This article provides a quantitative analysis of the effects
of Pakistan government domestic wheat procurement, sales, and trade
policies on wheat supply, demand, prices, and overall inflation.
Analysis of price multipliers indicates that increases in wheat
procurement prices (one means of promoting domestic procurement) have
relatively small effects on the overall consumer price index. Partial
equilibrium analysis of wheat markets suggests that fluctuations in
production, rather than market manipulation, are plausible explanations
for price increases in recent years. Comparisons of domestic and
international prices suggest that promoting private sector imports is
one alternative for increasing supply and stabilising market prices,
particularly in years of production shortfalls. Overall, this paper
concludes that market forces play a dominant role in price determination
in Pakistan, and that policies that promote the private sector wheat
trade can both increase price stability and reduce fiscal
costs.