Pakistan's problematic food economy

Pakistan's agricultural sector is grappling with a multifaceted crisis that has resulted in a widening food trade deficit. Farmer organizations, especially in Punjab, are increasingly agitated over the falling prices of essential crops like wheat, cotton, and sugarcane. The primary cause of this predicament is the government's withdrawal from large-scale procurement, leaving farmers at the mercy of private buyers in an era of soaring production costs.

Factors such as higher expenses for fertilizers, electricity, diesel, machinery, and labor, coupled with poor yields, weather shocks, pest attacks, market oversupply, delayed payments, and policy uncertainty, have plunged many farmers into distress. This deterioration in farm profitability is particularly pronounced for small and medium-sized growers who rely heavily on expensive irrigation and agricultural inputs.

The consequences of this agricultural turmoil are evident in Pakistan's external accounts. Food imports surged by 11.66 percent to $9.15 billion in fiscal year 2026 (FY26) from $8.2 billion a year earlier. Simultaneously, food exports plummeted by 29.49 percent to $5.02 billion, down from $7.12 billion in FY25. The food trade deficit, which stood at approximately $1.08 billion in FY25, widened by around 283 percent to $4.13 billion in FY26.

One of the key challenges is Pakistan's heavy dependence on imported edible oil, which cost the country $3.8 billion in FY26, accounting for more than 41 percent of the total food import bill. Domestic oilseed production, including canola, sunflower, and mustard, has not been commercialized on a scale needed to reduce this dependency. Similarly, sugar imports jumped almost five-fold to $175 million in FY26 due to inadequate domestic production and market management.

The export sector is also facing a tough reality. Rice, the flagship agricultural export, suffered a 31 percent decline in export earnings to $2.29 billion in FY26 from $3.35 billion in FY25. Non-basmati rice exports fell sharply, while Basmati rice earnings remained relatively stable. Vegetable and fruit exports saw a dramatic drop of 55.72 percent and remained broadly stagnant, respectively.

Structural issues plague Pakistan's agricultural sector, with stagnant crop yields, outdated cultivation practices, weak seed technology, and inadequate mechanization contributing to the problem. Post-harvest losses, which range from 20 percent to 40 percent depending on the crop category, further exacerbate the situation. A recent Asian Development Bank (ADB) report highlighted these inefficiencies in the supply chain, which involve middlemen, transporters, wholesalers, processors, and retailers.

To address these challenges, Pakistan needs to make agriculture economically viable and internationally competitive. This requires a multi-pronged approach, including the commercialization of oilseed farming, introduction of high-yield and climate-resilient seeds, improvement of irrigation efficiency, expansion of mechanization, and strengthening agricultural research and extension services. The government must also invest in modern storage and cold-chain networks to reduce post-harvest losses.

On the export front, the government should prioritize incentives that favor agro-processing, quality certification, sanitary and phytosanitary compliance, and value-added food products rather than the export of largely unprocessed commodities.