According to Salim Raza, former governor of State Bank of Pakistan (SBP), Pakistan’s agriculture sector has the potential to overcome the current account deficit and balance of payments crisis within six years.
Speaking at the ‘Agrarian Connections 2023’ organized by the Pakistan Agricultural Coalition (PAC) on Thursday, Raza stressed that the agriculture sector needs to grow at a steady rate of 6% to achieve the required economic growth and job creation. He added that agricultural growth has stagnated over the years, contributing to a $5.5 billion trade deficit in food and cotton imports in FY22, widening the current account deficit to $17.4 billion that year.
The PAC study outlines practical solutions to increase the agricultural sector’s staple crop productivity to international standards, producing surplus crops for export. A coalition that includes agricultural stakeholders and businesses such as banks, fertilizer manufacturers and insurance companies launched the research report at the conference. Raza emphasized that farmers’ welfare was not given much attention in the report.
“This year (FY23) we are going to import about 10 million bales of cotton (up from last year) … so the deficit could be around $6-6.5 billion,” explained Raza.
The former SBP governor claimed that Pakistan’s agriculture trade deficit could be eliminated as most imported agricultural products like beans and cotton could be produced domestically.
“If the agricultural trade deficit can be brought down to zero in the next three years and turned into a surplus in the next three years, Pakistan can overcome its current account deficit within six years,” he said.
He further pointed out that the sustained growth rate of agriculture sector has a direct impact on the GDP growth rate and noted that without 6% growth in agriculture, Pakistan cannot sustain the 6% annual GDP growth rate.
According to Raza, China, India and Brazil have an advantage in providing farmers with the financing they need for agricultural products, including seeds, fertilizers, pesticides, storage and warehousing, machinery and extension services, as they have state-owned banks dedicated to agricultural finance. In contrast, Pakistan has a predominantly private property system, which cannot be followed from the perspective of these countries.
However, the former governor of SBP suggested that the government should use 50% of the lending to state-owned banks, including National Bank of Pakistan, Punjab Bank, Sindh Bank and Khyber Bank, for agriculture financing.
PAC Executive Director Arif Nadeem noted that the company is making efforts to introduce tested cotton seeds that can increase cotton production from the current deficit to surplus. The seeds can increase cotton production up to 3 times to 21 million bales, compared to the current 7-8 million bales per year, taking Pakistan’s annual requirement to 15-16 million bales. The company has also developed new techniques to increase rice production in Pakistan by 40%. Nadeem pointed out that choosing the right seed is very important for agronomy because 60% of all technology is packed in seeds.
Asad Gilani, secretary of the Board of Investment, said, “Pakistan is losing 12-13% of its wheat yield, which is about $200 million, due to lack of mechanization. In addition, the country loses about $500 million in post-harvest losses.” Sindh Abadgar Council, Vice President Mahmood Nawaz Shah pointed out that the country has only one laboratory and few cold storage facilities and stressed the need for horticulture to increase exports. He said that resources are abundant in Pakistan but they are not being utilized effectively.
Published in The Express Tribune on March 17th2023.
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