shahrez eco presentation

8/2/2019 Shahrez Eco Presentation

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Presented by:

Shahrez khan

Presented to:Prof. Imran

Ag# :

1307

College of AgricultureD.G.Khan


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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%).


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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


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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


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Increase in International Wheat Prices


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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


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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


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Causes: SUPPLY SIDE High petroleum prices (affecting the price of fertilizer

and transport costs)

Disruptive weather patterns negatively affectingharvests in several regions


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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.


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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)


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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.


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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


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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


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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


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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.


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PSLM Results


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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


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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


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


Food Prices 0.222 0.232 0.245 0.271

Energy Prices 0.221 0.222 0.225 0.232


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Simulated Poverty Head Counts (by Province) after increases

in FOOD prices

(PSLM Data)


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


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Simulated Poverty Head Counts (by Province) after increases

in ENERGY prices

(PSLM Data)


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


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MICS Results


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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


Food Prices 0.428 0.439 0.458 0.501

Energy Prices 0.426 0.427 0.429 0.435


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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


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


Food Prices 0.325 0.333 0.350 0.389

Energy Prices 0.324 0.325 0.328 0.334


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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).


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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.


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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%.


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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.

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