With inflation at nearly 10 percent, the Cabinet has agreed a package of measures to ensure adequate supplies of foodstuffs and other goods, prevent prices rocketing even further and thus protect standards of living.
The supply of foodstuff is perhaps the most important measure. And rice is of particular importance. It is one of the most important elements in the country’s diet. The price has doubled in the past year. The reason is not the move to biofuels or a drop in subsidies, as happened with cereals, meat and dairy products. In fact, despite a drop in global stocks in recent years, largely because of declining prices, Asian producers, who are the world’s major exporters, expect a bumper harvest this year; global production is expected to rise two percent. But that is not going to stabilize prices because, as with oil, the market is made by jittery dealers who crank up the price every time the news can be seen as potentially bad. It is a commodity and they make money out of commodities; that is their job. The price, which was rising last year because of falling production, has been pushed through the roof because of export restrictions by major producers, notably India and Vietnam. This is bound to have serious implications for us and for the government’s efforts to counter inflation.
Indian rice currently accounts for almost 80 percent of Saudi consumption. The rest comes from Pakistan, Thailand (the world’s largest rice exporter) the US and Egypt. India’s action makes sense from an Indian perspective, but it could result in half empty shelves in the Kingdom. Were that to happen, it would not be a case of prices doubling; they would make the oil price rise look peanuts in comparison.
Normally, the supply of rice could be left to the private sector to sort out. But these are not normal circumstances. The decision to restrict exports by India and Vietnam is political. Egypt too is banning exports. A response at political level is essential to ensure adequate supplies continue to flow. The government has to negotiate with India (and with Egypt) to limit or remove the ban — or find other suppliers.
That could open the door for Pakistan. There was a time when it had a near monopoly of rice in the Kingdom. Even 15 years ago, over 40 percent of rice consumed in the Kingdom was Pakistani. Today it accounts for about 11 percent. The reason for the shift was the growth in popularity of Indian parboiled (sela) rice. Pakistan now also produces parboiled rice, but Saudi merchants have got into the habit of dealing with Indian producers.
The governments’ hands may be tied in the sense that rising food prices are a global problem, but it can at least ensure adequate imports of rice. If it does not, the price will rocket when the export bans start to bite over the next few weeks. At that point the government’s options will be severely limited. There will be virtually no alternative other than subsidies or increasing salaries — neither of which it really wants to do.
