing hikes and IMF pressure

By Pearly Neo contact

- Last updated on GMT

Wheat is one of the commodities most hard hit by Pakistan's current food crisis. ©Pixabay
Wheat is one of the commodities most hard hit by Pakistan's current food crisis. ©Pixabay

Related tags: Pakistan, Food prices

The Pakistani government aims to reduce the skyrocketing prices of basic food items in the country by reducing taxes, amidst an unsuccessful bid to the International Monetary Fund (IMF) to reduce its tax collection target.

Two of the food commodities most hard-hit by price hikes have been sugar and wheat, which are both staples in the country. Severe shortages of both items have been key contributors to this, resulting in sugar prices jumping to as high as high as PHR (US$0.55) per kg and wheat flour to PKR70 (US$0.45) per kg, from PKR70 (US$0.45) and PKR60 (US$0.39) respectively, according to Dawn​.

Adding to the messy situation were laughter-inducing explanations from politicians about the crisis, such as Minister for Federal Railways Sheikh Rashid who claimed that ‘In December and November, people eat more bread than usual’​ at a press conference last month.

He went on to insist that ‘this is not a joke as there is a study that backs this statement up’​ when the media burst into laughter.

In response to the escalating crisis, Prime Minister Imran Khan and his government decided at a senior-level meeting that a proposal would be put forth to the country’s Economic Coordination Committee (ECC) under the Ministry of Finance (MoF) to lower taxes for basic food items.

“Bringing about stability in prices of basic food items and reducing them as much as possible is the government’s top-most priority,” ​Khan said during the meeting.

In accordance with this, it was also decided that twice the previous amounts of wheat imports would be purchased by Pakistan to stabilise prices, and that sugar prices will be fixed by the country’s sugar advisory board with third-party evaluation performed.

Food smuggling and hoarding were also put under the spotlight, with Khan pushing for more concrete steps against both of these issues. Previous investigation had revealed the involvement of senior government officials in wheat hoarding, which led to the crisis, according to Pakistan Today​.

At a separate event, Khan had also pledged to take action against the perpetrators of the situation, admitting ‘negligence’ on the government’s part.

“This was our negligence, I admit,”​ he said.

“We are conducting an investigation into this [situation] and are slowly getting to know who is involved. I promise you, whoever is involved in the crisis, we will not leave that person [alone],”

IMF pressure

As of December 2019, the IMF reduced Pakistan’s tax collection target by PKR265bn (US$1.8bn) to PKR5.238tn (US$34bn), from its initial PKR5.503tn (US$35.7bn) after a weak performance in the first half of the fiscal year (July to December), which Express Tribune​ stated was due to ‘sluggish economic growth’​ and ‘weak enforcement by the Federal Board of Revenue (FBR)’​.

However, Pakistan requested for further target reduction to PKR4.7tn (US$30.5bn) when it met with the IMF on February 4, citing political instability and tight economic conditions, which the IMF did not immediately accede to and rejected later in the month.

In a formal statement the Ministry of Finance insisted that things were ‘on track’​ and ‘considerable progress’​ had been made.

“The IMF staff team had constructive and productive discussions with the Pakistani authorities and commended them on the considerable progress made during the last few months in advancing reforms and continuing with sound economic policies,”​ said MoF.

 “[All] end-December performance criteria were met, and structural benchmarks have been completed.”
“The Finance Division would like to make it very clear that the Government’s reform program supported by the IMF’s Extended Fund Facility is on track.”

That said, no specific details were released on how MoF intended to meet the PKR5.238tn (US$34bn) target given many prior analyses have predicted this would be impossible at its current rate, or how the proposed reduction of taxes on basic food items would factor into this.

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