Wages of War, Wages of Peace: Food Prices and Unskilled Labour Pay in Afghanistan, 1996-2002

Abstract

This paper contains the main results of a FAO study on staple food prices and real wages in Afghanistan during the period 1996-2002, based on information systematically collected weekly by the World Food Programme in all major cities (Kabul, Kandahar, Jalalabad, Herat, Mazar-e-Sharif and Faizabad). The main conclusion of the study are as follows: 1. Large fluctuations have been registered in nominal food prices. However, the fluctuations were mostly due to changes in the exchange rate. Food prices in dollars have been remarkably stable, especially during the years 2001 and 2002. During precedent years, disrupted markets and international isolation caused prices to fluctuate, and to be usually well above international levels. 2. There is no evidence that increased production and increased food aid in 2002 may have depressed domestic prices. Wheat price in dollars in 2002 has been approximately the same than in 2001, in spite of large increases in food aid and an even larger increase in domestic production. Commercial imports have acted as price regulators, keeping domestic prices more or less stable. 3. The purchasing power of wages for unskilled urban labour (in terms of bread) has remained remarkably stable from 1998 to 2001. One day's wage has been equivalent to the cost of approximately 4 Kg of bread, with a slightly better situation in Kabul than in other cities. Faizabad, in the more isolated North Eastern region, has been at the lowest level of purchasing power. 4. During the first half of 2002 the purchasing power of wages increased significantly in all cities, reaching a level of 7-8 Kg of bread at mid-year. During the last months of the year (September-December) there were no further increases in real wages, except in Faizabad that has continued recovering. In the case of Kabul, real wages have fallen significantly in October-November, back to the levels of 2001, i.e. about 5 Kg of bread equivalent per day. This indicates saturation of the urban labour market, and increased food insecurity of the urban population. The study recommends urgent start of labour intensive public works to help improving the real wage of urban workers, and therefore reducing food insecurity in urban areas.