EDITORIAL: Why is the government so paralysed, without rhyme or reason, when it comes to taking a position about setting the wheat support price and procurement targets, especially since the ministry of national food security and research is warning that failure to act in time could result in needless $1 billion import bill?
The government is hamstrung by its agreement with the IMF that forbids it from intervening in agriculture markets. That much is clear. Indeed, the finance minister has accepted that large-scale interventions in agri commodity markets, including fertilisers, were “no longer fit for purpose”. He’s also committed to the Fund that “we’re taking action to phase out federal and provincial government price-setting” by the end of FY2026.
But the strategy for “transition arrangements” that was supposed to come by end-Sep hasn’t yet seen the light of day, leaving farmers in the dark as planting season approaches. Let’s not forget that domestic wheat production has fallen short of self-sufficiency by an average of 2.5-3.5 million metric tons (MMT) over the last four years, requiring imports of about a billion dollars each year. And farmers are rightly cautioning that the uncertainty about the government’s position could cause wheat sowing area to shrink significantly in the upcoming Rabi season.
The government is clearly caught in a catch-22. The IMF does not care how it balances the equation as long as it does not directly interfere with the market mechanism. And the finance ministry cannot afford to run foul of any of the strict “upfront conditions” so early in the programme. But that does not mean it should hang farmers out to dry. A similar dilemma faces cotton farmers, who are also upset by the government’s silence about the support price even this late in the day, forcing textile exporters to resort to frantic imports at top dollar.
Managing wheat production is not just about the budget; it is also the country’s staple diet. And the food ministry, at least, seems more concerned than the finance ministry, floating proposals that have not been answered. One option is to announce a profitable support price and fix procurement targets for Rabi 2024-25, in consultation with provinces, and announce that this policy would be discontinued from Rabi 2025-26. Another is to categorically rule out a support price but then the government would have to procure the commodity for this year, at market rate, to create an element of certainty for farmers. A third option is for the PM to refer the matter to the economic coordination committee of the cabinet and see what comes of it.
Each has its own pros and cons, no doubt, but that does not mean the government has the option to sit back and do nothing as the clock ticks to the sowing season. The finance ministry should have started working on this issue the minute the government signed the EFF (Extended Fund Facility) with the IMF, knowing full well that the Fund would halt the programme at the slightest interference in the market.
Yet there were no consultations, definitely not with farmers, and authorities are predictably behind the curve in a very important and delicate matter; one that could upset the food supply, rattle the budget and hurt farmers very badly. All because nobody moved at the right time despite all the hard work that went into securing the bailout facility.
It is vital that the government wastes no more time in consulting with provinces, connecting with farmers, and announcing its support price policy over the next few days.
Copyright Business Recorder, 2024