Just recently, under the $7 billion Extended Fund Facility, the International Monetary Fund (IMF) introduced a new condition that requires Pakistan’s federal and provincial governments to phase out the crop minimum support price (MSP) system by June 2026.

Currently, MSP is limited to just three crops — wheat, sugarcane, and cotton — unlike in India, where 23 crops benefit from it.

The MSP, widely used in many developing countries, serves two key purposes: it guarantees farmers a minimum return on their produce and stabilises the production and supply of essential crops. While the former aims to protect farmers from global price fluctuations and distress sales during periods of surplus, the latter safeguards consumers from supply-demand imbalances and market inefficiencies.

These benefits, however, come at a cost; effective implementation requires robust institutional support, adequate crop storage infrastructure, and substantial financial resources.

Wheat — Pakistan’s largest crop, cultivated on 9.6 million hectares — will be most affected by the IMF’s condition. The MSP system for wheat is not inherently flawed, and it has largely provided stability to the wheat market in most years. However, the real issue lies in its implementation, which is plagued by massive inefficiencies, widespread corruption, and a heavy reliance on borrowing from commercial banks at high interest rates to finance wheat procurement and storage.

The Fund is pushing Pakistan to end support price intervention as the system continues to put a burden........

© Dawn Business