There may be blood on the streets, but Pakistani appetite for pulses appears to be unsatiated. Despite cash margin requirements, import restrictions, and dollar shortage, Pakistan has imported a record quantity of pulses during 5MFY23 (Jul – Nov), and the importers are on the streets demanding more!
Reportedly, pulses importers’ association members were on the roads yesterday, demanding that banks make dollars available for the resumption of import. According to social media reports, the march started at wall street of Karachi – I. I. Chundrigar Road – where headquarters of major commercial banks and the central bank of Pakistan are located – and concluded at Karachi Press Club.
Since the beginning of the current foreign exchange liquidity crisis in the mid of 2022, the central bank has taken various measures to stem the rising flow of imports. Regular readers would recall that pulses, lentils, and legumes trade are a big-ticket item on Pakistan’s food import bill, closing in on a billion dollars on average annually. Nearly 60 percent of Pakistan’s annual pulses demand (in volume) is dependent on imports, thus making it a natural casualty once screws began to be tightened on commodities import.
In a bid to curtail demand, back in April 2022, SBP included pulses in the list of commodities with a 100 percent cash margin requirement on the import stage. When dollar rationing began in earnest in the second half of the calendar year, pulses importers complained of delays in payments against LCs and contracts, not unlike other commodities which have witnessed a similar fate. Now, as SBP has finally decided to leave the dollar rationing to the market forces, pulses importers have taken to the streets, insisting that a shortage of essential kitchen deals may be right around the corner unless banks mend their errant ways.
Yet, a cursory look at retail price data and import statistics raises suspicion that the import boys’ may be crying wolf. Between FY17 and FY21, Pakistan imported an average of 85 thousand metric tons per month of pulses, which puts five months' import quantum (between Jul-Nov) at 450 thousand tons. During the ongoing fiscal, the country has already imported over 612 thousand tons, which going by historical averages, is more than seven months of import demand. Ergo, despite cash margin requirements and administrative measures, Pakistan is on its way to raking in the highest import of pulses, demand compression notwithstanding.
This is doubly surprising as it has happened at a time when prices of pulses are resurgent in the international markets – up over 52 percent from their Covid bottom just two years ago. This escalation has followed through in the local markets, with average retail prices of four major pulses categories – as tracked by Sensitive Price Index – up by over 41 percent during December 2022 (over the previous year).
In fact, over the last few months pulses prices in the local market have skyrocketed at a never-before-seen pace. Consider that the pulses line item under the old base of the Wholesale Price Index took ten years to double, going from 100 to 218 between FY08 and FY18. Under the new base, the pulses sub-index has risen from 118 in Dec-19 to 216 in Dec-22, a meteoric rise in just three years.
Masoor, mash, and gram (dal chana) prices have risen by 75 percent on average during this period, with a respite in daal moong prices in the international market barely managing to hold ground. This was also at a time when local production of gram and masoor rose by 36 and 29 percent, respectively over the last fiscal.
What does this mean? Essentially that at a time of rapid of loss purchasing power, severe price inflation, and fear of mass layoffs, Pakistanis are somehow consuming a lot more pulses than before. It could have made sense if pulses were inferior goods, yet a protein-wise comparison of calories per gram/per rupee would probably indicate that pulses and lentils aren’t a whole lot cheaper than other sources of energy. Then, what gives?
Explanations are aplenty, but one stands out. Market watchers point towards the leakages across the northwestern border, with some holding Afghan demand responsible for the surge in pulses import in this country. If record imports of pulses and legumes are truly being lost to smuggling, then one might argue that no degree of import bans or dollar rationing would stop the country from facing a shortage in the upcoming days.
Guess by betting all its chips on Kabul’s fall to the Taliban, the Pakistani state took upon itself the burden of feeding millions of Afghans while the world punishes them by virtually freezing them out of international trade. Unfortunately, those that play watchdog at the cross-border trade on our northwest flank appear indifferent while the powers in Kabul bite the hand that feeds them. Good luck!