Growing wheat can fall below 28m tons

Islamabad:

The Treasury said on Thursday that wheat production can be reduced by 11% to below 28 million metric tonnes this year due to dry weather, but inflation will remain stable around 3% in February.

In its monthly financial prospects, the Treasury said the upward trend in exports, imports and foreign remittances would continue in February, indicating current transactions deficit for the second consecutive month.

The report said that favorable weather played a decisive role in achieving production goals. According to the weather prospects of the Pakistan meteorological section, relatively dry conditions can cause water stress for Rabi crops, especially wheat in rain -powered areas, he added.

According to the finance ministry, wheat production is expected to be 27.9 million tonnes this year, down 3.5 million metric tonnes or 11.1%. Last year, the country had a 31.4 million metric bumper harvest.

Production is much lower than the demands of the country and may need to introduce the commodity.

In October last year, the Food Ministry informed Prime Minister Shehbaz Sharif that failure to determine the price of wheat and supplies for the second consecutive year could discourage farmers to plant several crops for local consumption. This, the ministry warned, can lead to imports of wheat valued at more than $ 1 billion.

The federal and provincial governments did not announce the wheat support price and applied the status of the International Monetary Fund (IMF) one year in advance.

The Ministry of National Food Safety had proposed to the Prime Minister that he could order the announcement of a profitable support price and the targets of supplies for the Rabi Sowing Season 2024-25 in consultation with the provinces and publicize that policy would be interrupted by Rabi 2025-26.

However, the government did not accept the advice of the Ministry of Food. In 2023, the federal government had a fixed wheat support value in RS3,900 per 40 kg based on the estimated average production cost of RS3,304 per 40 kg. This gave about 18% profit margin to farmers.

The Ministry of Food was of the opinion that the IMF program required complete liberalization effective from the financial year 2025-26, beyond Rabi 2024-25. He said there was a need for a clear policy direction on the pricing and commissions of wheat must be formulated by the federal government in consultation with the provinces.

The Treasury said in its prospects that inflation is expected to remain 2% to 3% within the area in February 2025, however, there were prospects of slight growth to 4% by March.

The inflation rate amounted to 2.4% in January. The central bank has so far reduced the policy rate by 10 percentage points to 12%, but is still much higher than the rate of inflation.

During December, large -scale production (LSM) reported 3.7% compared to an increase of 3.1% in the previous year. During the first semester (JUL-DEK) of the current year, the LSM sector published a 1.9% decrease compared to the 1% contraction in the corresponding FY24 period.

The Treasury said the recent monthly performance of the major production industries has proposed a possible recovery in the coming months. In January, LSM growth is expected to be supported by the increase in imports and raw materials along with increased cement missions.

In addition, reducing inflation and favorable monetary policy were likely to further enhance business confidence and support LSM recovery, the ministry said.

The financial prospects are based on the basic performance of LSM, inflation, tax and foreign sectors as well as economic activities in Pakistan’s main trade partners. On the outside front, exports, imports and remittances of workers are expected to maintain their upward trend, the ministry said.

Pakistan recorded inflows of $ 20.8 billion in remittances during the first seven months of current year, up 31.7% over $ 15.8 billion last year. The largest share of 24.7% came from Saudi Arabia, followed by 20.2% of the UAE.

In the coming months, remittances are likely to grow further due to seasonal factors such as Ramazan and two EID festivals. Similarly, exports and imports are expected to improve due to the expansion of economic activity. All of these factors would help maintain the equivalence balance deficit within the management limits, he added.

The ministry claimed that Pakistan’s economy continued to display positive developments during the first seven months of FY25, as reflected in improvements in key economic indicators.

The location of the external sector has improved significantly, driven by the continued increase in exports and remittances of workers despite the upward trend in imports.

In January 2025, the current account recorded a $ 420 million deficit, compared to a $ 404 million deficit in January 2024.

Imports of goods amounted to $ 33.3 billion versus $ 30 billion last year, showing an increase of 10.9%. This led to a $ 14.1 billion trade deficit ($ 12.2 billion last year.