Economic policy of pakistan
Currently, Pakistan struggles with high food import costs and limited foreign exchange. Prioritizing the textiles and sugar industries could enhance foreign earnings and generate significant employment for low-skilled workers. However, this requires a commitment from the government, the introduction of supporting Economic policy of Pakistan and the implementation of these economic policies in letter and spirit.
It is on record that 20% to 40% of agriculture produce goes stale before reaching the market. This on the one hand deprives the farmers of a modest return for their efforts and on the other hand, creates shortages and use of paltry foreign exchange available to Pakistan. It is pertinent to point out that the Government of Pakistan (GoP) had come up with Warehouse Receipt Financing (WRF) program as back as in 2013. The lack of commitment on the part of the GoP as well as the financial institutions have failed in facilitating the construction of modern grain storage silos in the country.
Over the years the GoP has been increasing the quantum of lending to farmers and the indicative target for the current financial year is PKR1.8 trillion. The lending is being done under two heads: for the purchase of inputs and for development. The most shocking part is that some of the financial institutions prefer to pay the penalty, rather than extending credit to farmers. This has resulted in the exclusion of small farmers from the formal banking system.
Financial institutions have been lending to farmers against ownership documents of their land. Despite multiple land reforms, the bulk of the land is still owned by the feudal lords. Small landholders or those who have no land ownership documents have remained out of the formal banking system. WRF system was conceived as an alternative system for financial inclusion. Under this scheme, farmers could use their produce as collateral and secure funds from the financial institution.
If the GoP is serious it has to take on board the State Bank of Pakistan, the Securities and Exchange Commission of Pakistan, commercial banks and Naymat Collateral Management Company to undertake the construction of grain storage silos on war footings.
The most disappointing fact is that the country produces over 25 million tons of wheat, the federal and provincial governments are the major buyers but virtually no wheat storage silos are present. The bulk of the produce is kept in warehouses not fit for the storage of staple food grain. The result is over 20% of the produce goes stale before reaching the market.
I was amazed to hear from some religious clerics that the construction and management of warehouses is not Shariah compliant, the basic objection is it facilitates hoarding. They are unable in distinguishing between ‘safekeeping’ and ‘hoarding’.
Pakistan earns the bulk of its foreign exchange from the export of textiles and clothing. Without any exaggeration, the country is capable of producing 20 million bales of medium staple fiber. However, over the last few years, cotton production has reduced to around 6 million bales. An output of 10 million bales can be attained by: using certified quality seed, stopping the cultivation of sugarcane in the sugar belt and using certified quality pesticides/insecticides. This would also help in boosting the production of ‘cotton seed oil’ – an edible oil as well as an oilcake for feeding cows and buffaloes.
The third important crop is sugarcane which not only produces sugar but also exports ethanol and molasses in huge quantities. Cultivation of superior-quality sugarcane varieties can help in boosting the production of sugar, molasses and ethanol.
It is necessary to remind the policy planners, if they still don’t know, that ethanol is used for the production of biofuels. At one time the GoP had started the sale of E-10 – petrol containing 10% ethanol. Only the policy planners know why this project was abandoned?
Maize is yet another crop that can help in containing food import bills. Maize yields oil, flour and oilcake (used in the production of chicken feed). Now cultivation of two crops is a norm and in certain areas third crop is cultivated.
It may be pertinent to mention that maize yield in Pakistan is substantially low and the prime reason is the high price of DAP fertilizer.
This takes us to another key industry, the fertilizer industry. Over the years the industry has helped in saving precious foreign exchange. Now it has the capacity to export one million tons of urea. At times the country has to import urea, which is due to the bad policy of stopping gas supply to fertilizer plants during winter.
The GoP must also facilitate the running of power plants on furnace oil. The plea taken by the GoP for not running power plants on furnace oil is most absurd it contains a high percentage of sulphur. The GoP must immediately arrange funds for installing sulphur at local refineries. It would yield two benefits: the use of the furnace in local power plants as well as its export while extra foreign exchange will be earned from the export of sulphur.