Impact of flooding on low-income households

Impact of flooding will be very high for all low-income households, as is already evident through food inflation.

LAHORE: While there has rightfully been a lot of talk and analysis on how affected populations are impacted in the short and medium run by the flooding that has inundated their lives, houses, and livelihoods, much less attention has been paid to how this natural disaster is going to impact poor households in ostensibly unaffected areas.

The impact of flooding will be very high across the board for all low-income households in Pakistan, as is already evident through food inflation and price hikes in everyday commodities.

These macroeconomic indicators will continue to deteriorate, as has been predicted by numerous economic and social analysts, and bottom-of-pyramid households will find it exceedingly difficult to fund expenditure on non-food items such as utility bills, children’s school education and health-care facilities.

Inflation has already resulted in a massive decrease in disposable incomes as a major chunk is now being used to fund food consumption. This is naturally going to impact socio-economic indicators for this segment of the population in both the short and long term, making it difficult for them to ever come out of poverty. Moreover, low-income households will face greater financial exclusion as microfinance institutions will face an excess demand for capital and inflation will necessitate the disbursement of higher loan amounts to offset the decrease in the purchasing power of money.

Thus, previously obtainable lines of credit will become unavailable, decreasing available opportunities to set up and expand income generating businesses.

Coupled with this is the diversion of both private and state development funds towards the relief and rehabilitation of flood affected areas. Thus subsidies, development initiatives, financial support programs being run in non-flood affected areas will significantly decrease.

Consequently, in times of great economic hardship brought on by macro-economic instability the meagre existing support for households at the bottom of the income pyramid will diminish.

This will also apply to private charity in the form of Zakat and person-to-person cash transfers.

Furthermore, charitable organisations working for the provision of basic services, such as healthcare and education, will see a decrease in the donations they receive.

This is bound to further decrease the access of poor families to basic services and exacerbate their already deplorable social indicators such as literacy levels, life expectancy, maternal and child mortality, and fertility rates.

Published in The Express Tribune, August 23^rd, 2010.