The country's economic managers take pride in the assertion that they would regain economic sovereignty after the exit from the IMF's Poverty Reduction and Growth Facility in November this year.
Will they? Fiscal stability does not exist in a vacuum and is ultimately dependent upon the state of the real economy. Going by the conventional wisdom and Pakistan's own experience of 1950/60s, national sovereignty is also vulnerable to food insecurity, more so, when combined with a soaring trade deficit.
A potential threat is seen arising from the running annual food import bill at one billion dollars , expected to more than double this year by planned purchases of one million tons of wheat and reportedly 50,000-75,000 tons of gram. Tender for half a million ton of wheat has already been floated by the Trading Corporation of Pakistan. Food imports will widen trade deficit.
And despite the various measures in offing to boost agricultural output during the next five-year plan period (2005-2010), one official estimate is that the share of agriculture in GDP is expected to fall sharply to 19 per cent in 2009-2010 from the current level of 23.3 per cent which is again down from 25 per cent recorded some 2-3 years ago.
It indicates the low priority accorded to a sector which is the mainstay of the economy, provides employment to over 42 per cent of the population and is the largest source of foreign exchange earnings. Besides, there is large export potential to the whole of the Middle East market for meat and milk products with the growth in livestock exceeding official expectations.
With a ballooning trade deficit, officially estimated at around $3 billion per annum, sharply slowing down the building of foreign exchange reserves and impacting on exchange and interest rates, Pakistan may be forced sooner or later to go back to the IMF with a balance of payments crisis unless it evolves a crash import substitution action plan for slashing imports of food items and enforces it effectively.
The food group imports were at $978 million in fiscal 2003 and were recorded at $823 million for July-April FY 2004 equivalent to the value of total imports in this category for fiscal 2002.
In ten months of last year, major items of imports included edible oil at $553 million, tea $168 million, pulses, sharply down at $56 million.Though there has always been a wide spectrum of policies and projects for development of agriculture, the progress on execution of decades-old schemes like checking of water logging and salinity, proposals for building of small dams or big dams or provision of adequate bank credit to an under-starved sector have been nil to tardy, to have more meaningful impact on farm output.
In the three-year development strategy ending June 2004, import substitution in respect of edible oil and pulses was accorded a priority. Yet, import of edible oil is growing at faster rate.
The more than doubling of foreign exchange spending on food imports would come at a time when the trade deficit is officially estimated at $3 billion for fiscal 2005 against last year's $3.2 billion.
The import figure for current year is seen as an under-statement by independent economists like Saqib Sherani of the ABN AMRO who reckons that $4 billion would be more realistic estimate in view of the rapidly growing demand of a vibrant and growing economy.
On the other hand, fears are being expressed that exports to developed countries may be restricted, through anti-dumping duties, after the WTO January 1, 2005 when textile quotas are lifted and tariffs are to be reduced.
A study by a foreign bank indicates that of the 55 key exports items, Pakistan has definitely an edge in about 30-35 of them when compared to the competing countries. But, if the fears come true, Pakistan would not be able to seize full advantage of a freer trade.
About fifty per cent of the total exports are absorbed by Europe and USA. If John Kerry beats President Bush in the November elections, the US foreign trade policy will remain a question mark.
Kerry is against outsourcing of American jobs to other nations. His vice-presidential candidate is reported to have once remarked that "free trade is a security risk." He was referring to loss of American jobs in the manufacturing sector because of imports of foreign goods. The United States suffers from heavy debt, funded by Asia and needs to focus on the real economy.
Self-sufficiency in food-grains must therefore be accorded the first priority. China and India, with a population of one billion plus have achieved food self-sufficiency driven by land reforms and a right policy package.
Though Pakistan is blessed with one of the world's largest network of irrigation canals, it is most inefficiently managed. Output of major crops is subject to vagaries of nature and fluctuates according to climatic cycles.
Agricultural growth has been at an average of 2.3 per cent for the past three years against the target of 2.9 per cent when the average growth rate for the economy has been around 4.9 per cent.
Projecting an average annual 4.9 per cent growth in agriculture for 5-year plan 2005-2010, an official working paper reckons that the agriculture sector's contribution to GDP would decline to 19 per cent of the GDP in 2009-1010 from the current level of just over 23 per cent.
According to Pakistan Economic Survey 2003-2004, livestock accounts for 49.1 per cent of the value-addition in agricultural and for about 11.4 per cent of the GDP. Companies engaged in milk production see a growth rate of 10 per cent per annum in value-addition in livestock at least for the next five years.
The contribution of livestock exceeds share of any major crop to the farm economy. Of course, livestock farming is the outcome of efforts by peasants in which, the government has made very little contribution.
In a working paper for fifth five-year plan, the strategy for the agriculture sector is based on "continued surplus in production of wheat, enhanced import substitution in oil seeds and a push to growth in the livestock sector".
It acknowledges that agriculture sector continues to confront a wide range of problems such as depletion of existing capacity for water storage, limited distribution of improved varieties of seeds, higher prices of fertilizers and pesticides, higher rates of electricity for tube wells and poor infrastructure including farm to market roads.
Some of the issues discussed include: removal of GST on fertilizer, concessional rates of electricity for tube-wells, adoption of water saving techniques and changes in cropping pattern.
It also acknowledges that more across- the- board improvements are required in the marketing mechanism and storage capacity for key agriculture products to minimize waste which runs into hundreds of billions of rupees.
Under the fifth plan, it is proposed to undertake programmes for development of cultivable wasteland to encourage corporate farming by leasing out big chunks of state-owned uncultivated lands to potential investors. Gypsum would be used for amelioration of sodic soils. Research will be undertaken on bio-saline agriculture.
In the wide ranging measures for boosting agricultural output, the first priority should go to self-sufficiency in food-grains, without which economic sovereignty would remain elusive.
