Plan to end agri-sector intervention sought

The International Monetary Fund (IMF) has again asked Pakistan to submit a plan for orderly transition from the agricultural support price mechanism to market-determined rates of commodities aimed at preventing farmers from losses and supply chain disruption.

In the absence of any such plan, there is a policy paralysis and no decision has been taken on the quantum of maintaining the strategic reserves of wheat.

The global lender inquired about the agricultural transition plan late last month during a virtual meeting, two months after the deadline to prepare and submit the plan lapsed, according to the government sources.

The plan had to be submitted by the end of September 2024 but so far the Ministry of National Food Security and Research has not submitted any such document, according to sources in food and finance ministries. However, the food ministry has prepared a brief for provinces, where it emphasised the need for maintaining strategic reserves but there is no consensus that could determine the volume of reserves and give farmers a plan to deal with the end to the support price mechanism.

Sources said that the IMF held a virtual meeting three weeks ago and inquired about the plan. It also emerged that during talks for the $7 billion loan programme, the food ministry had certain reservations about ending the current agricultural policies. But those views were overruled and Pakistan signed the loan agreement. It is now bound to meet the agreed deadlines.

"To set expectations for the 2025 Kharif crop season and minimise disruptions, we will lay out our strategy for transition arrangements by end-September 2024," was the commitment the finance minister gave to the IMF.

Ministry of Finance spokesperson Qumar Abbasi's response was awaited till the filing of the story.

Pakistani authorities also held internal discussions last week to discuss the challenges being faced in smooth implementation of the IMF programme. The issue of submitting the transition plan was also discussed. The government last week transferred National Food Security Secretary Ali Tahir without attributing any reason, just three months after his posting. Prime Minister Shehbaz Sharif has been frequently transferring the food secretary after assuming the office.

He transferred Captain (Retd) Mohammad Asif and appointed Dr Fakhar Alam as food secretary in May this year. Then in September, Ali Tahir was posed as food secretary but was replaced last week. Now, Waseem Ajmal is the new secretary.

Sources said that during the IMF meetings, the mission chief raised questions about the transition plan and building strategic reserves in case Pakistan Agricultural Storage and Services Corporation (Passco) was closed down.

The PM had decided to wind up Passco but the process came to a halt. Passco is mandated to maintain 2 million metric tons of strategic reserves. Pakistan's federal and provincial governments had agreed, in principle, to refrain from announcing support prices for raw commodities and limit procurement to the extent of food security purposes.

As a result, the federal and provincial governments stopped setting prices and procuring wheat from the market. But the decision was abruptly implemented without any plan that led to price crash. Likewise, the government has not set the sugarcane support price, leaving farmers at the mercy of sugar mills.

There are complaints that farmers are not getting a good price and some of the mills are deducting Rs25 per 40 kg in charges for making immediate payment to the farmers.

The IMF's staff-level report stated that the government's intervention in the agricultural market has created distortions, stifling private sector activity and innovation, exacerbated price volatility and hoarding, and placed fiscal sustainability at risk, stated the finance minister.

The state's support of businesses through subsidies, favourable taxation arrangements, protection and governmental price setting has undermined the development of a dynamic and outward-oriented economy, according to the report.

The Khyber-Pakhtunkhwa (K-P) government has expressed concern that in case of a ban on inter-provincial movement of wheat and absence of strategic reserves, there could be a wheat crisis in the province.

There is so far no plan to address the issue of maintaining reserves and ensure that wheat-deficient provinces – K-P and Balochistan – get uninterrupted supplies. Azad Jammu and Kashmir, Gilgit-Baltistan and the armed forces also depend on federal departments for the required amount of wheat.

In October this year, the Ministry of National Food Security urged PM Sharif to swiftly announce a new wheat support price and set procurement targets, warning that failure to act could result in a wheat import bill of $1 billion.

In the last four years, the domestic wheat production has, on average, fallen short of the self-sufficiency level by 2.5-3.5 million metric tons, requiring imports worth about $1 billion annually, according to the food ministry.

The summary that sought the PM's approval did not have any plan for a smooth transition. But it recommended that the PM may announce that there would be no wheat support price this year but the government would procure the commodity only for this year at market prices to create certainty in the market and for farmers.