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Socio-economic implications of flood crisis in Pakistan

Pakistan’s worst ever flooding disaster has damaged twenty percent area of the country, which is
roughly equal to the size of England. It affected twenty million peoples, intensified the energy crisis
and may create fears of social unrest in the near future.
This humanitarian disaster left more than five million people homeless and around ten million in urgent
need of humanitarian aid. According to the United Nations, the disaster has affected close to 20 million
people, killing 1,600 and leaving 1.2 million homes damaged or destroyed.
It is worth mentioning that most disastrous aspect of the river’s floods is not its immediate effects; its
after effects are considered much severe than its immediate damages. Earthquakes and tsunamis
damage suddenly the human life on earth, but river floods are considered as slow tsunami because
they affect the human life more severely when flooding crisis is over. For instance flood along Yangtze
River in China in 1931 left 1.4 million people dead by drowning; while ultimately this number had
reached 3.7 million because of diseases and starvation.
Apart from the human losses, the worst ever disaster in Pakistan is threatening to disrupt the economy.
Though, it is too early to estimate the economic cost of the devastating floods at this stage as waves
of floodwaters may bring more destruction.
In comparison of magnitudes of human casualties and economic losses, the worst ever disaster in
Pakistan seems a less devastating; its severe problematic aspect is its timing and the socio-economic
characteristics of the region affected by the flood. Majority of the poor in Pakistan lives in flood affected
areas. Big urban business tycoons or financial houses are not its direct sufferers; it directly hits the
areas where majority of the people under the absolute poverty is living.

Government officials have estimated only public sector infrastructure losses, which range from $10 to
$15 billion, which the country will have to spare for rehabilitating and reconstructing of the
infrastructure. The donor organizations, including World Bank, Asian Development Bank, and the
United Nations, are also measuring the economic impact of the floods. All sources are agreed that
Pakistan’s economy would likely grow slower than predicted because of the extent of the damage
caused by the flooding. According to the Asian Development Bank’s estimates, now Pakistan is
unlikely to meet its 4.5 percent economic growth rate target.

It is noteworthy that after recording its lowest growth in a decade, GDP had been expected to grow by
4.5 per cent in the fiscal year ending June 30, 2011. Now, it was assessed that Pakistan could achieve
about 3.5 percent GDP growth rate this fiscal year. It means a loss of around two billion dollars in
terms of GDP. This loss does not include the losses of assets and properties.
Agriculture accounts for 20 percent of Pakistan’s gross domestic product (GDP). Flood has damaged
crops sown over 1.93 million acres. It estimated crop loss at one billion dollars, saying the full impact
on soil erosion and agriculture could only be assessed when the water recedes around mid-
September. The country has lost around 20 percent of its cotton crops.
The destruction of cotton, rice, sugarcane, vegetable crops and fish farms are enormous as well.
Damage to cotton, rice, sugarcane and maize will hit the export sector, the main source for Pakistan’s
foreign exchange reserves. Textiles and agriculture account for about three quarters of Pakistan’s 21
billion dollar export target this year. The floods have eaten about 20 percent of the cotton crop (14
million bales for this year). It may negatively affect large-scale manufacturing and exports by 25
percent.
The tragedy will strain the government’s finances in different ways. Before the crisis, the budget deficit
was expected to reach at 4.5 percent of Gross Domestic Product (GDP), but now it could widen to as
much as 6 percent to 7 percent of GDP. Obviously to fulfil IMF conditionality in term of Budget Deficit
to GDP ratio is not possible in the present situation. The higher fiscal deficit would lead to increase
government borrowing. The crisis of external debt will become more serious.