Manager Research, PAGE
Mar 10 - 16, 2008

Pakistan is an agrigarian economy and the agriculture sector continues to be the single largest sector and a dominant driving force for growth and the main source of livelihood for more than 50% of the country's population. It accounts for more than 20% of the GDP and employs 43.4% of the total work force.

The sector experienced mixed trends over the last six year. The country witnessed unprecedented drought during the first two years of the decade i.e. (FY01 and FY02) which resulted in contraction of agricultural value added. Hence agriculture registered negative growth in these two years. In the following years (FY03 to FY05), relatively better availability of irrigation water had a positive impact on overall agricultural growth and this sector exhibited modest to strong recovery. The performance of agriculture remained weak during FY05-06 because its crops sector particularly major crops could not perform up to the expectations. Growth in the agriculture sector registered a sharp recovery in FY07 and grew by 5% as against the preceding year's growth of 1.6% in FY06.

Major crops posted strong recovery from negative 4.1% last year to positive 7.6%, mainly due to higher production of wheat and sugarcane. Wheat production of 23.5mn tons is highest ever in the country's history, registered an increase of 10.5% over last year. Sugarcane production likewise improved by 22.6% over last year to 54.8mn tons, both being record high production. Cotton production at 13mn bales remained mostly unchanged in comparison to 13.02mn bales of last year. Rice production at 5.4mn tons as marginally less than 5.5mn tons produced last year. Minor crops registered a weak growth of 1.1% while it was 0.4% last year.

Policy measures in the last few years, were enhancing for the agricultural sector. Export taxes on agricultural commodities were reduced or eliminated, which benefited the agricultural sector. The other measures taken in the policy reforms package, are better support prices, better tillage and soil preparation practices and adequate and timely availability of fertilizer and certified seed. All this is likely to improve agricultural production in coming years. In order to address the issues of prompt actions for export of agricultural commodities and to keep vigilance around the globe for potential export of Pakistani agricultural commodities, the government plans to set up an "Agricultural Export Promotion Cell".

Over the past 20 years some important structural changes have taken place in the sector. According to the information available with, livestock contributes more than one-third of agricultural GDP, compared with about 28% twenty years ago. Similarly, fisheries and forestry, while still minor contributors to agricultural GDP, have grown rapidly. Structural changes have also taken place within the crop sector. Cotton is now as important as wheat in terms of value added with a one-fifth share of total earnings. Rice and sugar have, however, fallen from a 20% share in the early 1970s to less than 15% currently. Finance to agriculture sector has gone up by 23% to US$2.6bn in 2007 as against US$2.2bn in 2006.

Credit requirements of the farming sector have been increasing over the years mainly due to the rise in the use of fertilizer, pesticides and mechanization. In order to cope with the increasing demand for agricultural credit, institutional credit to farmers is being provided through Zarai Taraqiati Bank Limited, Commercial Banks, Punjab Provincial Cooperative Bank Ltd and Domestic Private Banks. The Government allocated Rs160bn for agriculture credit disbursements for the year 2006- 07 which was 23% higher than the allocation of the preceding year i.e. Rs130bn. But as per the provisional numbers the amount disbursed during the year was Rs129bn below the target.

The elimination of mandatory credit allocations coupled with active involvement of commercial banks in agri-finance is a major milestone achieved towards mainstreaming of agri-finance in the country's financial system. The flow of necessary funding to the sector was ensured through conducive policy and regulatory environment, policy advocacy and promotional initiatives and monitoring of agri-disbursements and portfolio build-up plans.

Forestry is also essential for maintaining a sustained supply of wood and wood products. Pakistan is a land of great diversity, which has yielded a variety of vegetation, however, only 5% of total land area is under forest, ranking it under Low Forest Cover Countries. Under Millennium Development Goals of Forestry Sector, Pakistan is committed to increase forest cover from existing 5% to 7% by the year 2011 and to 6% by the year 2015. This implies bringing an additional 1.051mn hectares land area under forest. The Government has allocated Rs9.7bn in MTDF (2005-2010) for promoting forestry and biodiversity in the country.

Fishery plays an important role in Pakistan's economy and is considered to be an important source of livelihood for the coastal inhabitants. Apart from marine fisheries and inland fisheries are very important source of animal protein. It has been estimated that about 400,000 fishermen and their families are dependant upon the fisheries for their livelihood. During (July-March) FY 06-07, a total of 87,907 tons of fish and fishery products were estimated to be exported, earning US$135mn. During July- March FY 06-07, the total marine and inland fish production is estimated to be 611,000 tons of which, 381,000 tons is marine production and remaining 230,000 tons catch come from inland waters while during 2005-06, the total marine and inland fish production was 595,000 tons. Out of which 366,000 tons were marine production and 229,000 tons were inland fish.