Effects of currency devaluation on agri

The Pakistani rupee has lost over 125 per cent of its value against the US dollar, sliding from Rs125 per dollar in June 2018 to Rs285 per dollar in June 2023. Several key factors have contributed to this situation, including a substantial trade deficit, diminished foreign exchange reserves, reduced foreign investment and the heavy burden of foreign debt servicing. These factors have had a detrimental impact on Pakistan’s fragile economy, adversely affecting the overall economic landscape. The currency devaluation has also had profound direct and indirect effects on Pakistan’s agriculture sector. First, currency devaluation has increased crop production costs due to price hikes in agricultural inputs such as fertilisers, pesticides, diesel, electricity, and agricultural machinery that are imported or use imported raw materials and are directly linked to the dollar value. The impact on production costs is more pronounced for input-responsive/input-intensive crops such as potato, maise, sugarcane, and vegetables, whereas wheat, chickpea, sesame, canola, and other crops, whose input requirements are low to medium, have been affected to a relatively lesser extent.