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Soaring prices for tomatoes, potatoes and onions have left flood-torn Pakistan without food, raising the specter of inflation reaching 30 percent, which could spur further monetary tightening.
READ ALSO | Pakistan floods: Death toll nears 1,300; fears loom over waterborne disease outbreak
The South Asian country, already struggling with dwindling currency reserves and the fastest inflation in nearly five years, faces food shortages after torrential rains flooded a third of the country’s land and destroyed crops. Eight more areas were added to the disaster list of 80 flood-hit areas in the country over the weekend.
Onion prices on the rise
According to Ali Asghar Londer, one of thousands of people living in tents mostly evacuated in cities near the west bank of the Indus, onions are selling for 300 rupees a kilogram (1.37 rupees), up from 50 rupees before the flood. Dollar). The production of rice and onions in Dadu has suffered the most.
READ ALSO | Pakistan inflation hits 47-year high before full impact of floods
Londer said last week that the price of potatoes has quadrupled to 100 rupees a kilo, tomatoes have risen 300 percent to 400 rupees a kilo, while the price of oil used for cooking has risen 400 percent. Elsewhere, supplies of dairy and meat have also been affected as warehouses flooded.
extra trouble
Soaring food prices will add pressure to an already fragile and politically divided economy that has just regained some financial strength after a $1.16 billion IMF bailout and $9 billion pledges from Qatar, Saudi Arabia and the United Arab Emirates .
Floods have cost an estimated $10 billion, have claimed more than 1,300 lives and forced half a million people into refugee camps. It also flooded swathes of farmland, washing away crops in a country where agriculture accounts for about a fifth of the economy.
Inflation impact
While Finance Minister Mifta Ismail expressed optimism on Sept. 3, saying vegetable prices are falling and inflation is at a 47-year high, near its peak, and likely to average 15 percent this year, analysts are less optimistic.
Amreen Soorani, head of research at JS Global Capital Ltd., said: “The main concern of floods is the impact on inflation. Food shortages from the last flood in 2010 nearly doubled food inflation in two months.” In a high inflation environment, this makes the situation even more difficult. “
Consumer price gains accelerated to 27.26% in August, the sixth straight month of gains, before the full effects of the floods were felt. Food inflation, which makes up a third of the basket, climbed to 29.5% last month. The calculation does not yet include the full impact of a 50% rise in energy prices, a condition of the IMF loan.
Inflation is likely to accelerate to 30% over the next two months, which would push average price gains this financial year to 23%-24%, beating the central bank’s estimate of 18%-20%. Ismail Iqbal Securities Pvt.
troubled citizens
Former prime minister Imran Khan, who was ousted in April but remains hugely popular, is launching a fierce campaign to push for elections while the devastating floods are fueling public outrage.
“Our children have been on the road waiting for food and shelter for four days. Our children are dying,” said Mohamed Sharif, a 40-year-old protest leader who blocked a major highway in the country last week after receiving no relief. Highway for a few hours. “We have no food, no tents, nothing.”
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