PAKISTAN is among the countries most vulnerable to climate disaster but least prepared to cope with it. Other factors aside, the economic cost of climatic changes have begun to destabilise and shrink the economy, adversely affecting all major growth indicators — GDP, per capita income, rate of savings, tax and revenue collection, and sovereign credit ratings. It has added to our debt burden and to the urgency for additional borrowing. The trade-offs are horribly painful: ‘repurposing’ painstakingly negotiated development projects with lenders to extend emergency cash support to the victims of floods. Business as usual is no longer an option. How can policymakers rethink adaptation strategies and reflect on new avenues for financing climate resilience? What lessons can be drawn from the recent floods in order to reduce the cost of similar disasters in the future?

According to Pakistan Floods 2022: Post-Disaster Needs Assessment (PDNA), just released by the Planning Commission, Pakistan has incurred losses and damages of $30.2 billion, or 4.8 per cent of this fiscal year’s GDP. The scale and severity of the flooding was unprecedented: a once-in-a-thousand-years heatwave, in some areas, made way for intense rains in many places that were 400pc to 800pc higher than previous averages. This calamity hit 94 districts, including 19 of the 25 poorest ones, pushing them further behind on SDG targets. It is estimated that these floods have increased the incidence of poverty by more than 3.7pc and pushed another 8.4 million people below the poverty line.

This was not a one-off incident — only bigger and more destructive. In fact, the recently released Country Climate and Development Report by the World Bank has projected that climate disasters, environmental degradation and air pollution will result in a 7pc to 9pc fall in Pakistan’s GDP, and lead to the latter shrinking by 20pc by 2050. The CCDR has estimated that Pakistan will need $348bn — 800pc more than the current annual budget — to stop climate-induced disasters. Merely $48bn will be available through public and private financing; there will be a projected gap of $300bn. On the ground, the PDNA urgently seeks $16.2bn for immediate recovery and reconstruction. The CCDR has put these needs in a longer-term perspective. It has projected that between 2023 and 2030, Pakistan will need $152bn for adaptation and $196bn for decarbonisation, as committed. These are very large sums by all standards. Imagine $86bn for disaster preparedness and response, $55bn for water and sanitation, $85bn for clean energy supply, and so on. Where would this money come from?

The ground realities are dismal, as the gap between possibly available finances and needs on the ground is widening. International financial mechanisms have no provision for this scale of financing. We have seen that there is no agreement on setting up a financial facility for loss & damage, otherwise happily added to the COP27 agenda. Likewise, the G20 discussions in Indonesia on a framework for debt rescheduling for low-middle-income developing countries like Pakistan have remained inconclusive. In the absence of any international pipeline, are there any efforts that Pakistan can make to reduce the direct costs of climate disasters?

It is estimated that these floods have increased the incidence of poverty by more than 3.7pc.

A closer look at the PDNA reveals that the total losses incurred by individuals were several times higher than losses to public sector infrastructure: i) individuals incurred losses of $19,191m, which included $6,222m in housing and $12,969m in agricultural crops and livestock; and ii) losses to public-sector infrastructure were to the tune of $9,599m. This includes $779m in education, $143m in health, $669m in community infrastructure, $711m in flood-protection infrastructure, $3,545m in transportation and communication such as roads and railways, and $113m in energy transmission and distribution lines — reflecting poor construction codes, standards, specifications, materials and site selections of public sector infrastructure, and often contributing to maladaptation.

These assets were not insured, and that has depleted the residual resilience of the state and its over 30m directly affected citizens. The efforts to create catastrophe funds and risk-transfer mechanisms have failed in Pakistan but technical knowledge and global experience over the past decade have accumulated sufficiently for them to work successfully now. They have become critical for Pakistan to reduce its recurrent costs and damages. Investments in more contemporary approaches can play a pivotal role in strengthening adaptative capacity.

State-owned insurance companies have enjoyed near monopoly and need to gear-up for action in partnership with the State Bank and the Securities Exchange Commission. They need to devise insurance mechanisms to protect the state infrastructure and such community assets as crops and livestock, as well as individual home-owners, including nominal owners in informal settlements in the katcha areas or katchi abadis where they do not always have land titles. This year, the federal government disbursed Rs37.2bn to 1.5m affected families. A similar amount through a trigger-based risk-transfer mechanism would have possibly covered the reconstruction costs too. A percentage of $10bn annually spent, mostly on untargeted subsidies, can be ‘repurposed’ for risk-transfer purposes. Likewise, the budgets in PC-1s can have a provision for insuring public sector infrastructure. One dollar spent on insurance can save 50 in the coming monsoon seasons.

More importantly, the PDNA has revealed that poor construction standards have led to disproportionately higher economic losses compared to the direct impact of the 1.1 degrees Celsius change. Climate-resilient standards would have saved Pakis­tan’s public sector assets only if we had upgra­ded our construction codes to international standards and benchmarks. The Pakistan Engineering Council, together with major public sector contractors who have dominated infrastructural development — FWO, Nespak, NHA, NLC and Naya Pakistan — and their sub-contractors need to spearhead the revision of archaic construction specifications and by-laws by municipalities. The private sector has a role to play in building national resilience. Such enterprises need to make way for private sector innovation, competitiveness ad finances. This can be Pakistan’s key to attracting and effectively utilising international climate finance, while reducing the costs of climate disasters.

The writer is an expert on climate change and development.

Published in Dawn, November 17th, 2022