Agriculture credit target for fy23 may prove paltry.

In the backdrop of massive damages to agriculture by unprecedented floods caused by historic monsoon rains, the State Bank of Pakistan (SBP) has fixed an indicative annual agriculture credit disbursement target of Rs1,800 billion for the financial institutions for FY23 to cater to the rising agriculture credit demand in the country. Last year, the Rs1,700 billion target was missed primarily due to financial institutions' cautious lending approach.

The current year is under the immense pressure of devastating flash floods across the country. No official data is available about the loss of crops, livestock, and other related valuables in the agriculture sector, a brokerage house initially estimated a total loss of Rs900 billion.

However, it is difficult for brokerage houses or independent NGOs to assess the possible losses due to limited capacity, only the government can provide data about the exact damages caused by the floods. At the same time, it is obvious that the agricultural sector needs much more financing to recover from the massive losses inflicted by the natural calamity.

Moreover, in line with the national food security requirements and the need for mechanization of farms to enhance agriculture productivity, specific targets of Rs140 billion for production loans of the wheat crop, Rs45 billion for tractor financing, and Rs20 billion for financing for harvesters, planters and other farm machinery have also been set under the overall target for FY23.

In addition, SBP has also enhanced the per acre indicative credit limits for agriculture financing to support the farming community to avail adequate funding from banks and optimize their agriculture inputs' usage. To ensure food security, per acre indicative credit limit for wheat has been enhanced from the existing Rs60,000 to Rs100,000 which will allow farmers to deploy quality inputs for improved yields.

During FY22, the financial institutions managed to disburse Rs1,419 billion to the agriculture sector as compared to the disbursement of Rs1,366 billion during FY21 whereas the outstanding agriculture credit recorded an encouraging growth of over 10% and reached Rs691 billion by the end of June 2022.

The unprecedented disbursement and growth in the agriculture credit portfolio were supported by various recent initiatives of SBP to promote agriculture credit and financial inclusion in the country.

One of the major recent initiatives of SBP was the introduction of a comprehensive...