Floods to cause $4 bn loss to Pakistan’s economy: Report | Cricket News
KARACHI: Unusually heavy monsoon rains and devastating flash floods have estimated cash losses Pakistani Economy more than $4 billion in the current financial year as natural disasters hit agricultural activities in Sindh and Balochistan hard, according to a research report.
Although it is too early to assess the actual impact, Pakistan, where agriculture accounts for 23% of gross domestic product (GDP), may still be very vulnerable as a result of the floods that killed nearly 1,000 people. killed, injured and thousands more displaced. since mid-June.
The monsoon season, which started in June, has brought particularly heavy rains to Pakistan this year and rescuers have struggled to evacuate thousands of people flooded. The crisis has forced the government to declare a state of emergency in many parts of the country.
The consequences of flash floods could include higher imports, compromise on exports and rising inflation, which would undermine the government’s efforts to deal with macro difficulties, reports The Express Tribune. news.
“Based on our preliminary estimates, the current account deficit could increase by $4.4 billion (1% of GDP) – assuming no countermeasures are taken, while around 30% of the CPI (Consumer Price Index) basket is under threat of higher prices,” the daily reported, citing a report by JS Global Research.
The situation could force the government to import more cotton worth $2.6 billion, wheat worth $900 million, and the country will lose about $1 billion in textile exports. This amounts to about $4.5 billion (1.08% of GDP) in the current 2022-23 financial year. Due to flash floods, consumers are expected to face a supply deficit for household grocery items such as onions, tomatoes and peppers, the report said.
The most affected crop is cotton. Farmers produced 8 million bales in the last financial year, but now they will again have a poor crop like previous years, amid heavy rainfall in Sindh. “Cotton seeding was reported to have been destroyed on a large scale (in Sindh), it said. “Assuming the country requires cotton imports to meet 80% of its needs this year, the import bill is likely to exceed $4.4 billion (+144% y/y) in fiscal year. main 23.
On the other hand, the lack of availability of imported raw cotton or other unprocessed textiles will negatively impact the country’s textile exports,” the researcher said.
Rice is another crop that is forecast to suffer major losses in the ongoing flood. It is one of the few crops where the cultivated area has increased significantly in recent times (+20% in two years). It contributes $2.5 billion in annual exports. “The damage to rice crops will result in a loss of exports, in addition to a slight reduction in GDP growth and higher CPI inflation.”
Since water from flash floods is expected to take two to three months to disappear, the consequences could result in delayed sowing of wheat and cooking oil. The delay in planting wheat will be a double hit as many farmers have switched from growing wheat to growing edible oil seeds. Furthermore, the post-flood situation is also expected to have a negative impact on upcoming wheat production. Given the delay in sowing and higher import prices for wheat, importing 15% of wheat demand of 30 million tonnes could bring the import bill to $1.7 billion in fiscal year 23.
Along with crops, more than 500,000 livestock are reported to have died in the floods. This will add to the burden on rural people, already reeling from higher diesel and fertilizer prices, and will lead to a shortage of milk supply. Furthermore, livestock shortages, coupled with the potential for disease outbreaks in the herd, can also cause meat shortages. Besides, tomato prices have started to increase due to monsoon.
This together with wheat, cooking oil, milk and meat makes up 18% of the CPI basket. It poses a risk of high food inflation (28%; highest in 13 years). “Any risk to food security, shortages and supply chain bottlenecks would increase our current FY23 CPI estimate of 21%. We expect fertilizer companies, banking, tractors and oil marketing to be among those that will be negatively impacted by flash floods,” the report said.