Pakistan’s agricultural heart beats strongly, yet its farmers are struggling to keep pace. Agriculture contributes about 20% to GDP and supports nearly 40% of the workforce. Despite this critical role, farmers face mounting financial challenges, with rising input costs, manipulation in crop pricing, and an ineffective government loaning system. Instead of empowering farmers, reliance on agricultural loans often sinks them deeper into debt.
According to the 2024-2025 Economic Survey of Pakistan, agriculture grew by a meager 0.56%, far below the 2% target. Major crops like cotton and wheat declined drastically, with production dropping by 30.7% and 8.9%, respectively. These weak figures highlight the sector’s struggles, compounded by financial instability. This dire situation requires a paradigm shift in agricultural policy.
The solution? Fair crop prices—not loans.
The Problem with the Loaning System
Loans as a Band-Aid, Not a Cure
The current strategy of extending credit to farmers might seem logical, but it is a band-aid for deeper systemic problems. Farmers borrow funds to purchase seeds, fertilizers, and machinery, expecting to repay loans with income from their harvest. However, when market prices fall short of expectations, the income fails to cover expenses, leaving farmers unable to repay their debts.
This is particularly evident in the cotton and wheat sectors, which saw significant production declines. Coupled with unfair crop prices, farmers face shrinking profit margins; loans end up being a burden rather than a support.
Rising Costs Worsen the Scenario
The cost of farming inputs, such as fertilizers, pesticides, and machinery, has risen persistently. Farmers often depend on loans to afford these essentials. Yet, when prices for crops are suppressed, their investments yield losses rather than returns. This imbalance creates a vicious cycle of borrowing, poverty, and dependency.
For example, while the Economic Survey highlights a fiscal surplus of Rs 1.896 trillion, the benefits of economic stability are not trickling down to rural areas. Increased budgetary allocations for subsidies or cost-saving programs could help reduce input costs and alleviate some financial pressure on farmers.
Exploitation by Middlemen
Middlemen dominate Pakistan’s agricultural supply chain, exploiting farmers’ lack of direct access to markets. Despite the existence of minimum support prices (MSPs) set by the government, middlemen often manipulate prices, leaving farmers with far less than fair value for their crops. Cotton, which already faced a 30.7% production drop, saw its price excessively controlled by intermediaries.
Unless comprehensive reforms are implemented to curb these exploitative practices, farmers will continue to be stuck on the bottom rung of the agricultural economy.
Why Fair Crop Prices Are Critical
Financial Stability for Farmers
Providing farmers with consistent, fair crop prices ensures they can cover production costs, repay loans (if taken), and reinvest in farming for the next cycle. For instance, in sectors like livestock, which grew by 4.72% last year, fair compensation could further boost output and stabilize rural livelihoods.
Reduced Dependence on Loans
If farmers receive fair prices for their crops, they can reduce reliance on loans to manage production. This independence allows them to avoid the high-stress situations created by defaults and mounting interest.
Better Productivity and Sectoral Growth
Fair pricing equips farmers with the resources to purchase high-quality inputs, adopt modern farming methods, and invest in technology. Such improvements will increase overall productivity, strengthening Pakistan’s status as an agricultural economy.
Keeping Young Generations in Agriculture
Disillusionment with farming has seen fewer young Pakistanis pursuing agriculture as a livelihood. Ensuring equitable income through proper crop pricing policies could reignite interest in farming across generations, safeguarding the sector’s long-term health.
Why Reducing Crop Imports Is Crucial
Another effective way to support farmers and boost Pakistan’s agricultural sector is by reducing crop imports. The government should shift its focus toward sourcing essential crops like wheat, pulses, and sugar locally by offering farmers fair prices and stable markets. This strategy would reduce the reliance on costly imports, saving valuable foreign exchange, which is currently under immense pressure.
Strengthening domestic agricultural production not only ensures food security but also improves employment opportunities within the rural economy. If farmers are motivated with adequate incentives, they would naturally contribute to higher yields, benefiting both local markets and the country’s trade balance. Prioritizing local farmers over imports is a win-win for the economy and the agricultural community.
Proposed Policy Shifts for a Sustainable Agriculture Sector
Transforming Pakistan’s agriculture demands bold and targeted policy changes. Here are key recommendations:
1. Implement and Enforce Fair Crop Prices
The government should set realistic MSPs that reflect rising production costs and enforce them strictly. Removing middlemen from the equation via state-run procurement centers can ensure transparent crop sales and fair payments.
2. Subsidize Farming Inputs
Subsidies can significantly lower the financial burden on farmers. For example, subsidizing fertilizers and seeds could prevent the kind of shortfall seen in cotton and wheat production.
3. Invest in Storage Facilities
A lack of storage options forces farmers to sell crops immediately after harvest at low rates. Establishing community storage facilities will empower farmers to hold crops until prices become favorable.
4. Promote Market Access
Investments in infrastructure such as farm-to-market roads and e-commerce platforms will enable farmers to access broader markets where they can negotiate fair prices, bypassing exploitative local systems.
5. Introduce Crop Insurance Programs
Insurance against natural disasters and unforeseen circumstances can mitigate risks for farmers. Given Pakistan’s climate vulnerability, such programs are essential to safeguard agricultural livelihoods.
6. Educate and Organize Farmers
Awareness campaigns can inform farmers about their rights, the benefits of fair pricing policies, and how to leverage cooperative movements for collective bargaining power.
Lessons from the June 2025 Economic Survey
Pakistan’s GDP growth rate of 2.68% fell short of its 3.6% target, with agriculture contributing significantly to the missed benchmark. The survey also highlights fiscal improvements, such as the current account surplus of $1.9 billion and better foreign exchange reserves, now sitting at $16.64 billion as of May 2025.
While these macroeconomic figures display progress, the story on the ground for farmers paints a different picture. Cotton’s 30.7% decline and wheat’s 8.9% drop signify that rural and agricultural development remains woefully neglected. If agricultural challenges aren’t addressed through fair pricing and policy reform, future GDP figures may further suffer, reinforcing a dangerous cycle of stagnation.
Conclusion
Pakistan must act swiftly to prioritize farmers’ welfare. The current loaning system is insufficient and often counterproductive, offering no solution to the root problems of rising costs and suppressed crop prices. Shifting focus towards fair pricing policies would reduce reliance on loans, increase farmer incomes, and boost agricultural productivity and sustainability.
The government must recognize that a prosperous agricultural sector is key to the nation’s overall economic health. By ensuring fair crop prices, Pakistan can pave the way for a more equitable and resilient future for its farmers and citizens alike.
