Floods caused losses of $31.2 billion to Pakistani economy
Pakistan needs $16.5 billion for the rehabilitation and reconstruction of flood affected areas
According to
the World Bank’s announcement, a damage, loss and needs
assessment following the unprecedented floods in Pakistan calls for ‘building
back better’, based on the principles of the poor first, transparency,
inclusion, and climate resilience.
The
assessment estimates total damages to exceed USD14.9 billion, and total
economic losses to reach about USD15.2 billion. Estimated needs for
rehabilitation and reconstruction in a resilient way are at least USD16.3
billion, not including much-needed new investments beyond the affected assets,
to support Pakistan’s adaptation to climate change and overall resilience of
the country to future climate shocks.
Housing,
Agriculture and Livestock and Transport and Communication sectors suffered the
most significant damage, at USD5.6 billion, USD3.7 billion, and USD3.3 billion,
respectively. Sindh is the worst affected province with close to 70 percent of
total damages and losses, followed by Balochistan, Khyber Pakhtunkhwa, and
Punjab.
The Ministry of Planning, Development and Special Initiatives, led the Post-Disaster Needs Assessment (PDNA), which was conducted jointly with the Asian Development Bank (ADB), the European Union (EU), the United Nations agencies with technical facilitation by the United Nations Development Programme (UNDP) and the World Bank.
The PDNA, in addition to estimating damages, economic losses and recovery
and reconstruction needs, also assesses broader macro-economic and human
impacts and recommends principles along which to develop a comprehensive
recovery and reconstruction framework.
The crisis thus risks having profound and lasting impacts on lives and livelihoods. Loss of household incomes, assets, rising food prices, and disease outbreaks are impacting the most vulnerable groups. Women have suffered notable losses of their livelihoods, particularly those associated with agriculture and livestock.
The PDNA
Human Impact Assessment highlights that the national poverty rate may increase
by 3.7 to 4.0 percentage points, potentially pushing between 8.4 and 9.1
million more people below the poverty line. Multidimensional poverty can
potentially increase by 5.9 percentage points, implying that an additional 1.9
million households are at risk of being pushed into non-monetary poverty.
Compounding
the existing economic difficulties facing the country, the 2022 floods are
expected to have a significant adverse impact on output, which will vary
substantially by region and sector. Loss in gross domestic product (GDP) as a
direct impact of the floods is projected to be around 2.2 percent of FY22 GDP.
The agriculture sector is projected to contract the most, at 0.9 percent of
GDP. The damage and losses in agriculture will have spillover effects on the
industry, external trade and services sectors.
The
government is providing immediate relief to the impacted communities and
supporting the early recovery, while aiming to ensure macroeconomic stability
and fiscal sustainability. Moving forward, as recovery and reconstruction
spending rises, the loss in output could be mitigated. Yet, significant
international support will be needed to complement Pakistan’s own commitment to
increase domestic revenue mobilization and save scarce public resources, and to
reduce the risk of exacerbating macroeconomic imbalances.
The report
puts forth recommendations for developing a comprehensive recovery framework.
While the primary focus will be on the affected areas, such framework presents
an opportunity to embed systemic resilience to natural hazards and climate
change in Pakistan’s overall development planning. This tragic disaster can be
a turning point, where climate resilience and adaptation, increased domestic
revenue mobilisation and better public spending, and public policies and
investments better targeted to the most vulnerable populations; all figure at
the core of policy making going forward.
Given Pakistan’s limited fiscal resources, significant international support and private investment will be essential for a comprehensive and resilient recovery. The Pakistani authorities are committed to accelerate reforms to generate additional domestic fiscal resources and improve efficiency and targeting of public spending. Beyond the immediate needs of floods reconstruction, these reforms, while protecting the most vulnerable, will be important to generate fiscal space to invest more broadly into more climate-resilient infrastructure and adaptation to climate change, as well as to build buffers to face future shocks, while addressing macroeconomic imbalances.
This commitment of the government will also be key to mobilise
further international support as well as to unlock private sector sources of
financing both of which will be absolutely critical to face the current climate
change-induced shock.
The ADB, the
EU, the UNDP and the World Bank are fully committed to working with the
government and people of Pakistan during the ensuing recovery phase, and to
increase the country’s climate resilience.
Khalid Bhatti
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