KARACHI: Former central bank governor Syed Salim Raza said on Thursday fixing the agriculture sector can eliminate the food trade deficit in three years and lead to a production surplus in the subsequent three years.

In his keynote address at a conference organised by the Pakistan Agricultural Coalition (PAC), Mr Raza said developing the agriculture sector is the only way to rid the country of its perennial external deficit and increase dollar earnings in the long run. “[Agriculture] is all that we have,” he said in an implicit reference to the sector’s relatively less dependence on imported raw materials and high export potential.

According to the State of Pakistan’s Agriculture 2023 report that the PAC and the Pakistan Business Council (PBC) released on Thursday, 80 per cent of Pakistani farms lack direct access to bank credit. Moreover, at least 75pc of credit demand for crops isn’t being met through banking credit.

The study referred to a survey conducted by Karandaaz that showed two-thirds of the farmers said the reason for not borrowing directly from the banking sector was either complex documentation requirements or a lack of knowledge about getting a bank loan.

As a result, two-thirds of the farmers borrow informally from family, friends, money lenders or loan sharks. Some 14pc of them borrow from Zarai Taraqiati Bank Ltd, 12pc from microfinance banks and only 4pc from commercial banks, which cater mainly to larger farmers.

Using a simplified method to assess credit demand by farms, the PAC study came up with a figure of Rs2.6 trillion for 2019-20 for the five major field crops only. In contrast, the actual disbursement was just Rs638bn for all crops in the same year.

The breakdown of the credit demand estimate by farm size showed a demand of Rs338bn for farms above 50 acres, which is comparable to the Rs384bn figure for the actual disbursement to the farms of this category in 2019-20. However, estimated credit demand for farms of 12.50-50 acres was Rs843bn versus only Rs73bn that was actually disbursed.

Credit demand for farms below 12.5 acres was Rs1.45tr, which was eight times the Rs181bn that banks actually disbursed to smallholder farmers. “The smallholder farmers are the ones beholden to the middlemen,” it said.

Speaking on the occasion, PAC CEO Arif Nadeem said economic growth targets must include 4pc real GDP growth in agriculture.

Published in Dawn, March 17th, 2023