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The SBP governor said that the floods had caused widespread devastation in 78 districts across the country with direct losses to major crops towering over Rs281 billion. “The manufacturing sector, which depends on agricultural inputs, has also been adversely affected,” he added. “These developments will lead to adverse economic outcomes with anemic growth and higher inflation,” said Kardar, adding that “Pakistan will not be able to address these issues alone and will need external support.” The governor also pointed out that the present scenario does not bode well for the agenda of financial inclusion as “a significant proportion of the flood-hit population could be pushed below the poverty line”.
Kardar urged financial institutions to “play their due role in the rebuilding of affected areas” citing that “the agriculture, microfinance and SME sectors need the special support of the banking industry”. He informed participants that the SBP has constituted committees in “areas of small and medium enterprises, microfinance, agriculture and general relief activities to develop a strategy for the settlement of existing loans and provision of fresh credit in affected areas”. He also revealed that the committees have “recommended the write-offs of existing loans” for flood affected areas.
The Director of the Economic Analysis department of the SBP Mansoor Ali said, “Inflation is estimated to be 13.5 per cent to 14.5 per cent,” adding that “agricultural growth could be significantly weaker than earlier projections”. The Executive Director of the Development Finance Group Ashraf Khan revealed that “floods have caused additional loan losses of Rs42.3 billion for banks out of which Rs28.3 billion is from the agriculture sector”. Participants, who included heads of banks and representatives of donor agencies, stressed the need to develop indigenous methods for sustainable rural financing.
Published in The Express Tribune, October 1st, 2010.
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