By Abdul Ghani

Agricultural credit disbursement rose by more than 21% during the first eleven months of FY2025-26, accompanied by higher imports of farm machinery and increased tractor production, reflecting continued investment in agricultural mechanisation despite climate-related risks facing the sector.

According to the Finance Division's Monthly Economic Update & Outlook (July 2026), agricultural credit disbursement reached Rs2.791 trillion during July-May FY2025-26, representing a 21.4% increase over the corresponding period of the previous fiscal year. The higher financing was accompanied by the improved availability of key agricultural inputs during the ongoing Kharif 2026 season.

The report states that investment in agricultural mechanisation also gathered pace during the fiscal year. Imports of agricultural machinery and implements increased by 23.1% to US$135.3 million during FY2025-26, while domestic tractor production rose 3.6% year-on-year to 29,633 units. Tractor sales also remained strong, reaching 28,791 units during the period.

According to the document, fertilizer utilisation presented a mixed picture during the Kharif season. Urea offtake during April-June 2026 stood at 1.474 million tonnes, an increase of 17.8% compared with the corresponding period of last year. In contrast, DAP offtake declined 37.3% to 194,000 tonnes, which the report attributes to higher fertilizer prices.

The Finance Division notes that improved access to agricultural credit and machinery is expected to support farm productivity by enabling growers to adopt modern cultivation practices and improve operational efficiency. Greater availability of financing also allows farmers to invest in quality inputs, mechanised equipment and better crop management practices, contributing to higher agricultural output.

Despite these positive developments, the report cautions that weather conditions remain a significant challenge for the agriculture sector. According to the Pakistan Meteorological Department's seasonal outlook issued on June 30, 2026, below-normal rainfall is expected across most parts of the country during July-September, increasing the risk of water stress for major Kharif crops, including sugarcane, rice, cotton and maize. The report also warns that temperature variations could trigger strong winds, dust storms, thunderstorms and hailstorms capable of affecting seasonal crops, vegetables and orchards.

According to the document, the government's broader macroeconomic outlook remains supportive of agricultural growth. The Finance Division expects the economic recovery to continue in FY2027, backed by improving macroeconomic fundamentals, resilient agricultural activity, stronger industrial performance and continued fiscal discipline. However, it notes that climatic conditions will remain an important factor influencing agricultural production during the current cropping season.

The report adds that sustained investment in agricultural finance and mechanisation will remain important for strengthening farm productivity and improving the sector's resilience. While higher credit disbursement and increased mechanisation provide a positive foundation for the current season, crop performance will also depend on weather conditions and the effective management of emerging climate-related risks.

Credit: INP-WealthPk