Is credit the devil in the agriculture? The role of credit in Pakistan's agricultural sector

Abstract The aim of this study was to use an econometric analysis to investigate the relationship between the agricultural gross domestic product (AGDP) and variables, such as total food production, cropped area, loan disbursed by ZTBL, cooperative loan and total loan disbursed by various institutions in Pakistan. Data were explored from 1960 to 2015; we used time series data collected from secondary sources, including the Pakistan Bureau of Statistics, Statistical Year Books and the Economic Survey of Pakistan. Data were analysed using the Phillips–Perron (P–P) test, and the results were interpreted using the Johansen Co-integration test. We found that total food production, loan disbursed by ZTBL and the total loan disbursed by various institutions had a positive and significant influence on the AGDP, whereas cropped area and cooperatives loan had a negative but insignificant influence on the AGDP. Based on our results, we suggest that the Government of Pakistan formulate and initiate new policies and funding schemes for the development and improvement of the agricultural sector.