With the price tag for the catastrophic monsoons that ravaged Pakistan over the summer expected to surpass the $10 billion threshold, it is safe to say the Southeast Asian economy faces an uphill climb. Pakistan’s Finance Minister insists that the nation will avoid defaulting on its debt, despite an account deficit ballooning by billions of dollars due to the floods.
Close to one-third of the country was left underwater due to the torrential downpours. Pakistan has not seen flooding on this scale in over 10 years, exacerbating already precarious economic conditions that have been festering, including a double-digit percentage spike in the inflation rate, a weakening currency, and political turmoil.
In a snapshot of the devastation that Pakistan has suffered, the floods have turned the Sindh province, which boasts a population of 50 million people, into what has been described as a 100-kilometer-wide inland lake, as captured by NASA satellite images. United Nations officials are blaming climate change, and Pakistani leaders are seeking international economic relief as they attempt to recover. So far, Arab nations are stepping up as well as leading global humanitarian organizations.
Image by Twitter/Al Jazeera English
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The extent of the Devastation
Pakistan’s annual rainfall in 2022 hovers at more than 780% above average, and the year is not over yet. By mid-June, the monsoons hit, making an already precarious situation worse. Some 33 million Pakistanis have been affected, while over 1 million houses are experiencing either devastation or complete destruction, forcing people into tents and other makeshift dwellings.
More than 1,500 lives were lost in the flooding, which spread across “tens of thousands of square kilometers” in Pakistan. The World Health Organization (WHO) has warned of waterborne diseases spreading in flooded regions as mosquitos flock to the filthy and dormant waters to breed. The WHO has described the health crisis as Pakistan’s “second disaster” in which “a wave of disease and death” follow the floods.
Meanwhile, the floodwaters have taken out bridges, roadways, major crops, livestock, and orchards in their wake. Worse, Pakistan’s agriculture sector is responsible for approximately 25% of GDP, and the economic damage has only begun to be felt.
The economic toll from the floods, which stretched from Pakistan’s mountains to the sea, has hit the hardest among the poor population, where villages have been entirely erased, changing life as they knew it forever. The devastation has also sparked fears that the struggling economy would not be able to recover, but Pakistani officials remain steadfast that they will make good on their debts.
Before the flooding, Pakistan managed to secure a loan program with the IMF to inject a much-needed $1.17 billion into the economy. Plus, the country boasts $1.6 billion in central bank reserves. However, those funds will not go nearly far enough with the rising economic toll from the floods.
Pakistan’s trade deficit reached a record $48.6 billion in the latest fiscal year, a 57% increase year-over-year fueled by the soaring cost of imports, including commodities like oil. Pakistan’s planning minister, Ahsan Iqbal, is cited by Reuters saying of the economic toll from the floods,
“I think it is going to be huge. So far, (a) very early, the preliminary estimate is that it is big, it is higher than $10 billion.”
Indeed, the more time that goes by, the more officials realize that $10 billion in damages was a conservative estimate. And Pakistan has a major bill around the corner to pay $1 billion in international bonds.
Pakistan’s Finance Minister, Miftah Ismail, insists that the payment will be met, pointing to some external funding that will help with the recovery efforts. These funds comprise $5 billion from the UAE, Qatar, and Saudi Arabia and are expected to arrive in the current fiscal year. Pakistan has also petitioned the IMF for more relief. The United Nations has pledged $7 million from its Central Emergency Relief Fund to help with the humanitarian efforts in the country.
In addition, the country’s Finance Minister told Reuters that Pakistan is poised to receive $4 billion-plus from the Asian Development Bank (ADB), Asian Infrastructure Investment Bank, and World Bank. More than $1 billion of that aid will make its way to Pakistan in October, from the ADB, as part of an emergency loan that will carry a comparatively high-interest rate of more than 3%.
Pakistan has also received roughly $3 billion in investment commitments made by Qatar, funds that are expected to arrive by next June. With much of Pakistan’s infrastructure underwater, Qatar investors are eyeing long-term leases in its major airports and liquified natural gas (LNG) facilities. Meanwhile, the finance minister notes that the UAE’s anticipated $1 billion investment should “definitely materialize” in the coming months as stock market purchases. The United States has been sending military planeloads of groceries.
The relief could not come soon enough. As mentioned, agriculture is a major contributor to Pakistan’s economy. The nation lost millions of acres of farmland, including an estimated 50% of its cotton crop, due to the floods. As a result, government officials are bracing for a food crisis in which there is not enough food to go around. In addition to cotton, other crops, including rice, tomatoes, and onions, have also been affected.
With the utter devastation from the floods, through which livelihoods have been destroyed, Pakistan will not be able to rebuild its economy overnight. Estimates suggest that it will take the country half a decade to recover from the floods, which were even worse than those that struck during the last devastating floods in 2010. In the meantime, the population will have to deal with a food shortage that Pakistani hopes will be helped by vegetable imports from neighboring India.
While Pakistanis might not be able to return to normalcy anytime soon, life is going on. One example of this is professional sports, more specifically Pakistan Cricket.
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England is bringing the Twenty-20 World Cup Series to Pakistan starting in September. The test matches will serve as a fundraiser for flood relief in Pakistan. The games will take place in the Pakistani cities of Karachi and Lahore.