Impact of Domestic Policies towards Agricultural Trade Liberalization and Market Reform on Food Security in Pakistan

Performance of the agriculture sector over the last four decades remained quite satisfactory with an average growth rate of 3.4% per annum. Still the country is far behind in its efforts to provide an acceptable level of dietary requirement to its people even at the aggregate level. The daily average availability of calories per person in the country is significantly lower than the other developing and developed nations. Though share of wheat is declining overtime, it is still the dominant source of total calories intake and thus plays a vital role in food security in the country. The government of Pakistan had been pursuing interventionist policies quite actively in agricultural inputs as well as outputs markets to ensure food security. Though most of these interventions have now been abolished, but some still remains. Particularly, wheat marketing mainly is being handled by the public sector. The comparison of incidentals of government-owned departments with that of the private traders clearly shows inefficiency of the former. In addition to cost difference, the corruption is pervasive in commodity marketing particularly in public sector. Eliminating the government interventions the results of the CGE model lead us to draw four major conclusions: 1) price of wheat would turn out to be too high to be affordable to the consumers; 2) Production may not increase much to compensate to bring the consumer prices down; 3) The loss in consumer surplus will be more than the producer gain; and 4) All household groups will face lower welfare except the urban non poor: The latter may look for cheaper food substitutes. The dynamic long-run effects have not been captured in this model. Though the existing system of procurement and distribution creates isincentives for the private sector to invest in wheat trade, it however may not be advisable to leave the wheat economy fully at the behest of the markets owing to the importance of wheat in household consumption and production. It is suggested that the government should slowly step out of the food market and let the market function freely. However, the system of effective monitoring and maintaining an optimal size of buffer stock for wheat can avoid extreme food price fluctuations and shortages in the country. The stock purchase and release by the government should be based on market prices.