Friday, September 1, 2017

Eid ul Azha Observance in Pakistan Transfers Billions of Dollars From Urban to Rural Population

An often overlooked benefit of buying and sacrificing millions of animals during Eid ul Azha celebration is the massive transfer of wealth from relatively rich urban population to the comparatively poor village population.   In other words, it helps create jobs and redistribute wealth to alleviate poverty in a similar way as zakat, taxes and sadaqa (charity) do.  Here's a blog post I wrote last year (2016) on this subject and I am reproducing it below:

Pakistanis are spending about $3.5 billion on Eid ul Azha this year, according to analysts. This includes $2.8 billion worth of livestock and another $700 million on clothes,  shoes, jewelry and various services. This amount represent a huge transfer of wealth from urban to rural population in the country.

Animal Sacrifice:

Eid al Adha commemorates the willingness of Prophet Ibrahim (Abraham) to sacrifice his most beloved son Ismail (Ismael) when asked to do so by God. It follows Hajj, the annual pilgrimage of Mecca by Muslims from around the world each year. Muslims believe that God had angels remove Ismael from under the knife of blindfolded Abraham and had him replaced by a lamb.

Economic Activity: 

The commemoration includes sacrifice of cows, goats, lambs and camels on Eid al Azha. This year, the media reports indicate that 4 million goats, 2.7 million cows, 800,000 lambs and 30,000 camels are being slaughtered in Pakistan on the occasion.

Using a conservative average price of $600 per cow, $200 per goat or lamb and $800 per camel, the total cost of animals adds up to $2.8 billion. Various services offered by, transporters, butchers and slaughter houses are in addition to this amount.

Apparel Purchases:

The Eid celebration includes buying and wearing new clothes and shoes as well as women's jewelry and other accessories that add up to another $700 million spent in Pakistan.

Charity:

Animal hides and significant amounts of meat are donated to various charities and the poor on Eid. Charities like Edhi Foundation are big beneficiaries of this largesse.

Rural Economy:

Rural residents who raise animals for sale on Eid bring in billions of dollars into the rural economy. These inflows help provide livelihoods and alleviate rural poverty.

Summary:

Eid al Azha this year represents a $3.5 billion worth of economic activity that is generating jobs and helping the charities and the rural residents of the country.

Related Links:

Haq's Musings

Pakistan Among Top Meat Consuming Nations

Livestock Revolution in Pakistan

An Indian Farmer Commits Suicide Every 30 Minutes

Pakistan's Rural Economy

Strong Eid Sales in Pakistan

Happy Eid-ul-Azha: Good Hygiene and Humane Treatment of Animals

Ho Kya Raha Hai - Impact of Eid-Ul-Adha on Our Economy - 12th September 2016


7 comments:

Rashid A. said...

This is a good post. Just one observation.


The numbers estimates can be very conservative as the actual numbers might be much higher. This is because in the rural areas, animals are raised by the farmers for the purpose of Qurbani and not necessarily purchased from registered live stock markets. I do not know if the estimate accounts for that or not.

On the question of transfer of wealth, the point is valid and excellent. However, given the fact the majority of Pakistan lives in rural areas, their own Qurbani does NOT represent a transfer of wealth. This is so when the rural dwellers sacrifice an animal that they have raised and not purchased, or even if purchased, it is not a net income transfer from urban to rural.

Riaz Haq said...

Rashid: "This is a good post. Just one observation. The numbers estimates can be very conservative as the actual numbers might be much higher."

Very good comments.

Here are some of the answers to questions you raise:

The numbers of animals sacrificed is based on data on the number of animals skins/hides purchased by Pakistan Tanners Association (PTA) immediately after Eid ul Azha.

The prices of animals ($600 per cow, $200 per goat or sheep) assumed in the $2.8 billion estimate are believed to be very conservative. Actuals this year are 20-25% higher.

http://nation.com.pk/national/26-Aug-2017/price-hike-online-qurbani-changing-face-of-eid

The rural/urban divide, depending on how urban is defined, is about 60:40.

A lot of what is called rural is "peri-urban" as seen in the latest census calling half the population living Islamabad Capital Territory" (ICT) rural.

Majumdar said...

An eye opener, sir. I saw with dismay on Facebook, that several Pakistani and Indian Muslims suggesting that the holy custom of animal sacrifice should be done away with, even some redoubtable warrior of Islam from chowk times, have fallen victim to such Western propag@ndu.

Regards

Riaz Haq said...

Pakistan received around $2 billion in foreign remittances, partly because of the seasonal effect of Eidul Azha.

The SBP is expected to officially announce the foreign remittances statistics next week.

https://tribune.com.pk/story/1501689/money-matters-pakistan-gets-230m-loans-cushion-forex-reserves/

---------------

Pakistan has received two short-term loans worth $230 million from international creditors, meant to keep the official foreign exchange reserves at a level sufficient to provide cover to three-month import bill.

According to officials, the country received an amount of $153 million from Citibank in August. Besides, Islamic Development Bank (IDB) gave a $77 million short-term loan in July for crude oil import.

The IDB’s short-term facility is meant for import of crude oil from Saudi Arabia and the lender directly makes payments to the oil supplier on behalf of an oil importer. It partially helped lower pressure on the country’s forex reserves.
From April to May this year, Pakistan had signed three separate short-term loan agreements with the IDB valuing $700 million. Of this amount, Pakistan has already imported crude oil equivalent to $340 million.

For the current fiscal year, the government has estimated receiving $1.55 billion short-term loan from the IDB against the oil import facility.

--------

During the week ending August 31, 2017, the SBP’s reserves increased by $338 million to $14.681 billion due to official inflows, the central bank had reported on Thursday.

For almost one month, Pakistan was touching the three-month import cover border line as its reserves remained at around $14.3 billion.


In order to avoid downgrading in its credit ratings and keep the tap of budget financing open from the World Bank, Pakistan has to maintain its official foreign currency reserves above the three-month import cover level.

The finance ministry is currently making arrangements for floating about $1 billion worth of Sukuk Bonds by middle of November and a better credit rating will help lower the cost of borrowing. It had also raised $1 billion last year at 5.5% interest rate – the lowest rate on the Islamic bond that it ever paid.

The government was reviewing different options to keep the reserves above the level of three-month import bill. The options included incentives for expatriates to invest in Pakistani dollar-denominated bonds, more restrictions on imports and steps that will encourage exporters to bring back export proceeds.

Finance Minister Ishaq Dar on Friday held a meeting with his Chinese counterpart Xiao Jie and discussed issues of mutual interests – including ways and means to further enhance bilateral economic relations.


During FY2016-17, Pakistan had borrowed a record $10.1 billion external loans that included a record-breaking $4.4 billion short-term financing.

Out of this, $2.3 billion came from Chinese financial institutions. The government took $1.7 billion from the China Development Bank, $300 million from the Industrial and Commercial Bank of China, and $300 million from the Bank of China.

It also obtained $445 million from the Noor Bank of the UAE, $650 million from a consortium of the Suisse Bank, the UBL and the ABL, $275 million from Citi and $700 million from the Standard Chartered Bank, London.

This was the first time in Pakistan’s history that any government has taken over $10 billion as fresh foreign loans in a single year.

Pakistan Tahreek-e-Insaf Chairman Imran Khan on Thursday called Finance Minister Ishaq Dar Pakistan’s economic hitman while criticising his economic policies.

In July, Pakistan obtained a total of $254.9 million loans, including $77 million from IDB. It received $75 million from the World Bank for project financing.

China also gave $71.5 million worth of loans for carrying out various Beijing-funded schemes. The Asian Development Bank provided $28.8 million worth of loans.

The $254.9 million loans were 3.2% of the total annual budgetary estimates of $8 billion for FY2017-18.

Ali K. said...

Well fortunately rural areas in Pakistan are doing exceptionally well as compared to urban areas. Also UNDP report 2017 says healthcare is the largest contributor to poverty in Pakistan and not hunger.

Riaz Haq said...

Ali: "Well fortunately rural areas in Pakistan are doing exceptionally well as compared to urban areas. Also UNDP report 2017 says healthcare is the largest contributor to poverty in Pakistan and not hunger."

There's a lot more poverty in rural areas of Pakistan. Multi-dimensional poverty in urban areas is 9.3 percent vs 54.6 percent in rural areas. Multi-dimensional poverty includes income poverty and access to education and health care. http://www.pk.undp.org/content/pakistan/en/home/presscenter/pressreleases/2016/06/20/pakistan-s-new-poverty-index-reveals-that-4-out-of-10-pakistanis-live-in-multidimensional-poverty.html

Riaz Haq said...

Eid economy takes an upturn
Afshan SubohiUpdated August 20, 2018

https://www.dawn.com/news/1428014/eid-economy-takes-an-upturn

The demand price spiked by 20 per cent on average in 2018 because of higher transport and incidental expenses, but the increase in the selling price is in the range of five to 10pc depending on the buyers’ negotiation skills.

The greater volume of cattle trade on “Bakra Eid” means a bigger net wealth transfer from urban to rural Pakistan, with cattle farmers of Punjab being rewarded generously for their better cattle rearing skills by the market. In contrast, ultimate beneficiaries of higher consumer spending on Eidul Fitr are urban manufacturers, traders and service providers. The gains, however, are not equitably shared across all regions on both festive occasions owing to the geographical disparities in development.

Roughly one-tenth of the total population of goats and cows is sacrificed every year during the three days of Eidul Azha. Livestock has a growing share of 58.9pc in the agriculture sector and 11.1pc in the gross domestic product, according to the Pakistan Economic Survey 2017-18. The growth in the livestock sector remained 3.7pc last year, which is 80 basis points higher than the agriculture-sector growth of 2.9pc.

Currently, general sentiments are upbeat. The nation has heaved a sigh of relief at the peaceful transfer of power for the third consecutive time.

---.

The cash-based nature of cattle trade makes it difficult to monitor the flow of money. There is a whole chain of people involved in the activity that spans over the year and culminates on Eid. There are investors, breeders, cattle farm owners, short-term retail investors, brokers, transporters, mandi operators, caretakers in urban centres, service providers and millions of temporary workers. Identifying the share of each segment in the pie of the Eid economy is hard, but the risk-reward ratio for brokers with both ends secured is said to be the most lucrative. For all others, risks are high and returns are uncertain.

Many dependable indicators that shed light on the size of the market — like the data of hides and skins collected and the consolidated number of the headcount of cattle marked by the state-managed markets — are released after a lag of one month. At this point, we know that remittances spiked by 25pc in July to $1.93 billion from $1.5bn in the same month of 2017. Some of this hike is attributed to Eidul Azha-related transfers by overseas Pakistanis.

The figures of Eid-induced cash withdrawals and the tally of additional payments to employees in the form of bonuses have yet to surface.

---
Final figures are not available, but early indicators point to a massive Eidul Azha economy revolving primarily around cattle trade. Preparations for the festive occasion spur the sale of clothes, shoes and accessories, but the major share of Eid-centric liquidity is soaked up by qurbani.

“Counting their blessings in a pleasant weather this year, Pakistanis are all set to loosen the purse strings and delve deep in fervour to celebrate the religious festival of Eidul Azha. The visible level of the activity is more than the last year’s as male members of families hit the mandis and ladies frequent malls for preparation,” a market watcher commented.

The composition of the Eidul Azha market is expected to remain unaltered as Pakistanis switch in greater numbers to the ‘group’ segment to follow the religious tradition of sacrificing cattle in the name of Almighty.

“I would love to keep the affair exclusive, but my conditions do not permit the luxury any more. After several visits to the mandi over the past week, I have decided to pool in with neighbours for a collective qurbani as the prices are way beyond my reach. I settled for a pair of goats when cows became too expensive. Last year, I sacrificed one goat. My income increment has failed to keep pace with growing family expectations,” said a senior officer of the Punjab Livestock Department over the phone.