Edible oil deficit and its impact on food expenditure in Pakistan

Abstract

This study is an attempt to analyze the impact of Edible Oil Deficit on Food Expenditure in Pakistan for the period 1971-2008. Edible oil deficit is one of the major concerns for the policy-makers in Pakistan. Despite of having agriculture based economy; Pakistan is unable to fulfil her domestic demand of edible oil by local production. This situation forces the government to import edible oil and oil seeds from other countries. This import not only increases our balance of payment deficit but also it negatively affects the ability to finance the external debt repayments. Autoregressive Distributed Lag model has been used to analyse the long run relationship amongst the variables. Other important determinants of food expenditure along with edible oil deficit were also used to check for their collective long run impact. It was found that long run negative relationship exists between edible oil deficit and food expenditure and hence the result derives the policy implication that there is a need to boost up the efforts in the agriculture sector to steadily increase the local production of oil seeds in the country. The relationship between the per capita GDP and food expenditure is found to be positive and significant with elasticity of 0.261 suggesting that 1 percent increase in per capita GDP will cause food expenditure to increase by 0.26 percent. The relationship between food subsidy and food expenditure is found to be insignificant suggesting that due to improper targeting and consumer's perception about quality and accessibility of subsidised food, Government's food support programmes are not effective.