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The wheat pricing policies in Pakistan: Some alternative options
Abstract
Pakistan is currently facing large fiscal deficits. The fiscal deficit of the federal and provincial governments averaged about 6.5 percent of GNP during 1980s. Pakistan is increasingly a net importer of wheat and the cost of the wheat price policy has an important impact on the exchequer of the country. The government of Pakistan has tried to keep the price of wheat below international levels to subsidize domestic consumers. Agricultural Policy has also subsidized key inputs to encourage output. The government wishes to keep prices low for consumers. At the same time, it is in the national interest to reduce budget expenditures and costly subsidies on both inputs and consumer food prices. The purpose of this study is to evaluate the impact on production, consumption and trade of wheat of changing the input subsidy and output price subsidy policies. A model of the wheat market in Pakistan is developed to examine the likely effects of alternative wheat pricing policies in Pakistan. The production side of the model consists of input demand equations, estimated acreage and yield equations and an identity. Wheat consumption is based on per capita wheat consumption. To analyze the implications of alternative wheat pricing policies in Pakistan, the simulation model was used to project production, consumption and trade under baseline and two other scenarios. The Baseline scenario is designed to predict the evolution of production, consumption and trade if agricultural policies are maintained until the year 2000. In scenario one, the effects of instantaneously removing subsidies are assessed while in scenario two the subsidies are reduced more gradually. The results of the study indicate that the decline in wheat production will be greater if the government eliminates the input subsidies instantaneously as compared to phasing them out gradually. The results suggest that there will be little impact on the consumption of wheat due to increase in consumer price of wheat. Imports of wheat are greater if the subsidies are eliminated instantaneously as compared to phasing them out gradually.
Subject Area
Agricultural economics|Public administration
Recommended Citation
Ghani, Ejaz, "The wheat pricing policies in Pakistan: Some alternative options" (1995). ETD collection for University of Nebraska-Lincoln. AAI9614986.
https://digitalcommons.unl.edu/dissertations/AAI9614986