Khalid Saeed Wattoo / Dr Waqar Ahmad

Pakistan’s trade statistics at the close of FY26 reveal a worrying trend. Despite being an agrarian economy, the country’s trade deficit in food products has increased significantly. Food exports declined by 29.5 per cent, falling from $7.1bn in FY25 to $5.02bn in FY26, while food imports increased by 12pc, rising from $8.2bn to $9.15bn.

Nearly all of Pakistan’s major food exports — including rice, fruits, vegetables, maize, and sesame —registered a decline during FY26. Although the export volumes of tobacco and spices increased, their export earnings fell because of lower international prices. However, meat and fish exports registered positive growth.

This disappointing performance reflects a combination of structural, policy, and market-related weaknesses.

Pakistan’s agricultural production is primarily geared towards meeting domestic demand rather than serving export markets. Consequently, agricultural exports remain largely surplus-driven, with commodities exported only when production exceeds domestic requirements. Wheat (in surplus years), sugar, maize, and sesame are among the most prominent examples of this pattern.

Past export surges have been driven either by higher international prices or temporary external developments

Due to this supply-driven model, unlike successful agricultural exporting nations, Pakistan has failed to develop export-oriented production clusters that integrate farmers, processors, exporters, research institutions, and other value chain players to produce crops that meet international standards for quality, food safety, and traceability.

As a result, Pakistan’s agricultural exports have remained highly volatile. Whenever exports surged in the past, the gains have been driven largely either by higher international prices or temporary external developments rather than by sustained competitiveness.

During FY24 and FY25, for instance, Pakistan benefited from India’s restrictions on rice exports. With India’s return to the global market, rice exports declined in FY26. Likewise, armed conflicts in Sudan and parts of Ethiopia disrupted global sesame supplies, enabling Pakistan to expand its sesame exports to China.

Another structural weakness is Pakistan’s continued reliance on exporting a handful of agricultural commodities with limited value addition and branding. Such bulk exports compete largely on price. However, Pakistan is steadily losing its cost competitiveness in international markets. Over the past two years, the prices of diesel, electricity, fertilisers, and pesticides have increased sharply, raising the overall cost of agricultural production.

At the same time, climate change has adversely affected crop yields, while fertiliser use — particularly phosphate, which has a direct bearing on yields — has declined because of rising prices. Changing climatic conditions have also increased the incidence of pests, diseases, and weeds, forcing farmers to spend substantially more on pesticides, fungicides, and herbicides.

Together, these factors have pushed up domestic crop prices, making it increasingly difficult for Pakistani exporters to compete in international markets.

That is why the government this year launched a Rs20bn subsidy scheme to help rice exporters offset their declining competitiveness in international markets. Even so, rice exports declined from $3.35 billion in FY25 to $2.29bn in FY26.

A commonly held view is that rupee depreciation could enhance export competitiveness. However, this argument overlooks Pakistan’s heavy dependence on imported agricultural inputs, including diesel, pesticides, and most fertilisers other than urea. Any depreciation of the rupee therefore increases production costs, offsetting much of the competitive advantage gained from a weaker exchange rate.

While production costs directly affect export competitiveness, domestic market dynamics also influence the prices at which exporters procure. Agricultural commodity markets have recently witnessed a growing presence of private stockists. Faced with high taxation, soaring energy costs, and rising cost of doing business, many businessmen have shifted from manufacturing and services to commodity trading.

Unlike farmers, who are often forced to sell immediately after harvest to meet their financial obligations, these stockists have the deep pockets to hold produce for extended periods. Their interest and confidence were strengthened by last year’s wheat windfall, when wheat purchased at around Rs2,200 per 40 kg was later sold for nearly Rs4,400 — 100pc gain in just eight months.

High inland road transportation costs are another factor that has eroded Pakistan’s export competitiveness. For example, transporting maize from Okara or Pakpattan — two major maize-producing districts — to Karachi costs around Rs200 per 40 kg, equivalent to 8-9pc of the prevailing market price. Such high freight costs make it difficult for exporters to compete on price.

Another underlying reason for Pakistan’s volatile export performance is the limited number of export destinations, reflecting the country’s failure to diversify its markets. The closure of the Afghanistan border in October 2025 due to security reasons sharply reduced exports of fruits, vegetables, and other agricultural commodities.

The same vulnerability was exposed during the recent potato glut. Despite a substantial production surplus, the relevant authorities and exporters failed to secure new export markets. Consequently, many farmers were left with no option but to use their produce as livestock feed or simply dump it. Those who stored their potatoes in cold storage facilities are also incurring losses.

In conclusion, Pakistan must fundamentally rethink its agricultural export strategy. The country needs to develop crop-specific, export-oriented agricultural clusters led by the private sector that can integrate farmers, processors, exporters, input suppliers, farm machinery service providers, and crop advisory services through contract farming or other market-based arrangements.

However, the success of this model depends on raising crop yields to lower per-unit production costs and enhance export competitiveness. Equally important is diversifying export destinations to reduce dependence on a few markets, particularly those vulnerable to geopolitical tensions.

Khalid Wattoo is a development professional and a farmer. Dr Waqar Ahmad is a former Associate Professor at the University of Agriculture, Faisalabad.

Published in Dawn, The Business and Finance Weekly, July 27th, 2026

Published Date: July 27, 2026