M Omar Dogar, Aziz
The Farmer’s Balance Sheet
Behind the macroeconomic indicators lies the reality of the rural household. The average Pakistani farmer is already navigating multiple crises: the aftermath of the 2022 floods, erratic weather patterns, and a credit market that often favors traders over producers.
The current supply chain constraints are manifesting in three ways at the farm level:
First, access to timely inputs has deteriorated. Even when credit is available, the physical availability of quality seed, fertilizer, and pesticides can be disrupted by supply chain bottlenecks. Delayed planting leads to lower yields, and lower yields lead to reduced incomes.
Second, output prices are volatile. While the government announces support prices for key crops, the actual price realized by the farmer is determined by the interplay of local supply and the cost of transportation to markets. Higher fuel costs mean that mandi prices offered to farmers often do not reflect the true retail price, because middlemen factor in increased transport costs before they make their offers.
Third, the informal credit cycle tightens. In rural Pakistan, a vast proportion of agricultural credit is informal, from landlords, commission agents (arthis), and input suppliers. When these informal lenders face their own liquidity constraints due to supply chain disruptions, they reduce advances to farmers. The result is that even before a farmer sows a crop, their capacity to invest in quality inputs is compromised.
Export Competitiveness: A Fading Edge
Pakistan’s agricultural exports, particularly rice, fruits, and vegetables, compete in a crowded global market. Our competitive advantages have traditionally been price and, for certain products, quality. But when global supply chain disruptions increase the cost of freight, packaging (much of which is petroleum-based), and cold storage (energy-intensive), that price advantage erodes.
Basmati rice, our premium export, faces particular challenges. The Middle East is a major market for Pakistani basmati, and instability in the region can dampen demand or disrupt payment channels. Additionally, international buyers are increasingly demanding supply chain certifications that guarantee traceability and uninterrupted delivery. In a volatile environment, Pakistani exporters risk being seen as unreliable counterparts compared to competitors like India, Thailand, or Vietnam, whose supply chains are perceived as more insulated from the immediate conflict zone.
The Fiscal and Monetary Bind
For the Government of Pakistan, the confluence of supply chain pressures creates a painful policy dilemma. Inflation, driven in large part by food and energy prices, remains a persistent challenge. The State Bank of Pakistan has maintained a tight monetary policy to rein in inflation, but high interest rates make agricultural credit more expensive for farmers and agribusinesses.
At the same time, the government is often compelled to offer subsidy packages, on fertilizers, electricity for tube wells, or wheat procurement, to shield farmers and consumers from global price shocks. These subsidies, while necessary in the short term, place enormous strain on the fiscal deficit at a time when Pakistan is navigating commitments to the International Monetary Fund and seeking to rebuild foreign exchange reserves.
The risk is that short-term palliatives replace long-term structural reform. Instead of investing in infrastructure that would insulate agriculture from global shocks, such as silos for storage, solarization of tube wells, or domestic oilseed production, the state finds itself perpetually firefighting.
Beyond the Immediate Crisis: A Case for Structural Transformation
If there is a lesson from this moment, it is that Pakistan’s agricultural economy cannot continue to operate on a just-in-time logic in a world of just-in-case geopolitics. The disruptions emanating from the Iran conflict should serve as a catalyst for a fundamental rethinking of how we produce, finance, and trade agricultural goods.
1. Energy Independence at the Farm Level
Pakistan has some of the highest solar irradiation rates in the world. Yet, adoption of solar tube wells remains fragmented. A concerted national program to transition agricultural water extraction to solar energy would not only reduce the sector’s vulnerability to oil price shocks but also lower the carbon footprint of agriculture. This requires innovative financing models, perhaps blending government subsidy with commercial bank lending, but the long-term payoff is immunity from the kind of energy price spikes we are seeing today.
2. Reviving Domestic Oilseed Production
The edible oil import bill is a hemorrhage that supply chain disruptions only worsen. Pakistan was once self-sufficient in oilseeds. Rebuilding that capacity requires not just promoting sunflower and canola cultivation but also investing in local crushing capacity and storage. This is a classic case where import substitution aligns with both economic security and supply chain resilience.
3. Strategic Reserves and Storage Infrastructure
One of the reasons Pakistan is so vulnerable to global price fluctuations is the lack of adequate strategic reserves for key commodities like wheat, sugar, and even fertilizers. Investment in modern silos, not just for wheat but for urea and DAP, would allow the country to buy in bulk when global prices are favorable and release stocks when geopolitical tensions spike prices. Such infrastructure also reduces post-harvest losses, which currently stand at an unacceptable 10-15% for major crops.
4. Diversification of Trade Routes
While the Iran conflict complicates overland and maritime routes, it also underscores the need for Pakistan to diversify its trade connectivity. Fully operationalizing the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline, enhancing the China-Pakistan Economic Corridor (CPEC) agricultural cooperation, and deepening linkages with Central Asia via the Kyrgyzstan-Uzbekistan-Afghanistan-Pakistan (KUAP) rail route can help reduce the share of trade that passes through the most volatile zones.
5. Rethinking Agricultural Credit
The banking sector has a critical role to play in de-risking agriculture, but the traditional model of short-term production loans tied to a single crop cycle is ill-suited to an era of compounded shocks. What is needed is a more holistic approach: longer tenure loans for capital investment (solar tube wells, on-farm storage), structured finance for supply chains that link farmers directly to exporters, and risk management products such as index-based crop insurance that can cushion farmers against both climatic and geopolitical volatility.
Conclusion: Farming as a Strategic Asset
For too long, agriculture in Pakistan has been treated as a residual sector, something to extract revenue from, or to subsidize when elections approach, but rarely to strategically invest in. The ongoing conflict in Iran, and the global supply chain convulsions that accompany it, should finally disabuse us of this complacency.
Food security is national security. When a farmer in Rahim Yar Khan cannot afford diesel to irrigate his cotton, or a rice exporter in Gujranwala loses a shipment because of skyrocketing freight insurance, the effects reverberate through every corner of the economy. Inflation rises, the current account deteriorates, and the social contract frays.
As someone who has witnessed the resilience of Pakistan’s farmers through floods, droughts, and economic crises, I know that they are capable of remarkable adaptation. But adaptation requires support. It requires that we, as a nation, recognize that insulating agriculture from external shocks is not a cost, it is an investment in stability.
The guns of West Asia may feel distant, but their economic echoes are already here, in the cost of a bag of urea, the price of a liter of diesel, and the worried eyes of a farmer contemplating the next sowing season. The question is whether we will respond with the same short-term fixes that have left us perpetually vulnerable, or whether we will finally build an agricultural economy resilient enough to withstand whatever storms, geopolitical or climatic, come our way.
The author is Executive Vice President, Groud Head ZTBL . The views expressed are personal and do not necessarily reflect the official position of the institution.
