While the government continues the "all is well" mantra, the prevailing agriculture crisis in the country has started to show its impact on the larger scale and it is all set to disturb macro-economic targets set by the economic managers for fiscal year 2003-04.
The most evident effect is that appearing on the external trade. Despite the highly encouraging performance of exports over last two fiscal years, expanding trade deficit has assumed a worrisome trend.
And this is because imports are increasing at a faster rate than exports. The trade deficit has already crossed the target fixed for the whole fiscal year in just six months. It stands at $728 million during July-Dec 2003 period up by 23 per cent over the corresponding period of last financial year. Exports in the same period have increased by 13 per cent reaching $5.88 billion while imports jumped up to $6.609 billion recording a 14.19 per cent increase.
Analysts believe that one of the major factors behind this trade deficit is smaller-than-expected cotton crop. The September rains and more importantly a mismanaged pest attack on cotton crop is negatively impacting Pakistan's external trade.
On the one hand the millers are forced to import cotton and that is increasing the import bill while on the other the cost of textile products is going up, due to around 50 per cent increase in phutti prices, putting their exports at risk. It may also give birth to a further slow-down in export earnings.
The most ironic fact of the crisis-ridden farm scenario is that country that should be among the leading exporters of agricultural produce is forced to import the primary food staple, thanks to slumber and mismanagement of concerned authorities.
All the three provinces except Punjab are facing the shortage of wheat by a considerable margin and the government is in the process of importing some 750,000 tons of this important food commodity.
This will surely increase the country's import bill and result in further augmenting the trade deficit to an even more disturbing level. Though the rains have come in time at present and there are good prospects for this year's wheat crop, any shortfall in the production will make the situation worse.
The State Bank of Pakistan, in its report about the first quarter of year 2003-04, has itself projected the trade deficit to be around $1.1 billion- $400 million higher than the target fixed in trade policy.
The report says that though exports may reach $12.2 billion, as against $12.1 billion target, imports at the same time will reach $13.2 billion, $500 million above the target of $12.8 billion. The current trends indicate that the shape of things to come may be even more worrisome.
Analysts are of the view that Pakistan would be facing difficulties on the balance of payments front due to low investment inflow and decline in workers remittances. The increasing trade deficit will be adding to these difficulties.
The trade deficit is not the only problem that mismanagement of agriculture may cause. One may not forget that last financial year's GDP growth rate of 5.1 per cent owed a lot to excellent performance of the agriculture sector.
It was primarily the bumper cotton crop that helped increase exports and raise the growth. This year's growth target may not be achieved if the performance of this sector slows down due to slump in cotton production. It may be pointed out here that the IMF review mission visiting Pakistan during December was also concerned about the growth rate citing this very reason. Interestingly, the SBP in its report still expect the agriculture growth at 4.2 per cent and overall GDP growth in the vicinity of 5 per cent.
The government has been presenting low inflation rate as a big success and as a proof of excellent economic management. The wheat shortage has already resulted in skyrocketing the prices of flour, the no.1 food staple in households.
The bare fact is that this single factor has been highly devastating for the poor consumers, who are finding it hard to manage their domestic budget. Unexpectedly high increase in the prices of some other food items during the recently ending Ramzan was itself a big blow.
The ever rising POL prices are proving highly devastating, not only for trade and industry but agriculture as well. Still the government continues to claim that inflation is under control. One fails to understand how they really measure the inflation. Seeing the upward surge in commodity prices, overall inflation is certain to rise above the official targets and claimed levels.
It is time for those running the affairs at both local and provincial levels to face the realities. Announcements of increase in support prices alone may not make a big difference.
The crucial role of agriculture sector in national economy merits much more attention . This sector has been consistently suffering because of short-sighted policies of successive governments. What has been lost can not be recovered, but there is still time to prepare for the time to come and avoid difficulties for the nation in future.