Economic Impact of Floods in Pakistan

Economic Impact of Floods in Pakistan

Climate change has become a daunting challenge in the 21st century. Pakistan is one of the top 5 countries that are highly affected by changes in climatic temperatures and weather patterns. The impact is wide-ranging such as a reduction in agriculture production, continuous droughts, coastal erosion, and more than average rainfall. However, the recent flood situation in the country has been one of the major causes of climate change which has devastated thousands of acres of land and displaced millions of people with loss of lives.

The current floods have inundated 7 million hectares out of 22 million hectares of total cultivated land. According to the Ministry of Food Security and Research Department, the agriculture and livestock sector has to face a loss of Rs298 billion. The floods of 2010 negatively affected the agriculture sector, as major crop production declined by 15%. However, the destruction caused by the recent floods is of a higher magnitude, as it has flooded vast areas of cultivated land.

The damage caused to the cotton crop (which contributes 1% to the GDP) has been irreparable and the remaining crops accounted for a 50% production loss. Around 700,000 to 800,000 livestock has been annihilated, as it contributes 11% to the national GDP. Geographically, 110 districts have been badly affected. The agriculture sector production loss will be around 25-30% including livestock losses and crop damages (Express Tribune, 2022).

It has been estimated that a contraction of 25% in the agriculture sector generates a gross output loss of $21 billion and a gross value addition loss of $14.7 billion. This loss will directly impact the GDP growth and it will be reduced up to 3.84%. According to research, next year’s GDP growth will remain within 1-2% however, inflation and unemployment will be escalated.

To overcome the crisis, the government should renegotiate with the IMF to provide relief on the agreed condition of provincial surplus and reduce non-developmental expenditures, to spend more on rebuilding infrastructure. In addition, the authorities should announce the support price for wheat as soon as possible with subsidies on farm inputs and interest-free loans. Federal and provincial governments should increase the budgetary allocation for social safety nets.

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IMARAT Institute of Policy Studies

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