Muhammad Soban

The State Bank of Pakistan should provide easy credit facilities to the farmers to help them cope with the ravages caused to their crops due to the devastating floods, which have hit the country’s agricultural sector to the core and threatened food security. To avoid food insecurity, farmers in far-off areas need to get timely and easy-term credit facilities so they can prepare their land for the upcoming wheat cultivation, stressed an economic expert. It is to mention here that last month, the State Bank set a target of disbursing Rs1.8 trillion in agricultural credits to the financial institutions for disbursement among farmers during the fiscal year 2022-23.

Under the overall target for FY23, Rs140 billion have been set aside for wheat crop, Rs45 billion for tractor financing, and Rs20 billion for harvesters, planters, and other farm machinery, in order to meet the national food security requirements. Talking to WealthPK, Dr. Mahmood Khalid, a public policy expert at the Pakistan Institute of Development Economics (PIDE), said that a major portion of the agriculture land was underwater, especially in Sindh and Balochistan provinces. “Farmers in these areas need to be helped on an urgent basis to revive their lands for wheat sowing.”

Talking about the government’s agriculture credit scheme, he said the provision of loan rollovers in it was heartening as it would convert the interest and principal amount into a new loan, thus greatly facilitating the farmers in flood-hit areas on agriculture credit repayments. Mahmood Khalid said there was no restriction on commercial banks that how much they should set aside out of their credit portfolio for agriculture loans as the banks often extended credit to the government for earning easy profits. The PIDE economist maintained that the SBP could bind the banks to set aside 5% of their total loan portfolio for agriculture credit.

He said that another problem was that there was no official record available on how much of the agriculture credit was actually used for the purpose it was really disbursed for. Mahmood Khalid said low percentage of agriculture loan disbursal by banks was because the farmers were mostly unaware of the facility due to lack of education, and they largely relied on arthi (middleman) for attaining loans in times of need, which often resulted in their financial exploitation. The PIDE economic expert suggested that a robust mechanism should be put in place to ensure that loans were used purely for boosting productivity through increasing use of mechanised farming, and building water infrastructure such as tubewells, water channels, livestock shelters and farmers' homes. He called for providing debt waivers/relief to farmers, especially during times of stress, as they didn’t even have insurance against their productive assets such as animals, machinery or even crops.

“The government’s first and foremost priority should be early rehabilitation of the battered croplands,” he stressed, adding the agriculture sector needed a complete value-chain overhaul rather than targeting and reviving a few segments.

Credit: Independent News Pakistan-WealthPk