Agriculture: A Rare Bright Spot in Pakistan's Economy

[Riaz Haq]

Pakistan's agriculture sector grew 6.3% in 2023-24, far outpacing the overall economy that grew just 2.38%, according to the Economic Survey of Pakistan 2023-24.  This is good news for about 40% of the country's population working in the agriculture sector. By contrast, India's agriculture growth slowed to 1.2% in recent quarters. Studies have shown that strong growth in agriculture helps reduce poverty in developing nations like India and Pakistan. 

Snapshot of Pakistan's Economy. Source: Economic Survey of Pakistan...

The agriculture growth in Pakistan was the highest in 19 years. All major crops saw significant increases. Wheat output jumped 11.6% from 28.2 million tons last year to 31.4 million tons this year, the economic survey said. Cotton, severely damaged by floods and rains last year, reached 10.2 million bales compared to 4.9 million bales last year, growing by 108.2%. Rice output also saw a significant increase — up by 34.8% — reaching 9.9 million tons compared to 7.3 million tons. 

Strong crop output is in part the result of higher yields from increased water and fertilizer availability to farmers, according to the economic survey. 

The survey said the water availability during Kharif 2023 increased to 61.9 million acre-feet (MAF) from 43.3 MAF in Kharif 2022 (when the floods hit). For Rabi 2023-24, the water availability was 30.6 MAF, showing an increase of 4.1% over Rabi 2022-23.

Domestic fertilizer production during FY24 (July-March) rose by 17.3% to 3.25 million tons compared to 2.77 million tons in the same period of FY23. Fertilizer imports also increased by 23.7%, reaching 524,000 ton­s. The availability of fertilizer increased by 18.1% to 3.77 million tons. 

Pakistan's Rice Exports Soared 80% in Current Fiscal Year. Source: FT

The value of Pakistan’s rice exports soared to $3.6 billion over the last 11 months, up from $2 billion in July to May 2022-23. Its previous record for was 4.8 million metric tons of rice exports, valued at about $2.5 billion in 2021-22, according to the Financial Times. 

Pakistan is among the world's largest food producing countries. It produces large and growing quantities of cereals, meat, milk, fruits and vegetables. Currently, Pakistan produces about 38 million tons of cereals (mainly wheat, rice and corn), 17 million tons of fruits and vegetables, 70 million tons of sugarcane, 60 million tons of milk and 4.5 million tons of meat.  Total value of the nation's agricultural output exceeds $70 billion.  Improving agriculture inputs and modernizing value chains can help the farm sector become much more productive to serve both domestic and export markets.  

Agriculture is considered a key tool for reducing poverty in developing countries like Pakistan. It employs almost half of the rural workforce, contributes around 20% to the country's GDP, and provides raw materials for agro-based industries, according to a study by Yaping Liu, Asad Amin, Samma Faiz Rasool, and Qamar Uz Zaman.  However, some studies suggest that agriculture may only help mitigate rural poverty in the long term, while other sources say that sustainable agriculture practices can significantly improve agricultural production and reduce poverty.

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[Riaz Haq]

Nishat’s focus towards corporate farming - Newspaper - DAWN.COM


https://www.dawn.com/news/1844573

Quietly but steadily, corporate money is betting on Pakistani agriculture. One of the country’s largest business conglomerates — Nishat Group — for example, which began to expand into agriculture by setting up a modern dairy farm near Sukheki more than a decade ago is now planning to venture into the manufacturing of “precision” farm machinery in the country.

The growing corporate interest in agriculture is not surprising given the huge business opportunities offered by this sector in terms of its production of some key agriculture commodities like wheat, rice, cotton, meat and milk.

“I am very much excited about the agricultural sector in Pakistan. There are enormous opportunities here for sustainable business growth and exports,” Mian Mohammad Mansha, the chairman of Nishat Group, told this correspondent last week.

The country’s food exports, especially of rice, grew 37 per cent to $8bn in the first 11 months of last fiscal year to May. “The sector’s actual potential remains unexplored. The large productivity gap underscores that agriculture can make huge contributions to economic growth, food exports, and poverty alleviation,” he adds.

Ever since venturing into corporate farming in 2013, his company, Nishat Agriculture Farms Limited (NAFL), has invested consistently and heavily in agriculture. The group owns five farms spread over 1,500 acres of farmland and a large modern dairy farm producing packaged milk and other dairy products in collaboration with a Turkish firm for the large urban market.
“When Nishat Agriculture bought the land, it was water-logged and barren. We have constantly been investing in mechanisation of our farms every step of the way, from seed plantation to irrigation to crop harvest since 2017. This has helped us reclaim uncultivable land and turn it into one of the most fertile pieces of farmland in the country,” Mian Mansha notes.

His efforts to turn his own farms into fertile land have also helped his neighbouring farmers in Thatha Raika village recover their thousands of acres of water-logged farms. Nishat Agriculture is growing four crops — Alfalfa (protein-rich fodder), corn, rice and wheat — at the farm.

“Our lands were almost knee-deep below water when Nishat began reclaiming their land,” a local farmer recalls. “Now the groundwater level has gone down significantly, and we are again able to cultivate our area.”

Mian Mansha argues that Pakistan’s agriculture has enormous potential, but there is a need to improve farming practices, especially replacing the age-old flood irrigation method, by promoting mechanisation to get more out of the land at a reduced cost and less burden on natural resources and land under cultivation.

“The rapid climate change demands that we quickly adopt mechanisation in agriculture to reduce water consumption (around 90pc of available water in Pakistan is consumed in farm irrigation in the country), improve crop output, and cut time spent on sowing and irrigation,” he maintains.

Since Pakistan does not manufacture most of the machines used in farming, the upfront cost of farm mechanisation is quite formidable, especially for smallholder farmers.

“Nevertheless, the long-term benefits of mechanisation in the shape of huge water conservation, significantly reduced input and labour costs, and notable increases in crop yields and product quality can be enormous,” the Nishat Group chairman underscores.

“We are also helping smallholder farmers from the area by educating them in efficient farming practices and new technology.”

“The Pivot Irrigation System that we have installed to irrigate our farms, for example, is extremely efficient and uses 70pc less water compared to conventional flood irrigation, lowers electricity consumption, improves precision application of inputs, and results in time and labour savings due to its uniform uses as against flood irrigation methods.

[Riaz Haq]

Nishat’s focus towards corporate farming - Newspaper - DAWN.COM


https://www.dawn.com/news/1844573

“The pivot irrigation system can also be accessed online through a mobile app to perform various functions. The water thus saved could be used by other farmers. This also helps us get much better crop yields even from dry land or sandy soils than other farmers,” he says.

Local Manufacturing: Recently, Nishat Agriculture Farms has imported the Yanmar rice transplanter, the automated seedling picking and planting system, from Japan and aims to manufacture the machine locally.

“We have plans to invest in local manufacturing of agriculture equipment and machines in Pakistan, starting with the Japanese transplanter. We may collaborate with Millat Tractors or may use our own auto assembly facility in Faisalabad,” he asserts.

A hydraulic system for effortless operations and maintenance, the transplanter significantly reduces seedling waste, improves crop spacing and uniformity for optimal growth, controls plant density, and increases efficiency in water and fertiliser usage.

“The use of rice transplanters is estimated to drastically slash the labour costs from present Rs11,000 per acre to less than Rs1,000,” a senior Nishat Agriculture Farms official claims. According to him, the Japanese manufacturer of the machine claims that Bangladeshi rice growers had more than doubled (up to 100-200pc increase) their production by using this machine.

Agriculture is the backbone of Pakistan’s economy, contributing more than a fifth. The sector is the largest employer, employing more than 45pc of the country’s total workforce and is a major source of export earnings.

However, the sector faces multiple challenges: low yield, negligible mechanisation, growing water scarcity, large post-harvest crop losses, absent storage and cold chain facilities, rapidly declining soil fertility, extreme climate events, land fragmentation and so on.

Economic experts are unanimous that Pakistan cannot achieve robust, sustainable economic growth without a boost to its agricultural productivity and rural incomes. That will require intensive efforts to manage energy, water, land, soil and energy more efficiently and sustainably through adaptation to climate change and mechanisation.

It requires substantive policy reforms in agricultural research, extension, seed technology, and input markets, as well as large investments. Corporate participation and investment in agriculture are key to tackling these challenges and transforming agriculture with precision and efficient farming techniques and practices.

With Pakistan’s agriculture at a turning point, corporate participation will go a long way in realisation of the sector’s untapped potential provided policymakers seize this opportunity to execute reforms needed to encourage corporates like Nishat Group to invest in this largely neglected area.

[Riaz Haq]

Pakistan clinches IMF bailout deal, to raise tax on farm income | Reuters


https://www.reuters.com/markets/asia/pakistan-shares-hit-fresh-reco...

The new agreement introduced increased tax on agricultural incomes, underscoring the need to increase government revenue and reduce recurrent deficit to win the lender's approval.
The IMF said it had got assurances from Pakistani authorities - provincial and federal - that they would bring taxation on agricultural incomes on par with corporate and other tax rates.
Agricultural income has historically been taxed much lower than other sectors, despite contributing 23% to the GDP, employing 35% of the labour force, and bringing in an annual income of around 9 trillion Pakistani rupees ($32.37 billion).
Under the IMF deal, the highest effective tax rate can rise to as much as 45% from the current 15%. It will be implemented from 2025, a move that was termed "unprecedented" by brokerage and investment banking firm JS Global.
"These changes could contribute to inflation, particularly in food prices, affecting consumers nationwide," said Ghasharib Shaokat, head of product at Pakistan Agriculture Research, adding that larger farmers will be affected more.
Inflation averaged close to 30% in FY23 and 23.4% in FY24, which ended on June 30.
Policymakers have long wanted to do this, but were unable because Pakistani governments do not want to risk their popularity among the rural voter base, said Vaqar Ahmed of the Sustainable Development Policy Institute, a think tank.
"Most of the good reforms for fiscal consolidation, unfortunately, have not come as a result of our own political will and have come as a result of external push," he said.

Prime Minister Shehbaz Sharif's government is also based on a weak coalition and faces political pressure of a popular jailed opposition leader, former premier Imran Khan.
But Sharif says his government is committed to tough but unavoidable reforms.
Pakistan has been struggling with boom-and-bust cycles for decades, leading to 22 IMF bailouts since 1958. Currently the IMF is fifth-largest debtor, owing $6.28 billion as of July 11, according to the lender's data, opens new tab.
The latest economic crisis has been the most prolonged and has seen the highest ever levels of inflation, pushing the country to the brink of a sovereign default last summer before an IMF bailout.
The conditions of the programme have become tougher. The latest bailout is aimed at cementing stability and inclusive growth in the crisis-plagued South Asian country, the IMF said.
A source close to negotiations with the IMF told Reuters that the agriculture income tax was agreed weeks ago, but was deliberately not highlighted by the government because of the sensitivity of the matter.
The IMF has said the SLA agreement is subject to approval by its executive board and the confirmation of necessary financing assurances from Pakistan's development and bilateral partners.
This would include rollovers or disbursements on loans from Pakistan's long-time allies Saudi Arabia, the United Arab Emirates and China.
($1 = 278.0000 Pakistani rupees)

[Riaz Haq]

Pakistan’s current account posts deficit of $681mn in FY24 - Markets - Business Recorder

https://www.brecorder.com/news/40313476

Pakistan’s current account posted a deficit of $681 million in FY2023-2024, massively lower by 79% than the deficit of $3.275 billion in the previous fiscal year, revealed data released by the State Bank of Pakistan (SBP) on Friday.

The CAD amounts to 0.2% of GDP, which is the lowest in the last 13 years, said brokerage house Arif Habib Limited (AHL).

“This significant decline was driven by a 6% reduction in the trade deficit and an 11% increase in remittances,” it added.

In FY24, the country’s total export of goods and services amounted to $38.9 billion. Imports clocked in at $63.3 billion during the period, according to SBP data.

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Pakistan's IT exports up by 24% to $3.2bn in FY24 - Profit by Pakistan Today

https://profit.pakistantoday.com.pk/2024/07/19/pakistans-it-exports...

Pakistan's IT exports surge by 24% to reach US$3.2 billion in FY24. In a significant economic development, Pakistan's Information Technology (IT) exports have soared to US$3.2 billion in the fiscal year 2024, marking a robust 24% year-on-year increase from the previous fiscal's US$2.59 billion.

The latest data, released by the State Bank of Pakistan, underscores the sector’s resilience and growth amidst global economic challenges.

For June 2024 alone, Pakistan recorded IT exports worth $298 million, up by 33% compared to the same period last year. Despite a month-on-month decline of 10%, June’s exports surpassed the twelve-month average of $262 million, highlighting sustained momentum in the sector.


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FY24 exports soar 10.54pc to $30.645bn YoY - Business & Finance - Business Recorder

https://www.brecorder.com/news/40310979

ISLAMABAD: The country’s exports increased by 10.54 percent ($2.921 billion) to $30.645 billion during the fiscal year 2023-24 compared to $27.724 billion in the corresponding period of 2022-23, says the Pakistan Bureau of Statistics (PBS).

The monthly trade data released by the Bureau noted that Pakistan’s trade deficit narrowed down by 12.32 per cent in the fiscal year 2023-24 as it stood at $24.089 billion compared to $27.474 billion during the fiscal year 2022-23.

Imports declined by 0.84 per cent to $54.734 billion during the fiscal year 2023-24 as compared with $55.198 billion in the fiscal year 2022-23.

The data further noted that the trade deficit widened by 30.39 per cent on a year-on-year basis and stood at $2.390 billion in June 2024 compared to $1.833 billion during the same month of 2023.

The imports increased by 17.43 per cent on a YoY basis and remained $4.919 billion in June 2024 compared to $4.189 billion in June 2023. The exports increased by 7.34 per cent on a YoY basis and remained $2.529 billion in June 2024 compared to $2.356 billion in June 2023.

On a MoM basis, the trade deficit widened by 15.13 per cent to $2.390 billion in June 2024, as compared to $2.076 billion in May 2024. Exports recorded a 10.92 per cent negative growth to $2.529 billion in June 2024 when compared with $2.839 billion in May 2024.

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Remittances in FY24 - BR Research - Business Recorder

https://www.brecorder.com/news/40313433

Remittances to Pakistan grew by 10.7 percent year-on-year in FY24 to $30.3 billion. The annual tally is the second highest in the country’s history at $30.3 billion in FY24 after $31.2 billion in FY22. Remittances during June 24, the last month of the fiscal year stood at $3.16 billion, up by 44 percent on a year-on-year basis, but down by 3 percent on a month-on-month basis.

[Riaz Haq]

Pakistan's domestic exports rose by 8.90% in FY2023-24

https://www.samaa.tv/2087319468-pakistan-s-domestic-exports-rose-by...

In the fiscal year 2023-24, Pakistan's domestic exports saw a notable increase of 8.90%, reflecting a positive trend in the country's trade performance.

The total exports of goods and services surged by $3.16 billion compared to the previous fiscal year, bringing the total export volume to $38.48 billion.

Breaking down the figures, the export of goods reached $30.68 billion, while services exports amounted to $7.80 billion. The export of goods experienced an annual increase of $2.95 billion, whereas the services sector saw a more modest rise of $210 million.

The textile sector remained a significant contributor, with exports totalling $16.65 billion. The agro and food sector also performed well, recording exports of $7.37 billion. Additionally, manufacturing and engineering exports crossed the $4 billion mark, showcasing the sector's growth and potential.

According to the Ministry of Commerce, other sectors contributed $2.22 billion to the total export volume, highlighting the diverse range of products and services that Pakistan offers to the global market.


Meanwhile, in the first month of the current financial year, Pakistan witnessed a sharp increase in car imports, while smartphone imports took a downturn, according to the latest report from the Pakistan Bureau of Statistics (PBS).

Car imports more than doubled in July 2024, with vehicles worth $23.29 million ordered during the month. The value of these imported cars in local currency amounted to approximately Rs6.45 billion.


In addition to this surge in car imports, car assembly operations also saw a rise, with parts worth $34.2 million being imported in July 2024. The value of these parts in local currency was over Rs9.5 billion, indicating robust demand for both fully built units (CBUs) and completely knocked down (CKD) car kits.

This trend is notable as Pakistan continues to see increasing demand for automobiles, even amidst economic challenges and inflationary pressures. Industry analysts suggest that a growing middle class and increased consumer financing options may be driving the growth in car imports.

However, the same cannot be said for smartphone imports. In contrast to the car sector, smartphone imports saw a decline of 5.3% in July 2024 compared to the same period last year. Smartphones worth $64.5 million were imported last month, a sharp contrast to July 2023 when mobile phone imports amounted to $68.1 million.

[Riaz Haq]

Pakistan's agriculture exports reach historic $8bln: Jam Kamal


https://arynews.tv/pakistans-agriculture-exports-reach-historic-8bl...

Minister for Commerce Jam Kamal Khan Wednesday said Pakistan’s agricultural exports have reached a historic milestone of $8 billion for the first time in history.

During a virtual meeting with the Sectoral Council for Rice and the Council for Dairy and its Products, the Minister emphasized the importance of their contribution to the national economy.

He said our goal is to increase export volumes, and all possible measures will be taken in this regard.

The minister encouraged the council to set its sights on a five billion dollars target for the coming year, indicating the government’s confidence in the sector’s ability to continue its upward trajectory.

The minister observed Pakistan’s leading position in the European and Gulf markets in the rice sector but emphasized the need to focus on producing pesticide-free products to maintain this edge.

Earlier it was reported that over 1.126 million metric tons of vegetables valued at $430.055 million were exported during the financial year that ended on June 30, 2024, as compared to the exports of 1.336 million metric tons worth $300 million in the corresponding period of the last year.

During the period from July-June, 2024, vegetable exports from the country grew by 43.20 per cent as compared to the exports of the same period of the last year, according to the data of the Pakistan Bureau of Statistics.