Connect with us

Business

Navigating the agriculture sector

Published

on



KARACHI:

Pakistan is an agrarian economy, and the agriculture sector includes crops, livestock, fisheries, and forestry. Agriculture accounts for roughly 25% of GDP, and Pakistan is among the world’s top producers of wheat, cotton, sugarcane, mangoes, dates, rice, and oranges. The agriculture sector not only meets domestic demand for food but also contributes significantly to the country’s export earnings. According to the Pakistan Bureau of Statistics, the value of agricultural exports in 2023-24 was $5.2 billion, an increase of 13% from the previous year. The major agricultural exports include rice, fruits, vegetables, cotton yarn, raw cotton, fish, and fish preparations. The growth in agricultural exports was driven by improved productivity, better prices, and increased demand in the global market. Pakistan has also invested in modernising its agriculture sector by adopting new technologies, enhancing water management, improving seed quality, expanding cultivated land for high-value crops, strengthening linkages between processors and growers, and providing incentives for agro-processing.

Among the major crops grown in Pakistan, rice, sugarcane, and cotton are important for both domestic consumption and export. Rice is the second most important staple food crop after wheat and occupies about 10% of the total cropped area. Pakistan produces different varieties of rice, including basmati, famous for its aroma and quality. Pakistan is expected to produce a record 9 million tonnes of rice during the fiscal year 2022-23 (FY23), compared to 8.9 million tonnes produced during FY22. Experts believe that better weather conditions will play a key role in this record production. Pakistan exported 3.9 million tonnes of rice worth $2.2 billion in 2020-21, making it the 10th largest rice exporter in the world.

Advertisement

Sugarcane is grown on about 13% of the cropped area and is used for sugar production as well as ethanol and other by-products. Pakistan produced 67.1 million tonnes of sugarcane in 2020-21, making it the fifth-largest sugarcane producer in the world. However, due to a low sugar recovery rate and high cost of production, Pakistan has to import sugar to meet its domestic demand. Sugar production in 2023-24 is forecasted at 7.05 million tonnes, 3% above the 2022-23 estimate. The marginal increase is due to expectations for a recovery in cane area harvested compared to the flood-damaged 2022-23 crop. Cotton is the most important cash crop and a major source of raw material for the textile industry, accounting for about 60% of total exports. Pakistan produced 4.8 million tonnes of cotton in 2020-21, making it the fifth-largest cotton producer in the world. However, due to low yield per hectare and high pest infestation, Pakistan has to import cotton to meet its domestic demand. Cotton production is forecasted to rebound 36% to 5.3 million bales in 2023-24. After the flood-damaged 2022-23 crop, yields should return to trend, while better returns from competing crops will limit area expansion.

Pakistan is one of the most water-stressed countries in the world, with per capita water availability of less than 1,000 cubic meters. The main source of irrigation water is the Indus River system, which depends on snowmelt and rainfall in the upstream regions. However, due to climate change, variability in precipitation patterns, and melting glaciers, water availability is becoming more uncertain and erratic. Moreover, due to inefficient water management practices, aging infrastructure, and poor governance, a large amount of water is lost or wasted in conveyance and distribution. According to a World Bank report, Pakistan loses about $12 billion annually due to poor water management.

Pakistan’s agriculture sector is characterised by low mechanisation, outdated technology, and weak extension services. According to a report by the U.S. Department of Commerce, only about 50% of farmers use tractors, while less than 10% use other farm machinery such as harvesters, planters, and sprayers. The use of modern inputs such as improved seeds, fertilisers, and pesticides is also low compared to other countries. Moreover, due to a lack of access to credit, information, and markets, many farmers are unable to adopt new technologies and practices that can enhance their productivity and income.

The government of Prime Minister Imran Khan and his main rival Shehbaz Sharif have different views on how to address the economic crisis, energy sector reforms, and trade policy. Fiscal consolidation measures, such as reducing subsidies and increasing tariffs, have increased the cost of production and reduced the profitability of farmers. The floods of 2022 have also damaged crops and infrastructure, leading to a contraction of agricultural output for the first time in more than 20 years. The World Bank estimates that real GDP growth will slow down to 0.4% in FY23, and that poverty will increase to 37.2%. To overcome these challenges, Pakistan needs to implement sustained macro-fiscal and structural reforms, improve its competitiveness and productivity, and diversify its agricultural exports.

Pakistan has huge potential to increase its exports of rice, sugarcane, and cotton products by diversifying its markets, enhancing its quality standards, branding its products, and complying with international trade regulations and requirements. For example, Pakistan can tap into the lucrative markets of China, Turkey, Qatar, Kenya, Afghanistan, UAE, and Saudi Arabia for its rice exports by offering different varieties (such as basmati, irri-6, parboiled, etc.), meeting their quality specifications (such as moisture content, broken percentage, etc.), and ensuring timely delivery. Similarly, Pakistan can increase its exports of sugar by improving its milling efficiency, reducing its cost of production, and exploring new markets in Africa and Asia. Moreover, Pakistan can boost its exports of cotton products by upgrading its textile industry, improving its compliance with environmental and social standards, and taking advantage of preferential trade agreements with various countries.

Advertisement

THE WRITER IS A MEMBER OF PEC AND HAS DONE MASTER’S IN ENGINEERING

 

Published in The Express Tribune, October 9th, 2023.

Like Business on Facebookfollow @TribuneBiz on Twitter to stay informed and join in the conversation.

 

Advertisement



Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

Pakistan’s economy stuck in ‘low-growth trap’: WB

Published

on

By



ISLAMABAD:

Martin Raiser, the World Bank’s Regional Vice-President for South Asia, has warned that Pakistan’s economy is stuck in a “low-growth trap” with poor human development outcomes and increasing poverty.

Raiser reaffirmed the bank’s commitment to support the people of Pakistan in his address during a ceremony in Islamabad.

Advertisement

In his address, Raiser delivered a stark assessment of the nation’s economic landscape.

“Pakistan’s economy is stuck in a low-growth trap with poor human development outcomes and increasing poverty. Economic conditions leave Pakistan highly vulnerable to climate shocks, with insufficient public resources to finance development and climate adaptation,” warned Raiser.

“It is now time for Pakistan to decide whether to maintain the patterns of the past or take difficult but crucial steps towards a brighter future.”

Raiser’s remarks underscore the urgency of the significant policy initiatives he unveiled during his visit. These initiatives, encapsulated in a series of policy notes, highlighted the critical policy shifts required for fostering a more productive, sustainable, resilient, and healthier Pakistan.

The policy notes—focusing on child stunting, fiscal sustainability, private sector growth, energy, learning poverty, agriculture, and climate change—are the culmination of several months of outreach and engagements conducted across the country under the “Reforms for a Brighter Future – Time to Decide” banner.

Advertisement

They are intended to help inform the public policy dialogue in the context of the upcoming elections.

Read also: WB wants Sukkur Barrage modernisation work in time

The policy notes advocated that Pakistan needs to address its acute human capital crisis—including the high prevalence of stunting and learning poverty—by adopting a coordinated and coherent cross-sectoral approach to basic services involving both provincial and federal governments.

They suggested that Pakistan should improve the quality of public spending and take serious measures to expand the revenue base, ensuring that the better off pay their share.

They also stated that the country should pursue business regulatory and trade reforms and reduce the presence of the state in the economy to increase productivity, competitiveness, and exports.

Advertisement

He said that Pakistan should remove distortions that undermine the performance of the agricultural and energy sectors, including through subsidy reform and privatisation of electricity distribution companies.

Highlighting Pakistan’s acute human capital crisis he said: “Almost 40% of children in Pakistan suffer from stunted growth, more than 78% of Pakistan’s children cannot read and understand a simple text by the age of 10. These are stark indicators of a silent human capital crisis that needs priority attention,” said Martin Raiser.

“With additional spending on water and sanitation of around 1% of GDP per year and better coordination at the local level, stunting could be halved over a decade with significant positive impacts on growth and incomes. This is just one example of the huge economic benefits a coherent and decisive reform strategy could have”.

During his visit, Raiser will meet government officials at the federal and provincial levels, and representatives from the private sector and academia.

He will also visit the Dasu and Tarbela hydropower projects, as well as project sites in Sindh and Punjab.

Advertisement



Continue Reading

Business

Little prospect of Russia oil deal

Published

on

By



ISLAMABAD:

Russia is reluctant to strike a long-term commercial oil export agreement with Pakistan at a price cap of $60 per barrel, say officials.

The European Union and the United States had agreed in December 2022 to slap a price cap of $60 per barrel on Russian crude supplies in a bid to put pressure on Moscow and choke revenue flows over its war in Ukraine. The cap was also aimed at ensuring continuous supplies and avoiding potential shortage of the fuel across world markets.

Advertisement

Washington has given its concurrence for Pakistan’s oil deal with Russia while remaining within the price ceiling. However, Moscow has rejected the price cap.

Pakistan’s government had decided in October to negotiate a long-term oil supply pact with Russia within the price cap. It wants Russia to set free-on-board price at $60 per barrel. Free on board means the actual price charged at port.

design: Ibrahim Yahya

design: Ibrahim Yahya

However, Pakistan shelved plans for a government-to-government contract and instead allowed Pakistan Refinery Limited (PRL) to clinch a crude purchase agreement on a commercial basis.

Following that, PRL struck a long-term contract with plans to bring first cargo in December this year.

Advertisement

PRL had been nominated as a procuring entity as per commitments made in the Pakistan-Russia Inter-governmental Commission meeting in January 2023.

PRL will purchase crude oil from Russia according to commercial terms, as agreed from time to time, without violating the international commitments of Pakistan and the international framework governing such transactions.

The refinery has already imported 100,000 tons of Russian Urals crude and processed it successfully. It also made a profit on that transaction. The oil was loaded at a Russian port and offloaded at an Oman port on two small shuttle vessels for onward delivery at Karachi port.

Though PRL, on sidelines of the Russian Energy Forum in October this year, inked a long-term agreement with its Russian counterpart for crude oil supply at mutually agreed specifications, during commercial negotiations, the Russian side did not show its willingness to enter into long-term contracts at the price cap.

In a bid to break deadlock, a Russian delegation is set to arrive on Tuesday (today) to meet key Pakistani officials.

Advertisement

Sources pointed out that Pakistan could not agree on an agreement that would be in breach of the price cap, which could invite US sanctions.

Read: PRL clinches long-term oil supply deal with Russia

Earlier, Russia shipped one crude oil cargo of 100,000 tons that took one month to reach Pakistan. Freight cost was also borne by the Russian side.

However, “if Russia does not pay freight charges on future cargoes, a deal may be unlikely,” an official remarked.

Experts say Pakistan can benefit from Russia crude oil if it makes regular imports.

Advertisement

The above crude cargo was brought on a trial basis, which PRL processed at a cost cheaper by $7 per barrel.

Russian crude is said to produce 32% high-speed diesel (HSD) and 50% furnace oil as compared to the Arabian Light crude that produces 45% HSD and 25% furnace oil.

Initially, PRL blended 50% Russian oil with the same quantity of Arabian Light being imported from the Gulf market. Later, it mixed 35% Russian crude with 65% Arabian oil that produced a low quantity of furnace oil.

So far, Pakistan has been relying on the Middle East market for its oil requirement but the import of Russian oil has opened a new avenue, which will diversify markets.

Meanwhile, PRL has awarded a contract to contractors for kicking off work on doubling its production capacity from the current 50,000 barrels per day (bpd) to 100,000 bpd. With the expansion of the refinery, there will be potential for significant imports from Russia as well.

Advertisement

Published in The Express Tribune, November 28th, 2023.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

 



Advertisement
Continue Reading

Business

Foreign companies repatriate record $272.5m in October

Published

on

By



KARACHI:

Foreign companies operating in different sectors of Pakistan’s economy have continued to freely repatriate profits to their headquarters abroad, totalling a 39-month high profit of $272.5 million in a single month, October 2023.

October marks the second consecutive month in which they have continued to send profits with no restrictions from the government and the central bank, sending a strong signal to global investors to initiate new investment projects in Pakistan.

Advertisement

Cumulatively in the first four months (Jul-Oct) of the current fiscal year 2023-24, multinational companies (MNCs) have dispatched $485.4 million. This is significantly higher than the total repatriation of $331 million in the previous fiscal year 2022-23, according to the data released by the State Bank of Pakistan (SBP) on Monday.

The central bank’s data suggests the total repatriation in the fourth month was seven times (or 581%) higher compared to $71.3 million dispatched in the same fourth month of the last year.

Overseas Investors of Chamber of Commerce and Industry (OICCI) President, Amir Paracha, acknowledged the resumption of profit repatriation by foreign companies from Pakistan in the wake of improvements in the supply of US dollars in the country in recent times.

He said the government’s support to foreign companies in resuming sending profits to their headquarters abroad would support the country in attracting new foreign investment.

The resumption of repatriation has taken place as the Securities and Exchange Commission of Pakistan (SECP) is making efforts to attract investments in the agriculture, mining, and IT and telecom sectors, mainly from Middle Eastern countries.

Advertisement

Read: Ease restrictions on profit repatriation: OICCI

Pakistan has been attracting foreign investment mainly in financial, power, oil and gas, and telecommunication sectors. While these four sectors remain top dispatchers of profit from the country.

Multinational companies (MNCs) faced challenges in repatriating profits in the past one-and-a-half years.

The multinational companies have repatriated an average profit of $1.6 billion a year in the past 10 years. They notably sent a high of $2.3 billion in profit alone in 2018.

The latest central bank repatriation data suggests the MNCs have sent the monthly earned profit in addition to the profit withheld in the country in months of low foreign exchange reserves in Pakistan.

Advertisement

Pakistan has never officially announced or unannounced a ban on the repatriation of profits by MNCs in the past two-and-a-half decades. However, the recent depletion in foreign exchange reserves to a critically low level of less than a month has led concerned authorities to delay the dispatch to avoid default on foreign debt repayment.

Profit repatriation had remained low in the previous one-and-a-half years, ranging from $2 million to $60 million a month.

Published in The Express Tribune, November 28th, 2023.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

 

Advertisement



Continue Reading

Trending