Pakistan proclaimed a state of emergency on August 25 as heavy monsoon rains that were incredibly strong and glaciers that began to melt after a severe heat wave all contributed to the floods in Pakistan. Over 1,500 people have died and 33 million people are affected by the floods in Pakistan as a result of floods since June 2022.
This flood has caused the most fatalities and is regarded as the worst flood in the history of the nation which is all related to climate change. Moreover, the economy of Pakistan was already under a great deal of stress, Now the economic impact of the floods in Pakistan 2022 can be clearly seen as the loss has increased from USD 10 billion to USD 12.5 billion.
Back in 2010, less than 100 districts were damaged but the recent flood has affected 118 districts which are important centers of economic activity. In this article, we’ll discuss the impact of floods on different sectors in Pakistan and what should be future policies to fight and overcome the damage.
The area most severely affected by the floods in Pakistan was agriculture. Heavy rains had destroyed cotton, rice, and date crops, causing a loss of Rs109.347bn.
According to the Dawn News, over 1.4 million acres of cotton, 602,120 acres of rice, and 101,379 acres of dates, sesame, tomato, chilli, Kharif vegetables, onion, 50% of the sugarcane crop on 729,582 acres and all of their crops damaged. The sowing of wheat, which was required in the following two months, would be extremely difficult. It is anticipated that the flood water would not completely drain from the farmers’ fields in two months.”
Even before the floods, the manufacturing sector (particularly the large-scale component) was struggling due to power shortages, high-interest rates, a lack of foreign direct investment (FDI), and a heavy external debt burden caused by the country’s deteriorating situation.
The textile and petroleum products sub-sectors (hit by refineries being submerged by flood waters and further storm-related power outages) were particularly affected by flood-related causes. Future budgetary challenges for the government will probably lead to decreased prices paid to farmers, potentially decreasing rural earnings. This together with the likelihood that floods will continue to recur, shows how vulnerable the agriculture-manufacturing connection is.
The GDP growth of the construction sector is primarily influenced by flood magnitude and damage over the short- and long-terms, respectively. Since flood disasters cannot be avoided, it is first necessary to establish a new method of construction to ensure that the infrastructure and buildings are resilient. Long-term, significant damages can be avoided by having well-designed buildings and infrastructure. Additionally, to avoid short-term setbacks, the building industry should arrange an adequate store of materials such as basic metals.
The impact of the floods on Pakistan’s services industry contributed to some of that sector’s expansion. Public administration and the defense social services industry are the key drivers of its expansion. The former was due to government employee pay increases and increased defense spending, while the later was due to logistics support and flood-related social activities.
As a result of the catastrophic floods, Pakistan’s inflation increased for a sixth consecutive month in August, setting a new record 47-year high and which is now at risk of rising much more due to the devastating floods.
According to data the government provided on Thursday, consumer prices increased 27.26% last month compared to the same period in 2017. Comparatively, the median expectation in a Bloomberg survey of analysts was for a growth of 26.6% and a gain of 24.93% in July.
Floods in Pakistan 2022 have a great impact on those in or close to poverty and it has increased their suffering. The situation for many people in the flood area is really bad even before the floods. Nearly one-quarter of the population is malnourished, and it is believed that one-third of people survive on less than $1 per day. One in ten children does not survive to the age of five years old. Unfortunately, small farmers and unskilled workers are most affected by the floods. They are among Pakistan’s most vulnerable people, and Nearly everyone is below or barely above the poverty level in their country.
Many Afghan refugees have traveled through Pakistan in order to access medical care, pursue education or employment, find temporary safety, or transit to another nation. While the number of refugees in camps is increasing, many of those who have been evacuated are wandering into some of the main cities, including Karachi and Lahore as their houses are completely damaged and water s spread across many areas. it will take a lot of time to get rid of it.
This migration has resulted in increased pressure on existing infrastructure in those cities. Electricity, sewage systems, and other overburdened public services are feeling the strain, resulting in an increase in slums and congestion. The lack of jobs and the miserable living circumstances are causing serious societal issues, and crime and violence are increasing, especially in Karachi.
Rural Feudal System
Many of the flood victims living in refugee camps are complaining about the rural feudal system and trying to flee its cruelty. Across the nation, enormous estates owned by feudal families cover hundreds of acres. This feudal society which has powerful landowners put a lot of pressure on Landless farmers and they struggle mightily to reclaim their livelihoods.
The issues faced by the landless farmers and peasants have only aggravated as a result of the floods. They no longer have a job or a place to live. Most of them do not qualify for government assistance because they do not own the property or their homes. The landowners received this money. Little was provided to the underprivileged peasants and small farmers, while other facilities went to the feudal lords and large farms. Farmers have been forced to pay excessive interest rates while receiving low returns on crops due to landlords’ unfair control. Many people are forced into a vicious cycle of debt by this system.
The Floods in Pakistan have led to a situation with long-term economic and political repercussions. Since mismanagement of disaster by the government only increase the mistrust that many Pakistanis already felt for their civilian political leaders. NGOs and the Pakistan Military reached and rescued the stranded people and coordinated sustained relief efforts.
Due to the ongoing structural issues in the nation, floods continue to have a higher economic impact than would typically be the case. Poor levels of foreign and flood relief help, low tax receipts, and the current inflation situation increased the cost of living for common people and led to a lack of resources for relief and reconstruction.
As mentioned above, even in the short run, many of the economic effects of the floods are difficult to distinguish from other causes because extraneous variations are many, making even detailed statistical work challenging—assuming detailed data were available—because they are difficult to distinguish from other causes.
Identification challenges multiply exponentially after a year, particularly when it comes to policy – to what extent, if any, have the floods led to a significant change in the nation’s economic policies? The aftermath of the floods did offer a rare chance to implement severe economic reforms rather than appealing to the outside world to save Pakistan from the dire conditions. Government should be focused on the New Growth Framework which is likely to give the country more hope than traditional aid programs for tackling future floods.
Future Policy Considerations
Without continued growth, post-flood recovery will always be slow. Government deficits, inflationary pressures, and reduced capacity to offer viable employment opportunities for those unfortunate enough to lose everything—or those merely attempting to escape rural feudal enslavement—will all contribute to increased poverty and decreased capacity. However, it is becoming more and more obvious that conventional foreign aid is not the answer.
A rising number of Pakistani economists favor replacing the nation’s ineffective state-run policies with entrepreneur-led growth as an alternative to the aid-based strategy. The New Growth Framework envisions a free, functional market with dynamic entrepreneurship playing a prominent role in increasing investment, creating new sectors of economic activity, and giving the nation’s quickly rising labor force gainful employment.
The most crucial criteria for encouraging entrepreneurial expansion in nations at Pakistan’s developmental level are increased trade liberalization and improvements to the business climate.
With growth rates much below historical averages, an aid-based, business-as-usual approach to post-flood reconstruction would undoubtedly be detrimental to the economy for years to come. The real amount of aid received will never be very high due to donor fatigue and the bad reputation of the government. Regardless, it is unclear that even higher aid levels alone would start the reform and governance improvement processes required to put the nation on a course of high sustained growth, capable of producing the resources to lessen the harm from future floods. In these conditions, each cycle of flooding would have astronomical economic consequences. The New Growth Framework’s entrepreneurial-based approach, which focuses on the development of new businesses and innovative activities, offers promise for the future.