Arshad Mahmood Awan
Pakistan’s wheat policy stands at a crossroads — caught between the demands of international lenders and the economic survival of millions of farmers. The government’s recent decisions reveal a deep policy incoherence that risks undermining both agricultural stability and macroeconomic reform. While the state has promised the International Monetary Fund (IMF) a free market in agricultural commodities, it has simultaneously reintroduced a fixed minimum support price (MSP) of Rs3,500 per 40kg for the next harvest. This contradictory stance exposes a failure to decide whether Pakistan truly wants a liberalised market or to continue its tradition of state intervention.
Earlier this year, when wheat prices collapsed after an excessive import policy and poor coordination between provinces, thousands of farmers suffered heavy losses. In response, the government sought to restore their confidence by reintroducing a guaranteed price. Yet, this populist measure directly contradicts the IMF’s condition to end state-led procurement — a key benchmark in the ongoing bailout programme. If the government is no longer the buyer, as per IMF terms, who will purchase wheat at the official rate? This fundamental question, raised by the Pakistan Peoples Party (PPP), captures the confusion at the heart of Pakistan’s agricultural governance.
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The centre’s inconsistent stance reflects deeper tensions between short-term political expediency and long-term economic reform. On one hand, policymakers wish to appease global creditors by signalling commitment to liberalisation. On the other, they fear a political backlash from farmers — an influential constituency that can sway electoral outcomes in Punjab and Sindh. In trying to please both sides, the government risks alienating both: lenders perceive a lack of seriousness, while farmers see little real relief.
In this policy vacuum, the government has introduced a new mechanism — the Electronic Warehouse Receipt Financing (EWRF) system. This initiative, inspired by market-based models, allows farmers to deposit wheat in accredited warehouses and receive an electronic receipt verifying the quantity and quality of their grain. The receipt can then be used as collateral for bank loans worth up to 70% of the wheat’s market value. This system theoretically enables farmers to avoid “distress sales” immediately after harvest, when prices are lowest, and sell later when market conditions improve.
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In principle, EWRF could transform Pakistan’s agricultural markets by empowering smallholders and reducing dependence on government procurement. It encourages transparency, storage efficiency, and private-sector participation. However, the way it has been implemented reflects the same old political compromises. Instead of letting the mechanism operate freely, the government has decided to bear the borrowing costs itself — effectively turning EWRF into another subsidy scheme disguised as reform. This not only violates the spirit of market liberalisation but also undermines confidence among private investors and financial institutions.
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The bigger tragedy is that genuine reform — long overdue — remains hostage to political calculation. Pakistan’s wheat sector suffers from structural inefficiencies: poor yield per acre, high input costs, and exploitative middlemen who profit from farmers’ dependence on state-controlled markets. Each year, the cycle repeats — the government procures at high prices, stores inefficiently, and then imports wheat at inflated rates when shortages occur. The burden ultimately falls on consumers and the national exchequer.
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True reform requires dismantling this cycle by establishing transparent commodity exchanges, improving warehouse infrastructure, and ensuring affordable credit to farmers. The Electronic Warehouse Receipt system could have been a step toward this vision, had it been accompanied by political will and institutional consistency. Instead, it risks becoming another bureaucratic experiment — well-intentioned but poorly executed.
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Pakistan’s agricultural policy must choose clarity over confusion. Protecting farmers from exploitation and stabilising the economy are not mutually exclusive goals. A phased withdrawal from state procurement, coupled with safety nets and credit support, could gradually shift the burden from the government to a self-sustaining market. What is needed is policy coherence — not contradictory decisions made to please every stakeholder for a political season.
In the end, Pakistan’s wheat dilemma symbolises a broader failure of governance: the inability to plan beyond immediate crises. Without a consistent vision, even well-meaning reforms will collapse under their own contradictions. To build a truly competitive, resilient, and fair agricultural system, Pakistan must choose a clear direction — and stay the course.
