Flood in Pakistan, Economy Effects

• Since July, flooding has claimed more than 900 lives in the country.
• Floods destroy crops on millions of acres, according to the climate minister
  
  
  

Flooding has harmed millions of acres of crops, including cotton. This week, the nation's central bank warned that excessive rains could harm agricultural output. The regulator already anticipates that economic growth will slow from last year's 6% to between 3% and 4% in the new year beginning in July.

According to initial estimates, Pakistan's economy will suffer a loss of over $4 billion in the current fiscal year as a result of the unusually strong monsoon rains and flash floods, which have severely harmed agricultural activity in Sindh and Balochistan. Although it is too early to determine the exact effects, Pakistan, where agriculture accounts for 23% of GDP, might remain extremely susceptible in the wake of the floods.

Increased imports, compromises on exports, and increased inflation could be the results, undermining government attempts to combat macro headwinds. In a report released on Friday, JS Global Research stated that "based on our preliminary estimates, the current account deficit may increase by $4.4 billion (1% of GDP) - assuming no counter-measures are taken, while approximately 30% of the CPI (Consumer Price Index) basket is exposed to the threat of higher prices."

The government may be forced to import more cotton worth $2.6 billion, wheat worth $900 million, and lose roughly $1 billion in textile exports as a result of the current circumstances. In the current fiscal year 2022–2023, this amounts to about $4.5 billion (1.08% of GDP). Consumers are anticipated to experience a shortage of domestic goods including onion, tomato, and chili due to the flash floods.

The situation might require the government to import more cotton worth $2.6 billion, wheat worth $900 million, and the nation might stop exporting textiles worth about $1 billion. The equivalent amount in the current fiscal year 2022–2023 is approximately $4.5 billion (1.08% of GDP). Due to the flash floods, consumers may experience a shortage of domestic goods including onions, tomatoes, and chilies.

However, any shortage of imported raw cotton or other unfinished textiles will have a detrimental effect on the nation's textile exports, according to the research firm. Another crop that is anticipated to sustain significant damage from the continuing floods is rice. It is one of the few crops whose area under cultivation has significantly risen in the past two years (+20%). Each year, it contributes exports worth $2.5 billion. "Rice crop damage will result in lost exports, a minor slowdown in GDP growth, and increased CPI inflation.