Effects of exchange rate and trade policies on agriculture in Pakistan

This report on Pakistan is one of a series of country studies undertaken by the International Trade and Food Security Program are IFPRI on trade and macroeconomic policies. Other studies in this series include research reports on Colombia, Argentina, Nigeria, Zaire, and the Philippines, and collaborative work with the World Bank on this tonic in several other countries in Asia, Africa, and Latin America. The findings from this research have vividly shown the need to analyze the effects of policy interventions in agriculture in developing countries in an economic-wide framework. There is now an overwhelming body of evidence showing that trade and exchange rate policies have, in most countries, had a far greater impact, generally adverse, on agricultural incentives than policies that are specific to agriculture. Through their influence on incentives vis-à-vis the nonfarm sector, these indirect and usually implicit price interventions influence private investment and labor employment in agriculture and induce substantial income transfers from agriculture to the rest of the economy. This research report examines the Pakistan experience from the early 1960s until 1987. it attempts to quantify the effects on the agricultural sector of both sectoral policy interventions and the indirect effect of economy-wide trade and macroeconomic policies. The empirical findings are analyzed in a broad policy context, and the authors draw some implications for development in Pakistan.