KARACHI, Dec 6: The State Bank of Pakistan has said that failure in large crops production was mainly because of resource management issues and the absence of a clear pricing policy, which resulted in record low 1.5 per cent agriculture growth in 2007-08.
The SBP issued its annual report on Saturday with detailed comments and analysis of the economic performance of the previous fiscal year.
A number of adverse developments hit agriculture sector to record a dismal 1.5 per cent growth during the year under review, which is significantly lower than the 4.8 per cent target for the year and the lowest growth since FY03.
“A weaker output by major crops overshadowed the record sugarcane harvest and relatively improved performance of minor crops; livestock and fishing sub-sectors during FY08,” said the report.
A disappointing performance of major crops sub-sector is largely attributed to resource management issues and absence of a clear pricing policy. For instance, reduction in cultivated area under cotton, rice and wheat was a result of water shortages at the sowing time.
Delays in harvesting of cotton and sugarcane (mainly due to pricing issues), and lack of clear incentive signals (as the government could not announce its pricing policy before sowing) also resulted in area deficit for wheat crop. In addition, stubbornly high prices of fertilisers and pesticides also drained farmers to use appropriate agri-inputs; resulting in depressed yields by most of the major crops.
“The agriculture sector, however, benefited from continued support through strong growth of institutional credit. A significant 25.3 per cent rise in farm credit during FY08 helped farmers to partly compensate the impact of high fertiliser prices,” said the report.
Despite setback in major crops, prevailing high prices of agricultural commodities suggest that to enhance earning potential of the farmers Pakistan should focus on modernising agriculture sector with greater emphasis on crop diversification and its value chains.
Crop diversification experiments in major agriculture producing countries, for instance crops for bio-fuel, suggest that Pakistan could also benefit from favourable global prices, said the report.
Improved performance of fisheries sector in FY08, owed to both marine and inland fish catch, due to higher prices in domestic as well as international markets.
“This growth is remarkable as better feed and management for inland fishing offset the negative impact of water levels in reservoirs and rivers during the year,” said the report.
Fish production from marine also recovered well in FY08 and posted a respectable growth of 10.5 per cent as against 7.1 per cent decline in FY07.
Pakistan needs to improve hygiene and environmental conditions in handling fish and its products to increase its share in EU and Japanese markets, the report suggested.
“Value addition by forestry sub-sector declined for the fifth year in a row,” said the SBP report.
This continued disappointing performance is mainly due to massive deforestation - unabated cutting of trees and forests -- as well as poor law and order situation in Northern Areas.
As a result, timber and fire wood production from forests fell to the lowest level of 280 thousand cubic meters.
“It is interesting to note that production of timber increased with the rise in area under forests until FY03. Since then, area has increased by 4 per cent, but production fell by a massive 66 per cent,” said the report.
The major reason of this decline is probably poor law and order situation coupled with strong local demand from FY06 onwards due to massive reconstruction after October 2005 earthquake in affected areas. The report said that a gradual increase in the area under forest during last few years is likely to start paying dividends in the years to come. Therefore, a strong recovery is possible in forestry in coming years.
