Gilani puts loss to economy at $43 billion

ISLAMABAD: Though the damage assessments is far from complete, and data-collection still in process, Prime Minister Yousaf Raza Gilani has put the estimate of the losses incurred by the nation-wide floods to the economy at $43 billion.

The figure is equivalent to the loss suffered due to terrorism over nine years.

Chairing a somber meeting of the federal cabinet on Wednesday, the prime minister said that the country would need at least three years to recover from the crisis, and that too only if international help matches the scale of the disaster. Gilani announced that the government would hold a conference of multilateral donors towards the end of October or early November.

International donations will be sought once the damage need assessment (DNA) is completed by the World Bank (WB) and the Asian Development Bank (ADB), he added.

The cabinet, Information Minister Qamar Zaman Kaira told reporters later, had decided to lower estimations for the Gross Domestic Product (GDP) growth to 2.5 per cent compared to the initial target of 4.5 per cent for the current fiscal year.

“This economic loss will translate into massive job losses and incomes of thousands of families. Consequently, it may have serious social implications,” the premier said.

“The loss will have a snowball effect on manufacturing, services and export sectors. Most families face a real risk of income and employment losses. Food security of the country is also under threat.”

And the worst aftershock might come in the shape of the price hike, which is now estimated to remain as high as 15 and 20 per cent during the year. Initially in its annual budgetary plan, the government projected that it would curtail it at less than 10 per cent.

In his speech to the cabinet, Gilani feared that there can be a ‘sharp and significant’ rise in the prices of food items due to the suspension of supply after the floods ruined crops spread across an estimated 1.3 million acres.

According to Gilani, the price hike would occur in daily use items such as vegetables, spices, lentils, fruits, milk and meat in the short run (one to three months).

The medium term inflation (for four to eight months), Gilani told his cabinet colleagues, would rise due to a sudden spike in prices of wheat, rice and sugar until next harvest.

Another worry for the government and millions of Pakistanis would be a huge rise in the budget deficit, from targeted 4.5 per cent of the GDP to almost 7 per cent. This alone can disturb the whole economic balance.

Kaira told the news conference that over 1.2 million houses were either totally destroyed or partially damaged, rendering more than 7.5 million homeless.

The cabinet decided to prolong up to six more months the relief phase that was initially planned until October 30. Gilani reiterated his government’s resolve to build large and small dams to minimise losses from such calamities in the future.

Published in The Express Tribune, September 2^nd, 2010.