After years of resistance, the Pakistani government has finally decided to deregulate its wheat market, ending the practice of setting minimum support prices and engaging in procurement operations. This move, while politically challenging, has been pushed by international lenders for decades to unlock the agricultural sector’s potential. The current IMF program has made this reform a condition for continued funding, mandating its full implementation by June 2026. The writing was on the wall last year when Punjab province declined to purchase wheat despite farmer protests and falling prices.
The government’s involvement in the wheat market dates back to the 1960s. The goals were to protect farmers from price volatility, guarantee a minimum return, stabilize supply for food security, and control retail flour prices for consumers. However, this system proved costly. The government spent significant amounts on procurement, including storage, transportation, and loan interest, not to mention losses from spoilage and theft. Beyond the financial burden, government intervention distorted the market, hindering the adoption of new technologies and farming practices, increasing price volatility, encouraging hoarding, and misallocating resources. Ironically, farmers themselves haven’t truly benefited; instead, middlemen, millers, and corrupt officials have reaped the rewards of the subsidies.
The transition to a free market will likely be turbulent in the short term. However, the long-term benefits are expected to outweigh the initial disruptions. The money saved from subsidies can be reinvested in developing high-yield seeds and helping farmers adopt modern technologies to boost productivity, reduce costs, and ultimately lower consumer prices. Going forward, government intervention, if necessary, should be limited to addressing market failures and ensuring food security, rather than controlling prices and procurement.
