Governments historically have a slim window – usually the primary two years of their time period – to implement daring and transformative reforms. picture: file
KARACHI:
Pakistan’s financial coverage framework is more and more being formed by sector-specific reforms aimed toward correcting long-standing structural distortions and reviving progress. Among the many most vital developments are the gradual deregulation of the sugar sector, a renewed emphasis on an bold agriculture export technique, and sustained efforts to draw overseas direct funding (FDI).
These initiatives are intently interlinked and mirror a broader shift away from heavy state intervention in the direction of market-oriented, export-driven and investment-friendly insurance policies. Whereas challenges stay, official knowledge and historic expertise counsel that progress in these areas might strengthen Pakistan’s exterior place, elevate productiveness and generate much-needed employment.
The sugar sector has traditionally symbolised Pakistan’s interventionist financial strategy. For many years, it operated beneath in depth authorities controls, together with administratively fastened sugarcane assist costs, restrictions on exports and imports, regulated inventory releases and recurring subsidies. Though these measures had been meant to stabilise costs and shield farmers, they usually produced the other impact.
In line with the Pakistan Bureau of Statistics, sugarcane manufacturing has exhibited sharp fluctuations over the previous decade, rising from 78.9 million tonnes in 2019-20 to 85.4 million tonnes in 2020-21, earlier than falling to 75.2 million tonnes in 2021-22 and rebounding to 82.3 million tonnes in 2022-23. Such volatility has been pushed not solely by climate circumstances but in addition by coverage uncertainty and distorted incentives.
The sector expanded past economically environment friendly capability. The fast progress within the variety of sugar mills, significantly throughout the Nineties and 2000s, was not matched by features in productiveness or competitiveness. Because of this, Pakistan repeatedly confronted cycles of surplus and lack, forcing the federal government to subsidise exports or permit pricey imports. These interventions imposed a fiscal burden and undermined belief inside the provide chain, particularly as delayed funds to farmers grew to become routine. Regardless of being among the many world’s main sugarcane producers, Pakistan failed to ascertain itself as a constant exporter, with exports remaining sporadic and policy-dependent.
Current strikes in the direction of deregulation characterize an try to interrupt from this legacy. By easing export restrictions and decreasing direct administrative controls, policymakers intention to permit market indicators to information manufacturing and pricing choices. The Ministry of Nationwide Meals Safety and Analysis has indicated that better flexibility in sugar exports is meant to scale back surplus accumulation and monetary publicity. In international comparability, the potential stays important. In line with the US Division of Agriculture, main producers comparable to Brazil exported greater than 25 million tonnes of sugar in 2024, whereas India exported over 5 million tonnes. Pakistan’s traditionally negligible export presence underscores the chance price of extended regulation. Nonetheless, the transition carries short-term dangers, significantly for customers, underscoring the necessity for sufficient buffers and clear market oversight.
Reform of the sugar sector is intently tied to a broader reassessment of agriculture’s function in Pakistan’s financial system. Agriculture continues to be a cornerstone of financial exercise, contributing about 20.9% of GDP and using practically 38.5% of the labour pressure, based on the Pakistan Financial Survey 2024-25.
But its contribution to exports has remained restricted, largely attributable to dependence on a slim vary of low-value commodities comparable to rice and cotton. This focus has made export earnings susceptible to international worth cycles, local weather shocks and high quality constraints.
Historic commerce knowledge illustrate these vulnerabilities. Rice exports peaked at 4.3 million tonnes in 2018-19 however misplaced momentum in subsequent years as competitors intensified and high quality points constrained entry to premium markets. Cotton exports equally declined as home manufacturing fell and worldwide competitiveness eroded. These traits uncovered the constraints of a commodity-centric export mannequin and strengthened the case for diversification and worth addition.
Policymakers at the moment are selling a extra bold agriculture export technique that prioritises processed meals, horticulture, meat, dairy and specialised crops. Official figures from the Pakistan Bureau of Statistics present that agricultural exports elevated to roughly $3.14 billion in FY24 from $2.68 billion in FY23, indicating early features from diversification efforts.
The federal government has articulated longer-term ambitions to lift agri-exports past $5 billion yearly by the top of the last decade, contingent on enhancements in productiveness, logistics and compliance with worldwide requirements.
A key historic constraint has been weak post-harvest infrastructure. Restricted chilly storage, insufficient transport services and poor high quality certification have diminished the competitiveness of Pakistani produce in high-value markets. Present initiatives emphasise funding in chilly chains, storage services and laboratories aligned with worldwide sanitary and phyto-sanitary necessities. These steps mirror classes from previous initiatives that faltered attributable to infrastructure gaps and inconsistent coordination between federal and provincial authorities.
International direct funding is a important enabler of this transformation. Pakistan’s FDI expertise has been uneven, intently monitoring macroeconomic stability and coverage credibility. In line with the State Financial institution of Pakistan, FDI inflows peaked at $5.4 billion in FY08 however declined sharply in subsequent years amid political uncertainty and financial volatility. After falling to round $2.2 billion in FY23, inflows recovered modestly to about $2.8 billion in FY24, suggesting renewed however nonetheless cautious investor curiosity.
Current coverage efforts intention to broaden the sectoral base of FDI, with agriculture and agri-processing receiving better consideration. Initiatives such because the Particular Funding Facilitation Council have been established to streamline approvals and scale back bureaucratic delays, addressing long-standing investor considerations.
Authorities are actively participating potential buyers from the Gulf, China and Southeast Asia, highlighting alternatives in company farming, meals processing and agri-logistics. Proposed investments exceeding $500 million in refrigerated transport and processing services sign rising curiosity in export-oriented agriculture. The convergence of deregulation, export orientation and funding facilitation marks a strategic recalibration of Pakistan’s progress mannequin. Historic expertise means that partial reforms and coverage reversals undermine credibility and deter long-term funding.
To keep away from repeating previous errors, reforms should be sustained, clear and supported by complementary measures, together with entry to credit score, crop insurance coverage and extension companies for small farmers. With out these safeguards, the social and political sustainability of reforms may very well be compromised. Sectoral developments in sugar deregulation, agriculture exports and overseas funding attraction mirror an effort to appropriate deep-rooted inefficiencies and unlock Pakistan’s financial potential. Whereas the transition entails dangers, the prices of inaction are far better.
If reforms are carried out constantly and supported by institutional capability, these shifts might strengthen export efficiency, stabilise exterior accounts and lay the muse for extra inclusive and resilient progress.
The author is a member of the Pakistan Engineering Council and holds a Grasp’s diploma in Engineering
