This year proved particularly harsh for Pakistan’s agriculture sector. Government policies drove up input costs, reduced exports, and depressed domestic crop prices, whereas climate change adversely affected crop yields. Taken together, farmers of all major crops suffered badly.

Wheat prices fell by up to Rs2,000 per 40 kg when the government abruptly discontinued both the support price and procurement from farmers, without putting in place any alternative mechanisms to manage the annual supply glut during the harvest period. Likewise, cotton farm-gate prices declined due to an 18 per cent sales tax on locally produced cotton, selectively, whereas imports remained exempt until the end of July 2025.

Similarly, in 2025, the government scrapped its long-standing policy of announcing an indicative sugarcane price. As a result, sugar mills are paying farmers rates that neither align with crop expenses nor reflect prevailing sugar market prices.

Maize and rice yields were hit by climate change, while their market prices were depressed by the closure of the Afghanistan border. The border disruption also severely curtailed exports of citrus, potatoes, and other crops to Afghanistan and Central Asian markets, triggering a considerable decline in domestic prices. Sesame proved to be another loss-making crop due to weak global prices and erratic rainfall.

An underwhelming seed sector, water insecurity and a narrow agri export market will pose challenges to the sector in the coming year

In 2025, farmers have lost much of their cost competitiveness due to higher input costs, policy failures, and weather vagaries. In view of all these, they are not very optimistic about 2026. Many fear that the situation could worsen further in the years ahead as new challenges have come into play.

First, the government has recently assured the International Monetary Fund (IMF) that it will raise duties on fertilisers and pesticides — the two major cost components of crop production — if tax collection falls short. Such a move would sharply escalate production costs and could pose an existential threat to the agriculture sector.

Second, the intensity and frequency of erratic rainfalls and heat waves are rising, alongside increasing temperatures, which will continue to erode crop yields. With monsoon rainfall projected to rise by 22–26pc, floods are again feared in 2026. Yet, there is no visible improvement in flood preparedness or mitigation measures.

Third, unlike many comparable countries that levy minimal or no taxation, Pakistan — under IMF directives — will raise the agricultural income tax from the existing 15pc to as high as 45pc, effective from FY26. Farmers, who are the primary investors in the sector, particularly for upgrading farm practices and mechanisation, will likely see their on-farm investments suppressed. This decision comes at a time when farm sizes are shrinking, and both crop production and market risks are intensifying due to climate change and price volatility.

Fourth, if the Afghanistan border remains closed into 2026, both raw and value-added products of many crops will face significant setbacks. Under current farming practices, the sector is ill-prepared to access alternative export markets and to comply with their stringent sanitary and phytosanitary (SPS) standards. A prolonged border closure would therefore create widespread gluts in the country that would result in severe losses for farmers.

Fifth, earlier in the year, India unilaterally suspended the Indus Waters Treaty and disrupted the Chenab river flow by abruptly holding and releasing water. Such irregular flows badly affect the crops. Looking ahead, any future reduction in river flows — while Pakistan already struggles to distribute water equitably among provinces — could severely impact those regions that rely solely on canal water.

In such a precarious and fragile situation, the pressing question is: what is the way forward, and which targeted interventions are needed to stabilise the agriculture sector?

Most importantly, the top priority should be to enhance farmers’ access to high-yielding, climate-resilient seeds because higher productivity is the only viable way to partially offset rising production costs and heavier taxation. For this, Pakistan needs a dynamic seed sector where the public and private sector (national and multinational seed companies) undertake research and development and market their quality seed freely. However, this will require a highly robust seed regulatory mechanism.

Water shortages pose an impending threat to Pakistan’s agriculture. To offset potential reductions in river flows from India and Afghanistan — where several dams are in the pipeline — Pakistan must significantly expand its water storage capacity. Simultaneously, the widespread adoption of high-efficiency irrigation systems along with rainwater harvesting to recharge groundwater is essential, as reliance on groundwater is bound to increase in the coming years.

Pakistan must actively explore and tap into new export markets to manage its export surplus. However, to comply with their sanitary and phytosanitary standards, we need to upgrade our farm practices, which is far from easy. At the very least, export-oriented clusters can be developed in collaboration with the private sector, where crops — particularly high-value, non-traditional ones — are grown under contract farming arrangements and processed into value-added products.

Despite these mounting challenges — directly affecting the country’s food security, agricultural exports, employment generation, and poverty — the government’s response remains confined to short-term, headline-friendly interventions such as small bank loans, ballot-based distribution of tractors, solar tubewells and farm implements, model agricultural malls, and short-term training of 1,000 agri-graduates in China, even as hundreds of highly qualified PhDs and MPhils remain unemployed in the country.

What Pakistan urgently needs are focused and sustained investments in strengthening its seed sector, improving water resources, and upgrading on-farm practices to enhance yields and exports. However, given the ongoing political turmoil in the country and the government’s preference for optics-driven quick wins, these critical priorities are unlikely to get due attention. Consequently, the agriculture sector would remain rudderless, without a clear vision or direction.

Khalid Wattoo is a development professional and a farmer, and Dr Waqar Ahmad is a former Associate Professor at the University of Agriculture, Faisalabad.

Published in Dawn, The Business and Finance Weekly, December 29th, 2025