8/2/2019 Shahrez Eco Presentation
1/27
Presented by:
Shahrez khan
Presented to:Prof. Imran
Ag# :
1307
College of AgricultureD.G.Khan
8/2/2019 Shahrez Eco Presentation
2/27
AbstractThis presentation used PSLM and MICS household level data to analyzethe impact of higher food and energy prices on the poverty head count inPakistan.
Simulated food and energy price shocks present some important results:
First, the impact of food price increases on Pakistani poverty levels issubstantially greater than the impact of energy price increases.
Second, the impact of food price inflation on Pakistani poverty levels is
significantly higher for rural populations as compared to urbanpopulations.
Finally, food price inflation can lead to significant increases in Pakistanipoverty levels: For Pakistan as a whole, a 20% increase in food prices wouldlead to an 8% increase in the poverty head count (from 36% to 44%).
8/2/2019 Shahrez Eco Presentation
3/27
The Situation in International MarketsAccording to the World Bank:
Global food prices have risen by 83% from February2005 to February 2008
Food prices was at peak in 2009, but higher than averageprices are expected to remain until 2015
8/2/2019 Shahrez Eco Presentation
4/27
Increase in International Food PricesFigure 1. Food prices
(Nominal $ Index, Jan 1995=100)
0
50
100
150
200
Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07
Source: DECPG
8/2/2019 Shahrez Eco Presentation
5/27
Increase in International Wheat Prices
8/2/2019 Shahrez Eco Presentation
6/27
The Situation in Pakistan: 20% increase in wheat prices between November 2007
and February 2008.
Food prices had risen 14.7% from October 2009 toOctober 2010
One-half of Pakistans population is considered to be
food insecure, according to the World FoodProgramme
8/2/2019 Shahrez Eco Presentation
7/27
Causes: DEMAND SIDE Rising demand for food in India and China (especially
meat, requiring large quantities of grain to raise)
Bio-fuel initiatives in developed countries Speculation in commodities markets
8/2/2019 Shahrez Eco Presentation
8/27
Causes: SUPPLY SIDE High petroleum prices (affecting the price of fertilizer
and transport costs)
Disruptive weather patterns negatively affectingharvests in several regions
8/2/2019 Shahrez Eco Presentation
9/27
Impacts on the poor: Large negative impacts on poor net consumers of food,
because food is a large part of household budget.
Potentially positive impact on net producers of food, iffarmers have access to agricultural inputs and markets.
8/2/2019 Shahrez Eco Presentation
10/27
Data SourcesThe data is taken from two different sources:
Household level data from the Pakistan Social and LivingStandards Measurement Survey (PLSM), 2004-2005 (usingdata on 14,100 households and 96,833 people)
Household level data from the Punjab Multiple IndicatorsCluster Survey (MICS), 2003-2004 (using data on 29,342households and 192,398 people)
8/2/2019 Shahrez Eco Presentation
11/27
Poverty Line and Head Count Ratio For PSLM data, poverty line used was Rs. 878.64 per
person.
For MICS data, the poverty line used was Rs. 750 perperson.
A household was characterized as poor if the averageincome of its members was below the poverty line.
The poverty head count was calculated as the number ofpeople as a proportion on the population that had incomesbelow the poverty line. So a poverty head count of 0.30implies that 30% of the population lies below the poverty
line.
8/2/2019 Shahrez Eco Presentation
12/27
Various Categories of Expenditures and
Budget SharesAnalysis looked at five categories of expenditures ofeach household, which were used to determine thebudget share of each category of expenditure:
(1) Food Expenditures (2) Energy Expenditures (containing expenditures on
gas, electricity, cooking and heating oil and other fuel
related expenditures) (3) Educational Expenditures (4) Medical Expenditures (5) Other Expenditures
8/2/2019 Shahrez Eco Presentation
13/27
Figure 3: Expenditure Shares on Major Budget Items by Income
Per Capita Deciles in Pakistan (PSLM)
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
1STDE
CILE
2NDDE
C
3RDDE
C
4TH
DEC
5TH
DEC
6TH
DEC
7TH
DEC
8TH
DEC
9TH
DEC
10TH
DEC
FOOD
MEDICAL
EDUC
ENERGY
Majority of household expenditures in Pakistan are made up of foodexpenditures which fall as a proportion of total expenditures as theincome level increases.
After food, the second most major expenditure category acrosshouseholds was energy expenditures
8/2/2019 Shahrez Eco Presentation
14/27
Figure 4: Expenditure Shares on Major Budget Items by Income
Per Capita Deciles in Punjab (MICS)
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
1STDE
CILE
2NDDE
C
3RDDE
C
4TH
DEC
5TH
DEC
6TH
DEC
7TH
DEC
8TH
DEC
9TH
DEC
10TH
DEC
FOOD
MEDICAL
EDUC
ENERGY
In Punjab, the picture is similar, with Food making up themajority of expenditures and energy expenditures havingthe second largest budget share
8/2/2019 Shahrez Eco Presentation
15/27
Simulated Price Shocks In the first part of our analysis, we adjust per capita
incomes given in the PSLM and MICS data sets for shocksto the price of food and energy.
Given that the price rises will reduce real incomes, the priceshocks bring additional households below the poverty line.
We then recalculate what the new poverty head-count ratio
would be after each price shock.
Price shocks of 1%, 5%, 10%, and 20% on the price of foodand energy are simulated and the impact on the povertyhead count is analyzed.
8/2/2019 Shahrez Eco Presentation
16/27
PSLM Results
8/2/2019 Shahrez Eco Presentation
17/27
Simulated Poverty Head Counts in Pakistan After Increases in
the Prices of Food and Fuel
(PSLM Data)
Base Poverty Head Count for Pakistan = 0.364
1% Increase 5% Increase 10% Increase 20% Increase
Food Prices 0.368 0.383 0.402 0.441
Energy Prices 0.365 0.367 0.372 0.380
8/2/2019 Shahrez Eco Presentation
18/27
Simulated Poverty Head Counts in RURAL vs. URBAN Areas After
Increases in the Prices of Food and Fuel
(PSLM Data)
Base Poverty Head Count for Rural Areas = 0.457
1% Increase 5% Increase 10% Increase 20% Increase
Food Prices 0.464 0.482 0.506 0.553
Energy Prices 0.459 0.463 0.469 0.478
Base Poverty Head Count for Urban Areas = 0.221
1% Increase 5% Increase 10% Increase 20% Increase
Food Prices 0.222 0.232 0.245 0.271
Energy Prices 0.221 0.222 0.225 0.232
8/2/2019 Shahrez Eco Presentation
19/27
Simulated Poverty Head Counts (by Province) after increases
in FOOD prices
(PSLM Data)
1% Increase 5% Increase 10% Increase 20% Increase
PUNJAB
Base Poverty HeadCount = 0.364
0.368 0.379 0.395 0.427
SINDH
Base Poverty Head
Count = 0.371
0.376 0.392 0.411 0.453
NWFP
Base Poverty HeadCount = 0.392
0.394 0.409 0.434 0.476
BALOCHISTAN
Base Poverty Head
Count = 0.312
0.392 0.395 0.399 0.411
8/2/2019 Shahrez Eco Presentation
20/27
Simulated Poverty Head Counts (by Province) after increases
in ENERGY prices
(PSLM Data)
1% Increase 5% Increase 10% Increase 20% Increase
PUNJAB
Base Poverty Head
Count = 0.364
0.365 0.367 0.372 0.379
SINDH
Base Poverty Head
Count = 0.371
0.372 0.376 0.378 0.385
NWFP
Base Poverty Head
Count = 0.392
0.392 0.395 0.399 0.411
BALOCHISTAN
Base Poverty Head
Count = 0.312
0.314 0.317 0.323 0.330
8/2/2019 Shahrez Eco Presentation
21/27
MICS Results
8/2/2019 Shahrez Eco Presentation
22/27
Simulated Poverty Head Counts in Punjab After Increases in
the Prices of Food and Fuel
(MICS Data)
Base Poverty Head Count for Punjab = 0.412
1% Increase 5% Increase 10% Increase 20% Increase
Food Prices 0.428 0.439 0.458 0.501
Energy Prices 0.426 0.427 0.429 0.435
8/2/2019 Shahrez Eco Presentation
23/27
Simulated Poverty Head Counts in RURAL vs. URBAN Areas After
Increases in the Prices of Food and Fuel
(MICS Data)Base Poverty Head Count for Rural Punjab = 0.480
1% Increase 5% Increase 10% Increase 20% Increase
Food Prices 0.495 0.508 0.529 0.574
Energy Prices 0.493 0.494 0.496 0.500
Base Poverty Head Count for Urban Punjab = 0.306
1% Increase 5% Increase 10% Increase 20% Increase
Food Prices 0.325 0.333 0.350 0.389
Energy Prices 0.324 0.325 0.328 0.334
8/2/2019 Shahrez Eco Presentation
24/27
Important Results
For Pakistan, substantial changes in the poverty head countaccompanied the 10% and 20% increases in the food prices,increasing the poverty head count to 40.2% and 44.1%respectively. The impact of higher energy prices on poverty
is substantially smaller that the impact of food prices.
For Pakistan, a 10% increase in food prices pushes thepoverty head count to 50.5% while a 20% increase in foodprices pushes the poverty head count to 55.3%. So
substantial increases in food prices can be seen to have adramatic impact on rural poverty levels (at least in theshort run, since farmers should eventually benefit fromselling at higher prices).
8/2/2019 Shahrez Eco Presentation
25/27
Important Results (contd) The impact of energy price increases on poverty is
significantly smaller than the impact of food priceincreases, for all the provinces. The second interesting
point worth noting is that though the impact of higherfood prices is significant for all the provinces.
Punjab level results obtained from the MICS dataset showthat higher food prices lead to greater poverty in Punjab.
10% and 20% increases in energy prices lead to increases inthe poverty head count from 41.1% to 45.8% and 50.1%respectively.
8/2/2019 Shahrez Eco Presentation
26/27
Conclusions The results show that both food price shocks and energy price
shocks cause higher levels of poverty, though the analysis implies agreater short run impact for food price shocks (assuming that foodand energy price shocks are of equal magnitude).
The results show that the negative impact of food price shocks fallsdisproportionately on the rural poor, as opposed to the urban poor.
The negative impact of food price shocks is significant acrossprovinces.
Food price inflation can lead to significant increases in poverty. ForPakistan as a whole, a 20% increase in food prices would lead to an8% increase in the poverty head count, from 36% to 44%.
8/2/2019 Shahrez Eco Presentation
27/27
Policy Recommendations The government must ensure household food
security in the face of dramatic food price shocksthrough targeted safety nets.
The government must ensure food security bycontrolling domestic food prices.
Government policies must focus on the supply sidein order to stimulate greater food production inthe medium and long terms.