With more than half of the country already underwater, Pakistan’s flood emergency continues.

Urban flooding generated by the unprecedented Monsoon rains — mostly in Sindh, Balochistan and parts of South Punjab — in the last several weeks is aptly described by climate change minister Sherry Rehman as the ‘climate-induced humanitarian disaster of epic proportions’. Over the last few days, the scope of coverage of this humanitarian disaster has also extended to other parts of the country like Khyber Pakhtunkhwa which had initially escaped the devastation caused by torrential rains and consequent flash floods.

According to a National Disaster Management Authority (NDMA) flood alert issued last weekend, the River Indus was expected to flood to very high levels with the releases from Tarbela amid reports of exceptionally high flooding in the Kabul River at Noshehra, with calls to citizens to evacuate as soon as possible.

So far, the floods have killed close to 950 people, left millions homeless, perished around 800,000 livestock, destroyed livelihoods, as well as extensively damaged 4,100 kilometres of the road network, 149 bridges, power and telecom infrastructure, and still counting. Cotton and rice crops in Sindh are also badly hit, which will significantly shrink the national production.

With the rich countries focused on the Ukraine war as they cope with recessionary pressures and donor fatigue, international help will be little and slow to come

The government says the floods that have inundated most parts of Sindh and Balochistan as well as parts of South Punjab, Gilgit Baltistan and Khyber Pakhtunkhwa, were estimated to have affected at least 30 million people, or 15 per cent of Pakistan’s population, in ‘different ways’ by last Friday.

Farmers from Sindh are reporting massive destruction of their cotton and rice crops due to knee- to waist-high standing rainwater in some areas. That the water accumulated in large swathes of Sindh and Balochistan is unable to drain because of repeated heavy monsoon spells shows that damages will be massive.

The government says that the current deluge is more severe than the 2010 floods, which were the second deadliest in the country’s history with a death toll of 1,985 and infrastructure losses of more than $15 billion.

Islamabad has already sought international humanitarian assistance to help the affected population as rescue and relief operations are ramped up to minimise the loss of life. In response, the government has received commitments worth half a billion dollars from the World Bank, the World Food Programme (WFP) and others. With the rich countries focused on the Ukraine war as they cope with recessionary pressures — not to mention donor fatigue — international help will be little and slow to come.

The present floods, more devastating than those in 2010, could not have come at a worse time. The economy is facing one of the worst balance of payments crises and one of the world’s highest inflation rates in a highly polarised and tense political environment. This presents the Shehbaz Sharif government with a huge challenge.

Analysts are of the view that the 2010 deluge followed by less devastating but two major floods in the next two years didn’t derail the economy. GDP growth increased to 3.6pc from 2.6pc in 2010, with agriculture also posting positive growth as the drop in cotton and rice production was more than compensated by the increase in wheat, sugarcane and maize production. The current account, according to a note on floods by Ismail Iqbal Securities, saw a surplus of 0.1pc of GDP as exports and remittances soared. Led by food prices, inflation did inch up but only for a few months.

The full extent of the likely economic losses still isn’t known as the situation is continuously evolving, with river flooding adding to water in the system. It, however, is clear that the devastation being caused by the deluge is going to heap upon the economic woes of the country.

Unlike 2010, we may see the present floods leave deeper negative stress on the budget and macroeconomic fundamentals as funding and reconstruction efforts will be a challenge for the cash-strapped government at a time when it is required to cut spending to keep the deal with the International Monetary Fund (IMF) on track.

The most immediate impact is being seen in food prices as inflationary pressures from floods are growing due to supply chain disruption. The crop and livestock loss would also lead to higher inflation in the coming months with the floods coinciding with high international commodity prices. Analysts are expecting inflation to surge in the band of 26-27pc over the next few months before coming down.

There would also be some pressure on the external account in the shape of higher cotton imports and lower rice exports unless it is fully or partially offset by foreign aid, higher remittances to support families and a reduction in the import bill due to further demand slowdown in the economy.

The damage to cotton and rice crops means the foreign exchange reserves could come under pressure on account of imports of raw materials for the textile industry (the 10pc decrease in cotton output means imports of $418m or so on, according to Ismail Iqbal Securities) and a potential dip in rice exports. Depending on how long it takes the land to dry, the wheat sowing could get delayed at the expense of a depressed harvest next year. Increased wheat imports will bring additional pressure on the current account.

Overall, the floods would further slow down the economy, hitting income from agriculture and corporate profits. The State Bank of Pakistan has also highlighted floods as a major downside risk to the economy and external sector along with elevated international commodity prices in its last monetary policy statement.

Given its weakened fiscal and external account position, the economic analysts are unanimous in their opinion that the scope of devastation from the floods will heavily increase Pakistan’s reliance on foreign loans and humanitarian assistance from the multilateral and bilateral agencies in the near to medium term, both for rehabilitation of the displaced populations and keeping afloat the struggling economy.

In 2010, Pakistan received $4.5bn in cumulative foreign flood-related assistance. The prospects of that much aid money flowing in its way this time around aren’t that bright despite the initial projections of much higher economic losses.

Published in Dawn, The Business and Finance Weekly, August 29th, 2022