Counting the losses- an estimate

By Moazzam Husain

Whilst it may be too early to predict economic losses given that the flow of water has not yet run its full course, what is clear is that the losses may reach catastrophic proportions.

The damage to infrastructure alone has been staggering with roads, bridges, farmland, power plants, dams, barrages and the irrigation system damaged across all four provinces and the northern  areas.

Loss of life and means of livelihoods will ravage millions of lives. The death toll may rise to 2000 dead and 4 million displaced. Millions others are at risk of infections and waterborne diseases. Beyond this millions others stand to lose their meager capital and means of livelihood as crops and livestock are destroyed, markets do not operate, shops collapse, and transport and communications come to a standstill.

In Khyber Pukhtunkhwa, Information Minister Mian Iftikhar Hussain estimates early losses at $ 2 billion whilst Chief Minister Azam Khan Hoti terms this the worst natural disaster that has pushed back the province fifty years. In Punjab, mainstay agricultural industry has been hit hard by the floods. Crops and livestock on 1.3m acres in Punjab’s agricultural heartland have been destroyed. Mainly cotton and rice have been affected and farmers cannot even harvest or sow their crops.

Meanwhile, according to the United Nations World Food programme, 80 percent of the food reserves have been wiped out. The Punjab Relief and Crisis Management Department (RCMD) said 1,343 villages have been affected and more than 25,000 houses destroyed.

In recent years our agricultural growth has been stagnant. In the renewed circumstances, and with the number of districts inundated, the sector could potentially contract by 3-4 %. With agriculture and livestock contributing over 20% to the national economy this could translate to 0.7 % being knocked off from the already low 4% expected GDP growth rate this year. Losses however are not likely to remain confined to the crop and livestock sector alone but may well extend into the value added agro processing sector like cotton ginning, rice milling and milk processing and also affect derived demand for seed, fertilizers and pesticide.

Taken together these may chip off another half to three quarters of a percentage point from the GDP or approximately $ 1 billion in absolute terms. The resulting supply side contraction is likely to fuel inflation.

Beyond that the losses to infrastructure could translate to billions of rupees in lost productivity and reconstruction costs. Finally the costs of relief operations and subsequent resettlement would also have to be borne by the exchequer. In the post flood scenario the government is likely to grant waivers of electricity bills and taxes to the flood affectees. These costs will further balloon the fiscal deficit. For a government already struggling to meet the IMF’s conditionalites, this consequence would make the chances even more remote.

Although it may still be early to fully forecast these losses, it is expected nearly half of the expected 4% GDP growth – of a struggling economy – is under threat of being lost.

2 Comments

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2 responses to “Counting the losses- an estimate

  1. Arjun

    Poor innocent Pakistanis don’t deserve any of this. India has already sent some official aid and hopefully in the coming days, us Indians will be able to run some charity drives to gather more to help out. Our thoughts and prayers are with you.

    This is just the start of the deadly effects if global warming. As the overflowing Indus flows into the Arabian Sea, and with the Himalayan icecaps melting, we should all be very scared of what is to come when there’s a surfeit of so much water in the earth’s ecosystem.

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