How improving wheat yields could solve Pakistan's perennial balance of payments problem

Pakistan has a recurring current account deficit problem. Its foreign income isn't enough to finance its expenses abroad. Over the past decade, the country's average current account deficit stood at $8.1 billion, with the highest at $19.2 billion in fiscal year 2017-18 and the lowest at $2.8 billion in fiscal year 2014-15.

Yet it could potentially resolve its balance of payments crisis by simply boosting its wheat yields.

In 2024, Pakistan cultivated 9,632,000 hectares for wheat production, yielding 31.4 million tons, which translates to an average yield of 3.2 tons per hectare. This is significantly lower than the average yield of 6.0 tons per hectare achieved by the top 20 countries.

If Pakistan were able to match this average, its wheat production could increase to 57.8 million tons, adding 26.4 million tons to the current output. This surplus could be exported, potentially generating $7.7 billion in foreign exchange annually, assuming an average price of $292 per ton.

Beyond the macroeconomic benefits, higher wheat yields would also enhance food security, reduce the need for imports, and help lower food prices. Moreover, improved agricultural productivity would lead to higher farmer incomes, contributing to poverty reduction and rural development.

Why are wheat yields low?

Pakistan's wheat yields are nearly half compared to the top 20 countries, and only a third of the most-efficient countries such as New Zealand (10 tons per hectare), Saudi Arabia (10 tons per hectare), and the United Kingdom (nine tons per hectare).

In neighboring India, wheat yields are 20% higher than Pakistan's, at four tons per hectare. If Pakistan could match India's yield, it would result in an additional seven million tons of wheat, valued at $2.1 billion. Pakistan's average current account deficit over the last two years has been $2.0 billion, highlighting the potential impact of improving wheat productivity.

Several factors contribute to Pakistan's lower wheat yields compared to other countries. The country predominantly uses low-yield, non-disease-resistant seeds. Yield improvements can be achieved through the development and adoption of high-yield, disease-resistant varieties. Institutions like the Pakistan Agricultural Research Council (PARC) have been working on such varieties, but broader dissemination and adoption are needed.

How they can be improved

Despite having one of the largest contiguous irrigation systems in the world, over 95% of Pakistan's water is used for agriculture, with substantial losses occurring in the process. Efficient water use through drip irrigation, rainwater harvesting, and improved canal management is essential, as water scarcity poses a significant challenge in Pakistan. Public and private sector investments in water-saving technologies are critical.

In addition, balanced and timely fertilizer use, along with integrated pest management (IPM), can improve soil health and protect crops from pests and diseases, leading to better yields. Educating farmers on best practices such as crop rotation, soil fertility management, and modern agronomy techniques is equally important.

Since the early 2000s, Pakistan has become more inward-looking. Its exports as a share of GDP declined from 16% in 1999 to 10% in 2024.

The Index of Export Market Penetration, which measures how well a country reaches global importers, suggests that Pakistan has substantial room for export growth. This is why focusing on just one area — such as improving wheat yields — can make a huge different to the country's current account deficit.