Pakistan Boosting Food Imports as Afghan Demand Pressures Prices

(Bloomberg) -- Pakistan is stepping up food imports as it sees a surge in demand for staples in neighboring Afghanistan inflating prices at home.

“If demand from Afghanistan increases and we don’t have sufficient stocks, it will put pressure on prices,” Pakistan’s Finance Minister Shaukat Tarin said in a text message. “So we have made arrangements.”

Prime Minister Imran Khan’s government plans to import 500,000 tons of sugar and 550,000 tons of wheat, as it seeks to keep a lid on inflation which has breached the upper limit of the central bank’s 7%-9% target range for four out of seven months this year. The purchases also coincide with an as much as 35% increase in prices of food essentials like flour and oil in Kabul in recent weeks, reflecting supply disruptions in a nation in disarray after the Taliban’s takeover. 

Landlocked Afghanistan has historically relied on Pakistan to meet its needs for everything from cereals to pharmaceutical products. Kabul purchased $871 million worth of goods from Islamabad last year, with food items accounting for 34% of the total, according to Trading Economics.

Pakistan’s Economic Coordination Committee, the nation’s top panel on economy, decided to build strategic reserves in the wake of the evolving situation in Afghanistan, the Finance Ministry said in a statement after it met on Aug. 25. The decision to stockpile sugar comes despite the nation forecast to produce 6.8 million tons of the sweetener, more than the annual local requirement of 5.4 million tons. Wheat production at 27.3 million tons is sufficient to meet domestic demand.

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