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The country has the potential to accelerate the GDP growth rate, produce exportable surplus and optimise the cost of production

The year 2024 is anticipated to be a good year for Pakistan. Improved relationships with the lender of last resort— the International Monetary Fund (IMF) has paved the way for the inflow of funds from multilateral lenders as well as friendly countries.

Hovering of crude oil prices around US$80/barrel, despite the Israel-Hamas war going on for more than three months is likely to keep Pakistan’s energy import bill at a modest and sustainable level.

Production of above 7.8 million cotton bales is a good omen, provided the policy planners restrict the export of raw cotton and facilitate the export of higher value-added goods. Higher cotton production will also facilitate enhanced cotton-seed oil.

For the year GoP had set a wheat production target of 33 million tonnes. According to the initial reports, wheat has been sown in substantially higher areas and output may exceed 35 million tonnes. This offers an opportunity to export over 5 million tonnes of wheat and also earn substantial foreign exchange. However, the real advantage could be attained by the safekeeping of additional wheat produced and containing its smuggling to the neighboring countries.

The record production of corn and sesame seeds enabled the country to become a major exporter of these oil seeds. This year output of sunflowers is also estimated above the average, particularly in Sindh province. However, oil-expelling mills don’t seem keen on extracting oil from sunflowers.

Another encouraging factor is that the GoP has decided not to suspend the supply of natural gas to urea manufacturing plants. Production of additional urea will on one hand improve its availability in the country and on the other hand, save foreign exchange to be spent on its import.

The latest auction of Market Treasury Bills indicates that the GoP may decide to cut interest rates, though nominally. However, it may not be of any substantial benefit for the trade and industry because the GoP is under pressure to increase electricity and tariffs.

Biggest challenge

One of the biggest challenges facing the GoP is mounting circular debt. Analysts are of the consensus that the circular debt is the result of gross violation of good governance and blatant theft of electricity and gas. Added to these are capacity charges being paid to non-operative IPPS, sponsored by political elites. Therefore, persistent hikes just can’t help in improving the cash flow of the electric and gas utilities. Experts go to the extent of saying that each hike in tariff offers incentives to pilfer more gas and electricity.

It is encouraging to note that the State Bank of Pakistan has fixed an indicative target of PKR2.25 trillion for the agriculture sector. Experts say that some of the financial institutions are not keen on lending to farmers; these institutions are ready to pay the penalty. Investment in T-Bills is considered not only too lucrative but also risk-free.

A few analysts are of the view that the central as well as commercial banks do not have the capacity to convince the investors to construct modern grain storage silos and warehouses. It is on record that nearly 20% of food grain and 40% of fruits go stale before reaching the market only because of the lack/ absence of modern storage facilities.

This year the country is expected to produce about 35 million tons of wheat and the most shocking point is that there are no wheat storage silos in the country.

It is on record that the GoP introduced Electronic Warehouse Receipt (EWR) financing scheme in 2013. This was aimed at offering alternative lending channels to the farmers. After the lapse of a decade, the outcome is disappointing. According to an analyst, “Pakistan needs silos with more than 40 million tons, but there are hardly any silos. If there are no storage silos, where will the farmers store their produce and get the EWR. If there are no EWRs how the financial institutions will use these as collateral and lend to the farmers.”

According to energy sector analysts, Pakistan also needs to increase its strategic oil reserve facilities. They are of the consensus that the country does not have the requisite facilities; at best OMCs have seven-day storage facilities. At present more than 30 OMCs are operating in the country and out of these over a dozen virtually have no storage facilities, as per international standards.

One of the suggestions is that An independent oil storage company should be established in the country in which all the OMCs will have equity stake as per their market share. It will construct storage facilities at strategically important locations.

Pakistan has the potential to accelerate the GDP growth rate, produce exportable surplus and optimise the cost of production. The private sector has to quit the practice of living on GoP support. They have to establish economically viable projects, add new employment opportunities and be prudent decision-makers.