FAO Unveils Staggering $10 Trillion Annual Hidden Costs of Agrifood Systems Globally


FAO Unveils Staggering $10 Trillion Annual Hidden Costs of Agrifood Systems Globally - foto courtesy FAO

KARACHI, Nov 14: In a groundbreaking analysis, the Food and Agriculture Organization of the United Nations (FAO) has exposed the concealed financial toll of current agrifood systems, revealing an alarming annual cost of $10 trillion, equivalent to nearly 10% of the world’s GDP.

This revelation stems from a comprehensive study spanning 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) details that over 70% of these hidden costs are attributed to unhealthy diets prevalent in high- and upper-middle-income countries. These diets contribute to obesity, non-communicable diseases, and substantial labor productivity losses. Additionally, one-fifth of the total costs, amounting to a significant portion, are environmentally related. Factors such as greenhouse gas and nitrogen emissions, land-use change, and water use pose 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, underscoring the severe impact on poverty and undernourishment.

The report advocates for true cost accounting (TCA), recommending that countries 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.


Pakistan’s Agrifood System Bears $161.8 Billion USD Hidden Costs


For Pakistan, the total quantified hidden costs of the agrifood system amount to approximately $161.8 billion USD (2020 PPP), constituting around 15% of the country’s GDP. These costs are categorized into environmental ($28.9 billion), social ($20.9 billion), and health ($112 billion) dimensions.

A noteworthy distinction for Pakistan lies in the environmental realm, with a 10-percentage-point lower share (18% vs. 28%) in comparison to lower-middle-income countries. Conversely, health-related hidden costs show a 9-percentage-point increase (69% vs. 60%), 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.

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.

As the FAO reveals the hidden costs of agrifood systems, the call for global awareness and action intensifies, urging stakeholders at all levels to play a pivotal role in steering agrifood systems towards sustainability.