It is difficult to estimate the losses that small and medium enterprises (SME) suffered during the recent floods. But when we consider the 2022 floods affected more districts than the 2010 super floods, it becomes evident that the cumulative losses of the SMEs are colossal.

The federal and provincial governments, the national and provincial disaster management authorities (NDMA and PDMAs), Small and Medium Enterprises Development Authority (SMEDA) and commercial banks must develop an integrated plan to help revive SMEs. Enabling the flood-hit SMEs to restart business as soon as possible must be prioritised. In collaboration with the government, the State Bank of Pakistan (SBP) needs to roll out concessional financing schemes for flood-hit SMEs.

If all this begins right now, the SME sector can be expected to restart contributing to overall economic recovery from the beginning of 2023 — or even earlier. The resource-starved government must reach out to international financial institutions and non-governmental organisations (NGO) to seek exclusive funding for the revival of flood-hit SMEs, part of which can be utilised for refinancing SMEs’ concessional loan schemes. Meanwhile, the government also needs to develop a more straightforward documentation process for SMEs so that they may qualify for bank loans.

The floods of 2022 affected 118 out of 160 districts of Pakistan, whereas the 2010 floods affected 78 out of the then 143 districts. (Authorities have declared “calamity-hit” 81 districts where flash floods caused the most losses of human lives, infrastructure and livestock). According to the government’s initial findings, the number of severely/moderately affected districts also include those with high economic activity level. The number of people affected by the monsoon floods has exceeded 33 million.

The resource-starved government must reach out to international financial institutions and NGOs to seek exclusive funding for the revival of flood-hit SMEs, part of which can be utilised for refinancing concessional loan schemes

There are more than 5m SMEs spread across Pakistan. They can be broadly categorised as manufacturing SMEs, trading SMEs and services SMEs (including IT and IT-enabled businesses). The SME sector contributes 40 per cent to GDP and is responsible for generating 25pc of exports.

The monsoon 2022 floods have affected all SMEs. But losses of manufacturing SMEs are huge, particularly those in textiles, leather, foods and agriculture sub-sectors. The floods have damaged their physical infrastructure and stocks of products and disrupted their access to power and gas supplies, affecting labour availability.

More than two dozen SMEs are located across Punjab. The floods have already affected many SMEs established in southern Punjab’s calamity-hit districts. Many are manufacturing SMEs and are important parts of the supply chain of export-oriented industries like textiles and food and fruit processing.

In Sindh and Baluchistan, the situation is worse. The provincial government has declared 23 districts as calamity-hit, and SMEs in all these districts and some parts of two districts of Karachi have suffered losses of infrastructure and business stocks.

In Karachi, the access of these SMEs to the supply of labour, electricity, and gas was restored within a few days. But in 23 districts of interior Sindh, this has not been the case, and the SMEs located there or operating from there are waiting not only for the compensation of losses but are also unable to get utilities’s supply. Moreover, their workers living in adjoining areas, marooned by the floods, also cannot return to work.

The calamity-hit districts of Sindh include areas of high economic activity such as Hyderabad, Thatta, Mirpurkhas, Sukkur and Ghotki, which are home to hundreds of thousands of agricultural, manufacturing and trading and services SMEs.

The situation of SMEs in 17 districts of Khyber Pakhtunkhwa is similar. Furthermore, SMEs in the tourism industry, most notably hotels and restaurants, have lost almost all business and it might take them some time to get their clients back. Many calamity-hit districts like Charsadda, Chitral, Dera Ismail Khan and Swat are known for their agricultural, tourism, manufacturing and trading SMEs. The merciless floods have brought the businesses of these SMEs to their knees.

Although in Balochistan the normal level of economic activity is far less than the other provinces, it has suffered far more than the rest of Pakistan during these floods. The damages done to the road and market networks and bridges are so extreme that the rest of Pakistan lost land route access to this backward province for more than a week. This fact alone is enough to understand how the SMEs there (although much lower in number than in other provinces) may have suffered.

According to media reports, the most pressing problem of many SMEs, particularly those in Sindh, is the non-availability of workers and access to electricity and gas. Physical infrastructure and business stocks of them have been damaged completely or partially. Since the monsoon rains are predicted to continue in September, aggravating the flood situation, there is little hope for immediate relief for these and other SMEs.

With great help from local NGOs and the international community, the federal and provincial governments are currently focusing mainly on humanitarian relief and rehabilitation.

Published in Dawn, The Business and Finance Weekly, September 12th, 2022

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