(Bloomberg) -- Pakistan’s efforts to turn around its economy after winning bailout funds from the International Monetary Fund face a new threat -- from crop-eating pests.
Swarms of locusts are fanning out through the South Asian nation, gorging on wheat, cotton, mustard and other crops. That, together with unseasonal rain and a scourge of low quality seeds, has hit major crops in the country’s largest producing regions of Punjab and Sindh.
Cotton production in the current crop year is forecast at 10.2 million bales, or 20% short of the 12.7 million bales target, according to the state-run Pakistan Central Cotton Committee.
The pest outbreak has the potential to hurt farm production that accounts for about a fifth of the economy’s output. While cotton is Pakistan’s top farm export, wheat is the main staple food crop in the country where more than 40% of the labor force depends on agriculture for a living.
Prime Minister Imran Khan’s government is targeting economic growth of 3.5%-4% in the current fiscal year ending June from a year ago, but a lower cotton output could shave off as much as 25 basis points, said Ahsan Mehanti, chief executive officer at Arif Habib Commodities.
The locust attack also threatens to offset any export advantage created by a currency that has been devalued by almost half by the central bank. The devaluations made the rupee more aligned to the market-determined exchange rate recommended by the IMF as part of a $6 billion loan program to stabilize the economy.
Among the top five cotton producing nations, Pakistan may find itself importing a record quantity of the fiber. Islamabad will this year have to spend more than $1.7 billion to purchase about 6 million cotton bales, according to Naseem Usman, chairman of Karachi Cotton Broker’s Forum.
“We are pessimistic that the economic growth targets will be met,” said Jehanzaib Zafar, head of research at BIPL Securities Ltd. He does not see growth exceeding 3%, partly because of the poor farm sector performance.
Wheat crop spread across at least 10,000 acres (4,047 hectares) have been destroyed so far by locusts in Pakistan’s southern Sindh province, according to Zahid Bhurgri, general secretary at Sindh Chamber of Agriculture.
That’s set to undermine a 27-million tons production target set for the crop by Pakistan’s Federal Committee on Agriculture in October.
“Wheat has been damaged. Mustard has been damaged,” said Bhurgri, whose organization represents about one million farmers in the country’s south. “These locusts are damaging our crops very badly.”
Authorities tasked with protecting crops are in the process of hiring aircraft to spray pesticides in the worst-affected regions in at least 13 districts, including Khairpur, Tharparkar and Sukkur.
“We are having an emergency-like situation,” said Falak Naz, director general of crop protection at the Ministry of Food Security and Research.
Naz said last week Pakistani authorities also met their Indian counterparts at Khokhrapar-Munabao border point to deal with these crop-eating insects also threatening crops in the Indian state of Rajasthan.
A lower-than-expected crop output will weigh negatively on Pakistan’s external account, once again pushing it into deficit, according to Sulaiman Mehdi, the chairman of Pakistan Stock Exchange. The nation’s current account turned into a surplus for the first time in four years in October.
“Based on these weak production, your imports are going to go high,” Mehdi said.
Pakistan’s central bank Governor Reza Baqir is pinning hope on rice output to offset the impact of cotton.
“Cotton is doing less than what we have previously thought but other areas are doing better,” Baqir said in an interview. “We right now feel reasonably confident about the projections that we have on growth.”
--With assistance from Faseeh Mangi.
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