Pakistan’s Ministry of Finance has projected an 11% decline in wheat production this year, with output expected to drop to 27.9 million metric tons due to dry weather conditions. This shortfall, compared to last year’s bumper harvest of 31.4 million metric tons, could lead to wheat imports to meet local demand.
According to the ministry’s latest economic outlook, the relatively dry conditions may cause water stress for Rabi crops, particularly wheat in rain-fed areas. The Pakistan Meteorological Department also highlighted the impact of unfavorable weather on agricultural productivity.
A key factor contributing to this decline is the government’s decision not to set a wheat support price or make timely procurement. In October, the Ministry of Food had warned that failing to announce a profitable wheat price could discourage farmers from planting enough crops for local consumption. The government, however, adhered to the International Monetary Fund’s (IMF) conditions, implementing a deregulation policy a year ahead of schedule.
Despite the wheat production concerns, inflation is expected to remain stable at around 3% in February 2025. However, the finance ministry projected a slight increase to 4% by March. In January, the inflation rate stood at 2.4%, while the central bank cut its policy rate to 12%, significantly lowering borrowing costs.
The report also provided insights into the country’s economic indicators. Large-scale manufacturing (LSM) contracted by 3.7% in December 2024 compared to 3.1% growth the previous year. However, the ministry anticipates a recovery in the coming months, supported by rising machinery imports, increased cement dispatches, and declining inflation.
On the external front, exports, imports, and workers’ remittances are expected to maintain their upward trajectory. Pakistan received $20.8 billion in remittances in the first seven months of FY25, a 31.7% increase from last year. The highest share came from Saudi Arabia (24.7%), followed by the UAE (20.2%). With seasonal factors like Ramazan and Eid approaching, remittance inflows are likely to grow further.
The report also noted a current account deficit for the second consecutive month. In January 2025, the deficit stood at $420 million, slightly higher than the $404 million recorded in January 2024. Imports of goods reached $33.3 billion, marking a 10.9% increase from the previous year, leading to a trade deficit of $14.1 billion.
Despite these challenges, Pakistan’s economy continues to show resilience, with improvements in key economic indicators. The finance ministry remains optimistic that an accommodative monetary policy, increased business confidence, and rising exports will help stabilize economic growth in the coming months.
