The economic impact of devastating floods

Small farmers and peasants to suffer the most.

The full economic costs of the devastation caused by the floods- the worst in many years- in Khyber Pakhtoonkhwa, South Punjab, parts of Baluchistan and Sindh, will not be known for some time. But they are likely to be substantial, both for the people affected by the deluge and for Pakistan’s cash-starved government.

Former federal Finance Minister, Dr Salman Shah, estimates that costs of rehabilitation of the flood-affected population and reconstruction of damaged infrastructure in different parts of the country could be in the range of $ 4 – 5 billion. Another economist put the figure between $ 3.5 and 4 billion. These losses are enormous when seen in the context of cumulative damages of about $ 6.5 billion in 14 floods since 1956.

According to another former Finance Minister and ex senior Vice President of the World Bank, Shahid Javid Burki, “we should get ready for another poor year for the economy, in the terms of the rate of the growth in the national product, pace of job creation and inter-personal and inter-regional income distribution. The government’s prediction that GDP in 2010-11 would increase by 4.1% now seems extremely optimistic. Given some of the shocks the economy has received in last few days, it appears that the national product will not increase by more than 2.5 to 2.8% this year. This will be about the same as the revised rate of growth in 2009-10. If that came about, Pakistan’s current economic expansion will be less than one half that of Bangladesh and one third that of India. Pakistan today is South Asia’s “sickest” economy and will remain that way unless the policy makers move decisively”.

The information minister of Khyber Pakhtoonkhwa Mian, Iftikhar Hussain, told reporters that “the infrastructure of this province was already destroyed by terrorism. Whatever was left was finished off by these floods”. This is also the case with South Punjab. It will take years for economy to come out this pathetic state. According to the UN, “the emergency phase will require hundreds of millions of dollars and the recovery and reconstruction part will require billions of dollars”. The government is looking for foreign aid and external help to overcome the present crisis, but the experience of Friends of Pakistan shows that an inflow of money from richer nations will not come so easily. If the government continues to depend mainly on foreign aid and assistance for the relief work, then the situation will become worst. Already affected people will be left to their own devices, to survive in the impossibly difficult situation. After this natural calamity, a man made crisis will unfold.
Agriculture hit the hardest

According to the spokesman of the World Food Programme, Amjad Jamal, “At least 1.4 million acres of crops were destroyed in Punjab. Many more crops were destroyed in North West and Sindh. The flooding has caused massive damage to crops and also to the reserves that people had in their houses. Khyber Pakhtoonkhwa was a ‘food insecure’ province even before the floods, and now in a lot of areas, people can’t afford even one meal a day”.

If we include the figures of Sindh and Khyber province, the total goes up to more than 2 million acres. This is massive damage. Sugar cane, rice and cotton crops have been badly damaged. Agriculture experts are saying that farm production in Pakistan, Asia’s third-largest grower of wheat and the fourth biggest producer of cotton, may decline by 20 to 30% because of this damage. The losses to agriculture and livestock would have a spill over effect on industry and commercial activities to a great extent. This is because agriculture continues to play a central role in the national economy. Accounting for over 21% of GDP, agriculture remains by far the largest employer, engaging 45% of the country’s labour force.

Damages, on the one hand, are likely to affect raw material supplies to the downstream industry that contributes to the export sector and, on the other hand, reduce the demand for industrial products like fertilizers, tractors, pesticides and other agriculture implements. And all this comes at a time when agricultural productivity has been falling over the years.

Since the flooding has been widespread, the damages to cotton crops may