The State Bank of Pakistan (SBP) in its third quarterly report on Saturday said that increased production of agriculture commodities would help reduce the current account deficit. THE DISAPPOINTING HARVESTS OF KEY CASH CROPS ARE PARTICULARLY TROUBLING FOR PAKISTAN: "The raise in the commodity production would not only raise farm incomes and help reduce poverty but would also help narrow the country's current account deficit through import substitution and higher exports, as well as help contain domestic inflation," the report said. The SBP said that commodity prices were likely to remain strong. It is imperative that policies are framed to support farmers' ability to raise productivity substantially in the years ahead. Key areas requiring policy intervention remain the transmission of price gains by establishment of future markets, risk mitigation by crop insurance, storage facilities, increasing investment in agri-sector infrastructure, especially in water management, electricity, farm-to-market roads and in value-addition chains through processing. The report said that earlier it was expected that wheat production would be near about the target and would help to boost the performance of Kharif crop. However it was lower than the target, disappointing the Kharif crop. The disappointing harvests of key cash crops are particularly troubling for Pakistan. What is worrisome is the fact that domestic producers can not take advantage of the incentive offered by record international prices for many agri-commodities, such as rice and wheat, the SBP said. Pakistan is a low-cost producer of many such commodities, and could, therefore, have benefited substantially if productivity growth and output had remained strong, the SBP report added. The report said that delayed announcement of procurement price for wheat, along with rising prices of fertilisers and late sugarcane crushing and extended cotton picking caused reduction in the area under wheat crop. Additionally, anticipated decline in water availability at the time of sowing discouraged farmers to bring more area under wheat cultivation. The water shortage seen in Rabi FY08 is likely to continue in Kharif FY09, as the carryover water balance for Kharif 2008 from the ending Rabi season was a negligible--0.013 MAF at Tarbela, Mangla and Chashma as on April 1, 2008. Carryover water balance was 1.5 MAF during the beginning of the corresponding Kharif period. The water shortage is likely to impede sowing of the two major Kharif crops--rice and cotton. On the other hand, agriculture credit disbursement continued apace with its positive trend. The total agri disbursements, amounting to Rs 157.6 billion, were achieved during July-April FY08, depicting an increase of 34.9 percent. Copyright Business Recorder, 2008