Rising flood loss estimate
The government has doubled its estimated value of economic losses due to the floods, saying in a new report that the losses may total more than $40 billion. That is more than double the initial estimate made by the National Flood Response Coordination Centre (NFRCC) of $18 billion, and also significantly higher than the United Nations’ estimate of $30 billion. The jump illustrates just how bad the floods have been and how difficult it is to estimate losses while the damage is still taking place.
Indeed, the $40 billion estimate does not include the economic cost of knock-on effects of the standing water, such as a spike in dengue virus cases in Karachi, and many other parts of the country. Meanwhile, new threats emerge on the horizon, such as the threat to power plants from floodwater and the pollution of waterways essential for drinking water and irrigation. Also keep in mind that Sindh Chief Minister Murad Ali Shah and others have said the water will take between three and six months to clear from some of the worst-hit parts of the Sindh province.
In light of the stated facts, even the $40 billion figure may end up being a conservative estimate once the floodwater fully recedes and more accurate calculations can be done. The flood response centre has already told the finance ministry to hold off on publishing a flood impact report as new details of damage make every passing day’s estimates stale. Even areas where, on paper, some relief would have been expected are turning out to be much more complicated.
Widespread damage to railway lines, for example, may have been cancelled out by the fact that newer, better lines were being laid as part of the China-Pakistan Economic Corridor. However, projects like the $7 billion Mainline-I track were already stalled before the conditions imposed by the IMF resulted in further restrictions on financing, which in turn will cause even more delays in the project’s completion.
Even though the IMF has given some breathing room by saying it will consider relaxation of its bailout programme based on credible loss estimates, the cost of rehabilitation is staggering. The limitations created by the precarious pre-flood economic conditions mean that tough decisions need to be made on prioritisation — without road repairs, the supply chain may collapse and nationwide inflation and food shortages will increase, but without cash transfers to affectees, they may never be able to recover.
Apart from negative economic growth, some estimates suggest that unemployment will go up by at least 600,000 due to the diversion of government spending from development to relief and rehabilitation. This, in turn, could cause a dramatic rise in poverty — up to 12 million people may drop below the poverty line, according to one recent estimate. There may be many more areas where the damage done by the floods may not have been visible and would only surface in due course.
Published in The Express Tribune, September 15th, 2022.
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