ISLAMABAD: Putting the flood damage and loss estimates at over $30 billion (around Rs6.5 trillion), leading international agencies have warned of a substantial increase in poverty levels, widening fiscal and external account deficits amid political and economic instability.
Based on these estimates, Pakistan called for relaxing the International Monetary Fund’s (IMF) conditions and demanded “climate justice” to invest in rehabilitation and climate adaptation efforts.
The Post-Disaster Needs Assessment (PDNA) — conducted jointly by the World Bank, Asian Development Bank (ADB), United Nations Development Programme (UNDP) and the European Union with the support of the Pakistan government — called for a coordinated international support for $16.3bn (Rs3.5tr) funding for recovery and building disaster resilient economy, infrastructure and institutions to fight rising challenges of climate change.
“Given Pakistan’s limited fiscal resources, significant international support and private investment will be essential for a comprehensive and resilient recovery,” said the PDNA report, adding that Pakistan’s commitment to accelerate reforms would be critical to generating more domestic and international resources for efficient and effective utilisation.
The report was formally launched at a function presided over by Planning Minister Ahsan Iqbal, who requested the IMF to allow Pakistan to utilise its development funds for disaster recovery, particularly the condition of spending at least 40 per cent of the development budget only in the last quarter of the financial year, which he said was unwarranted under current circumstances and must be revised.
Minister for Climate Change Sherry Rehman said on the occasion that Pakistan had geared up its efforts to make a case for “climate justice” at the COP27 climate change conference in Egypt next month.
The PDNA report laid bare the inadequacy of Pakistani institutions and systems related to urban planning, water management, infrastructure maintenance, governance structures and risk management and reduction capacity, but it noted that the devastating flooding was “one in a 1,000-year” event that further exposed these weaknesses.
It pointed out that underlying political and economic instability was exacerbating the disaster impacts and undermining the effectiveness of recovery when a more resilient nation was critical to breaking the cycle of disaster-induced poverty. Simultaneous multiple shocks, including natural hazards, Covid-19, rising inflation, an energy crisis and fiscal challenges, continue to compound the impacts.
“Overall decline in GDP as a direct impact of the floods is projected to be around 2.2pc of FY22 GDP,” it said. Among the major sectors, value-added agriculture is projected to decline the most at 0.9pc of FY22 GDP, with floods causing the most losses to cotton, dates, sugar cane and rice crops. Besides, around one million cows and sheep are estimated to have perished.
Furthermore, damage in the agricultural sector is expected to have spillover effects on the industry and services sectors. Flood-related cotton losses are expected to weigh on the domestic textile industry, as local cotton constitutes about half of the industry’s required cotton input. Textiles account for around one-quarter of total industry output and more than half of goods exports.
Similarly, the local food processing and slaughtering industries will be negatively impacted by the expected reduction in food harvests and reduced supply of livestock. The value-added industry sector is consequently expected to shrink 0.7pc of the previous fiscal year’s GDP. Likewise, lower agricultural and industrial activity is likely to weigh on wholesale and transportation services activities, which account for around half of the service sector output.
The development partners pointed out that the disaster would have a profound impact on lives and livelihoods, as preliminary estimates of the PDNA suggest the national poverty rate to increase by 3.7 to four percentage points, pushing between 8.4 and 9.1 million people into poverty as a direct consequence of the floods.
The lending agencies insisted that there could be no leniency to reforms to generate additional domestic resources. In a nutshell, the assessment estimated total damages to exceed $14.9bn (Rs3.2tr), and total economic losses to reach about $15.2bn (Rs3.3tr).
Published in Dawn, October 29th, 2022