KARACHI: Floods have taken toll in each of the last five years, causing loss of Rs334 billion a year in monetary terms to the country, according to a recent report by the US World Resource Institute.

The study indicates that Pakistan’s GDP is affected by one per cent annually due to river flooding. While the agriculture sector bears the brunt of the blow, transportation sector also suffers and due to disruption in supplies of goods, food prices start to run high.

Food inflation which weighs around 35pc in the CPI basket has the potential to lead to higher inflation. The government has set an inflation target of 6pc for FY16.

Until now, the flooding this year has inundated around 200 villages, mainly those of Chitral, D.I. Khan, Layyah, Muzaffargarh and Dera Ghazi Khan and around 0.3m people have been rendered homeless.

“According to reports around 400,000 to 500,000 cotton bales, which account for 4pc of cotton production, have been affected from flooding which could marginally affect agricultural output and GDP growth,” says Umair Naseer, economist at Topline Securities.

“So far, key provinces where agriculture and industrial activities are high, like Punjab and Sindh, have not been affected.”

But Umair cautions that it is too early to predict the exact amount of damage by flooding this year. However, if it continues to rain, other Kharif crops, including rice, sugarcane and maize, may also suffer.

Agriculture has 21pc weightage in GDP and major crops account for 5.4pc of the GDP.

Besides agriculture, the wheels of manufacturing facilities could also start to turn slower as infrastructure loss could affect transportation sector.

As a result, industry off-take, especially those of cement and fertiliser, could decline in the short run while construction activities have already slowed down due to heavy downpour and flooding.

The third sector that could have to bear losses would be the insurance business as insurance companies would brace to face higher claims.

Economists believe that floods would be negative for cement, fertiliser and insurance sectors and ‘neutral’ for the remaining sectors, such as E&Ps, OMCs and refineries, power, banks, auto assemblers, telecom, textiles and consumer goods.

Published in Dawn, July 28th, 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play