(1/n) While there is a general upward trend in food prices in #Pakistan, there is also a lot of heterogeneity is how prices of key food items have changed across cities. This points to a mix of local, national and global factors underlying the upsurge in food prices recently.
(2/n) For example, average wheat flour price has increased by almost 5% in Punjab since May but the increase is much higher in Sindh, KP & Balochistan.
(3/n) In contrast, average onion prices have increased most in Punjab, Islamabad & Sindh but fallen significantly in Balochistan (due to imports from Iran?). Prices in KP have also increased but by less than half of the increase in Punjab, Isb & Sindh.
(4/n) Sugar prices have increased by roughly the same amount everywhere. Tomato prices have doubled everywhere but increased by more than 3 times in Sindh and more than 2 times in Punjab.
(5/n) Potato prices have increased much more in Punjab and KP than in other provinces. Finally, Pulse Moong prices have fallen everywhere but more so in Isb, Punjab and KP.
(6/n) This suggests, while there is a general upward trend in food prices, there is substantial regional disparity pointing to wide range of factors. A survey of Punjab based farmers by ADB does point to several factors which affected agri supply chain: adb.org/sites/default/…
(7/n) For example, some farmers reported that they could not visit markets to sell their produce due to COVID related disruptions. Most also reported an increase in cost of inputs including seeds, fertilizers and pesticides.
(8/n) More than half of respondents operating in 'mixed cropping zone' also reported Locust related disruptions. The report notes, "A locust infestation of such magnitude has not occurred in Pak for more than 25 yrs &, with outdated infrastructure, the govt is ill-equipped to..."
(9/n) The report also cites FAO estimates, "The Food and Agricultural Organization of the United Nations estimated that, without effective measures, locust infestations would cause up to PRs688.5 billion ($4.1 billion) damage of kharif crops and PRs705.8 billion ($4.2 billion)"
(10/n) While the report only covers Punjab, other regions also experienced floodings which must have affected agri production in those areas.
(11/n) The wide variety of shocks to agri sector over last few months set the stage for prices to increase. More so, since different regions were being hit by different shocks, the effect on prices was not uniform both across the country and across agri items.
(12/n) Finally, our govts' fixation with import controls amplified the effect of shocks on food prices. While the agri sector was constantly hit by a variety of shocks, govt machinery was ill equipped to stay up-to-date with the fast changing environment & make timely decisions.
(13/n) Even now imp decisions on wat to import & how much to import r still being taken by the cabinet. Perhaps it is time for the cabinet to devolve these decisions to the private sector & just focus on maintaining buffer stocks as a credible threat against speculative activity.
(n/n) Or else, a similar disruption in agri supply chains in future will result in a similar cycle of rising prices. Govt machinery is almost always ill equipped to stay up-to-date with ever evolving information set in such disruptive environments. Why risk embarrassment again?

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More from @ajpirzada

18 Oct
(1/n) The previous thread discussed supply side factors & focused only on food infl. But wat about the demand side? There is a lot happening here as well. After remaining stable around 10% for about 2 yrs, growth rate of money supply increased from 11% in Dec-19 to 16% in Oct-20. Image
(2/n) To wat extent such a sharp increase in money supply will affect inflation is not immediately obvious. This will partly depend on wat ppl decide to do with it & how the SBP will respond to it. But before this, lets look at why money supply has increased so much since Dec-19.
(3/n) While money growth started increasing from Dec-19, most of the increase was during the post-COVID period. Money growth increased from 11% to 13% during pre-COVID months and from 13% to 16% during post-COVID months (black line).
Read 15 tweets
15 Oct
(1/n) There is often a lot of emphasis on social security in political discourse around 'riasat-e-madina' in #Pakistan. But in the few books I hav ever picked up, the bigger story is always about development of trade networks & of financial instruments required for achieving this
(2/n) To an extent that George Saliba's whole thesis on the downfall of Islamic civilisation is centred around the diversion of east-west trade away from the traditional trade networks passing through Islamic lands.
(3/n) Arguing further tht it was the wealth creation frm trade which allowed Muslim elites to finance the scientific enterprise. And once traditional trade routes lost their appeal to newfound shipping routes, both wealth creation and, consequently, scientific enterprise declined
Read 5 tweets
4 Oct
(1/n) To ans questions raised in comments to my earlier post, let me explain y I hav a serious issue with this graph. Note that the graph DEFINES that anyone earning more than $300 per month belongs to middle class. This is exactly wat is wrong with it. Y?
(2/n) In short, bec purchasing power of $ has continued to change over time. Let's start frm 2014. Recall that while exchange rate remained almost fixed between 2014-18, domestic prices kept increasing by more than increase in world prices. Result: real exchange rate appreciated.
(3/n) Now the graph. A person earning $300 in 2014 does not hav same purchasing power as one earning $300 in 2017. In fact, one earning $300 in 2017 is poorer than one earning $300 in 2014. Y? Bec, due to overvaluation in exch rate, $1 buys u less in 2017 than wat it did in 2014.
Read 12 tweets
27 Sep
(Comment: 1/n) More than that, I will argue that the biggest disservice our govt does is not letting unproductive businesses go bust. There r guaranteed returns/prices, trade restrictions & plethora of (bad) regulations making sure that the economy remains more of the same. Image
(2/n) This then means that we keep using our resources to produce same goods/services rather than allowing them to get reallocated to more productive activities. See an earlier thread for more detailed discussion
(3/n) It is not hard to appreciate why govts are often reluctant to let businesses to go bust even if they are unproductive. Doing so makes people temporarily unemployed and give leeway to opposition to blame the govt for not doing anything about this. ImageImage
Read 5 tweets
25 Sep
(1/n) It turns out year-on-year credit growth is -ve in real terms. (Real) Outstanding credit in Aug-20 is 9.23% lower compared to Aug-19 & 9.47% lower compared to Aug-18. Now one can argue tht 2018 is not an appropriate benchmark since this was the year of debt fuelled growth. Image
(2/n) If u buy this argument then relevant benchmark is probably FY17/16. The picture improves considerably. But note that total credit in Aug-20 is still 2.57% lower than wat it was in Aug-17. There is still more to the story: distance frm pre-crisis trend is likely much bigger.
(3/n) But there r few positives as well. First, total credit (real terms) to export sector has continued to increase over this period. It stood 14.92% higher in Aug-20 than what it was in Aug-18. This confirms that the economy has rebalanced towards exports during last two years.
Read 5 tweets
19 Sep
(Thread: 1/n) Everyone in #Pakistan talks about elite capture but what does it even mean? After all, even good policy decisions leave behind "a roll of victims sufficient to give sound policy a bad name" - Hicks, 1939. tribune.com.pk/story/2264602/…
(2/n) In other words, there will always be people complaining about any policy decision ever taken. How then does the electorate know if policy decisions are being taken keeping in view society’s interests as a whole rather than the elites’?
(3/n) I argue tht elite capture can be identified by assessing credibility of decision makin processes. Since an imp part of decision-making r institutions, their nature, culture of meritocracy & autonomy with which they operate shud be central to any discussion on elite capture.
Read 7 tweets

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