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Inflation and poverty

Food prices rise, the government falls

Article published on the 2008-05-10 Latest update 2008-05-14 14:19 TU

A fruit-seller in a village near Islamabad, February 2008(Photo: Tony Cross)

A fruit-seller in a village near Islamabad, February 2008
(Photo: Tony Cross)

Zia Masjid, Pakistan, 12 February 2008

People were grumbling and stomachs were rumbing in the village of Zia Masjid as the PPP held an election rally.

“We are citizens of Pakistan and we cannot find attar [wheat-flour]," said a raggedly-dressed old man. "Everything is getting very expensive. So we get into debt… We have no money, we don’t run businesses, we don’t have any work. We can’t afford clothes, there’s no electricity, no gas. Everything is finished! Where should we go?”

He was speaking for perhaps all of Pakistan's poor--33 per cent of the population, according to the World Bank.

Baker in North West Frontier Province.(photo: Tony Cross)

Baker in North West Frontier Province.
(photo: Tony Cross)

Despite the country's official economic growth rate of seven per cent for four consecutive years, the price of fuel and food soared in 2007. Most serious of all for the poor was the rise in the price of flour.

This was partly due to the worldwide rise in wheat prices but seems to have been exacerbated by the PML-Q government overestimating the size of the domestic crop. Some newspapers claimed that the exaggeration was a deliberate move to inflate economic growth figures.

In 2007 the government allowed the export of 500 thousand tons to India, on top of the usual exports to Afghanistan. Ministers also claimed that 1.5 million tons were smuggled out of the country.

With a shortfall of 1.6 million tons in September, the government was forced to order the Trading Corporation of Pakistan to import wheat, leading the TCP to produce its own figures. The TCP estimated that only 800 thousand tons had been exported, either legally or illegally, thus putting more blame on the government’s shoulders.

The imported wheat cost more than 30 per cent more than Pakistan received for its exports.

Soaring food prices were a major contributor to the unpopularity of Musharraf and his government.