Pakistan’s economy is reeling from a 50 percent month-on-month surge in wheat grain prices, pushing the National Consumer Price Index (CPI) above 5 percent in September for the first time in 11 months.
This spike, with wheat and its products contributing 90 basis points to the increase, is more than an inflationary blip—it’s a stark exposure of the country’s mishandled wheat policy. For years, policymakers trumpeted a shift away from state-controlled markets, promising a private-sector-led system with market-driven pricing and reduced distortions. Yet, the reality is a chaotic void where no credible framework was built to replace what was dismantled, leaving farmers, consumers, and the broader economy to bear the cost of this failure.
The government’s loud declarations of reform over the past two years were little more than fiscal maneuvering dressed up as deregulation. Public wheat stocks were sold off early, exports were suppressed, and farmer incomes were squeezed to create a fleeting illusion of disinflation. No transparent price benchmark was established to guide markets. No mechanisms cushioned farmers against volatility. No channels were created to attract private buyers, and no infrastructure supported storage or trade. The result is a market without an anchor, where prices swing wildly—50 percent in a single month—despite stable global wheat prices. This isn’t a seasonal quirk; it’s a structural collapse, exposing the hollow core of Pakistan’s reform narrative.
Now, facing skyrocketing prices, the government is scrambling to revive the Minimum Support Price (MSP), a move that’s less a correction than a confession of defeat. After promising a market-driven future, policymakers are falling back on the same blunt tool that fueled distortions in the first place. The MSP, swinging between overgenerous subsidies and punitive cuts, has long been a source of volatility, not stability. Its return signals to farmers, traders, and international partners like the IMF that Pakistan’s reforms are reversible, eroding trust in the country’s economic stewardship. For a nation where roti is a daily staple, this failure hits hard, driving up living costs and deepening the struggles of millions already grappling with poverty.
The tragedy is that real reform was never about abandoning food security but about building smarter systems to balance producer and consumer needs. A functioning wheat market needs a transparent price benchmark tied to global trends, not political whims. It requires targeted protections, like crop insurance, to shield farmers from catastrophic losses without distorting prices. Clear trade rules—defining when imports or exports are allowed—would encourage private-sector participation, replacing abrupt bans with predictability. And investments in storage, collateral systems, and market data would enable traders and financiers to build supply chains, reducing reliance on state intervention. These are standard tools in modern commodity markets, adopted by countries with fewer resources than Pakistan, yet here they remain absent.
The fallout from this crisis extends beyond agriculture. Wheat’s 90 basis point contribution to CPI in a single month destabilizes monetary policy, strains external accounts, and hits the poor hardest. With nearly nine in ten Pakistanis living below the $4.2 per day poverty line, rising food prices exacerbate an already dire social crisis, eroding purchasing power and fueling food insecurity. Rural households, dependent on agriculture for 40 percent of jobs, face a double blow: low incomes from volatile markets and higher costs for staples. The government’s flip-flop on MSP risks further alienating the IMF, which has tied its support to structural reforms. Allowing Pakistan to revert to old habits without a clear roadmap invites volatility as policy, undermining the macroeconomic gains that have lowered the country’s default risk.
The way forward isn’t complicated, but it demands political courage. Pakistan needs a national price benchmark, independently reported and tied to domestic and global realities, to anchor price discovery. Trade rules must be predictable, with pre-defined conditions for imports and exports, ending the reliance on discretionary bans. Public procurement should be limited to a strategic reserve for two months of consumption, avoiding market distortions while ensuring food security. Targeted tools, like risk-transfer mechanisms, can protect farmers without skewing prices. And investments in storage, collateral systems, and data transparency would draw private players into the market, reducing the state’s burden.
These aren’t radical ideas—they’re the building blocks of a modern commodity market, proven in nations with weaker institutions than Pakistan. The problem isn’t capacity but intent. For too long, wheat policy has been a stage for political theater, used to appease farmers one season, consumers the next, and the IMF when convenient. The cost is now spilling over, undermining inflation management and reform credibility. The IMF must hold Pakistan accountable, insisting that short-term fixes like MSP come with binding commitments to long-term tools that genuinely deregulate. Without this, the cycle of crisis and reversal will deepen, threatening the fragile stability gained from lower default risks and improved macro indicators.
The 50 percent wheat price spike isn’t just a number—it’s a failure of governance that ripples through kitchens and fields. Pakistan can’t afford to stage another illusion of reform. It must build a wheat market with clear rules, protect its people from volatility, and deliver on the promise of stability. Time is running out, and the cost of inaction is measured not just in dollars but in the trust of a nation weary of broken promises.