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INP-WealthPk

SBP Enhances Credit Limits To Boost Agricultural Productivity

March 01, 2022

By Iqra Waheed ISLAMABAD, Mar 01 (INP-WealthPK): The State Bank of Pakistan (SBP) has increased credit limits for farmers through banks for alignment of finance with the input requirements. The enhanced indicative credit limits for production and development loans of the farm and non-farm sector will directly enable the borrowers to acquire more credit from banks resulting in increased productivity through the proper use of inputs. The agriculture sector’s performance during the fiscal year 2021 shows a growth of 2.77%. The major crops grew by 4.65%. The kharif crops also showed progress and surpassed the expected production level. To ensure a better output in 2022, the government increased the credit limits, reported WealthPK. The revised credit limits show a considerable rise in all five major crops. The credit limit for rice has risen from Rs45.000 per acre to Rs70,000, wheat by 50% from Rs40,000 in 2019 to Rs60,000, cotton from Rs52,000 in 2019 to Rs75,000, sugar from Rs73,000 to Rs105,000 and maize to Rs78,000 per acre from Rs55,000. The credit limits for minor crops also increased significantly. The credit limit for potato has increased from Rs77,000 in 2019 to Rs120,000, onion to Rs65,000 from Rs46,000 in 2019 and tomato to Rs80,000 from Rs60,000 in 2019. The indicative credit limits act as a guideline for banks to assess the needs of the borrowers. However, banks may make adjustments on the basis of prices of the inputs, existing market situation and repayment capabilities of the borrowers. The previous report was published in January 2020, but later the prices of agricultural inputs rose due to numerous factors which affected the cost of production per acre. As agriculture is the largest sector of Pakistan’s economy, a large proportion of population is involved in this sector directly or indirectly. The contribution of this sector, engaging almost 38.5% of the labour force, to the Gross Domestic Product is about 24%. More than 60 to 70 percent of the population is dependent on agriculture for livelihood.

Source: WealthPK

“The development and commercialisation of agriculture require financial services that can support: larger agriculture investments and agriculture-related infrastructure that require long-term funding, a greater inclusion of youth and women in agriculture and advancements in technology.” World Bank said in October 2020. Founding Chairman of Hi-Tech Hybrid Seed Association (PHHSA) Shahzad Ali Malik in the first executive meeting on Feb. 22 said, “The pace of hybrids is poor in Pakistan in the recent years due to absence of the legislative and economic incentives; it’s difficult for PHHSA to produce hybrid seeds locally, as it needs high investment on research and development.” He urged the government to withdraw 17% sales tax on the seed sector, as it was the agriculture sector’s backbone.

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