The total quantified hidden costs of the agrifood system for Pakistan amount to approximately $161.8 billion, constituting around 15 percent of the country’s GDP, according to an analysis by Food and Agriculture Organization of the United Nations (FAO).
These costs are categorized into environmental ($28.9 billion), social ($20.9 billion), and health ($112 billion) dimensions. The hidden cost is any cost to individuals or society that is not reflected in the market price of a product or service. It refers to external costs (that is, a negative externality) or economic losses triggered by other market, institutional or policy failures.
In its analysis, the FAO unveils the staggering hidden costs of current global agrifood systems, reaching an alarming $10 trillion annually, nearly 10 percent of the world’s GDP. This revelation comes from a comprehensive study covering 154 countries, shedding light on the multifaceted impact of hidden costs on health, the environment, and society.
The 2023 edition of the State of Food and Agriculture (SOFA) reveals that over 70 percent of these hidden costs stem from unhealthy diets prevalent in high- and upper-middle-income countries, contributing to obesity, non-communicable diseases, and substantial labor productivity losses.
A significant portion, one-fifth of the total costs, is environment-related, attributed to factors like greenhouse gas and nitrogen emissions, land-use change, and water use, posing a global challenge with underestimated scales due to data limitations.
Low-income countries bear a disproportionate burden, with hidden costs exceeding a quarter of their GDP, highlighting the severe impact on poverty and undernourishment.
The report advocates for true cost accounting (TCA), recommending to countries to conduct regular and detailed analyses, followed by strategic actions to mitigate these hidden harms. The FAO report uniquely disaggregates these costs to the national level, fostering comparability across categories and countries.
To harness the potential of such an approach in transforming food systems, FAO will dedicate two consecutive editions of the State of Food and Agriculture to the same theme. While this year’s report presents initial estimates, the 2024 edition will delve into in-depth targeted assessments to identify the most effective ways to mitigate these hidden costs.
A noteworthy distinction for Pakistan lies in the environmental realm, with a 10-percentage-point lower share (18 percent vs. 28 percent) in comparison to lower-middle-income countries. Conversely, health-related hidden costs show a 9-percentage-point increase (69 percent vs. 60 percent), emphasizing unique challenges in the country. Social hidden costs align closely with LMICs overall.
The detailed distribution of hidden costs across sub-categories, especially the intriguing land-use change component representing a hidden benefit, underscores the complexity of the agrifood system’s impact on Pakistan’s economy and society.
According to the report, lower-middle-income countries show the highest variation in the distribution of quantified hidden costs. In Pakistan, hidden costs from unhealthy dietary patterns causing obesity and NDCs dominate, as more commonly seen in high-income countries. Pakistan also faces major challenges associated with poverty and undernourishment.
The report advocates for governments to utilize true cost accounting, emphasizing that addressing the climate crisis, poverty, inequality, and food security requires a transformative approach. It calls for innovative research, data investments, and capacity building to scale the application of true cost accounting transparently and consistently.