Pakistan has published a preliminary assessment of economic losses as a result of the recent floods. According to this research, economic operations were severely disrupted in 118 districts, costing the country more than Rs2,000 billion.
As a result, the budget for the fiscal year 2022-23 now anticipates a growth rate of just 3% of GDP, down from the 5% goal that had been originally envisioned.
Because the SBP’s model is expected to establish losses based on disrupted economic activity, which hit all districts and tehsils in the flood-affected areas, the already enormous losses on the economic front may worsen.
The SBP has been evaluating the agricultural sector’s losses via satellite imagery of Suparco.
Google has also volunteered its services to the government of Pakistan to calculate the full extent of the damage done to the country’s agricultural and physical infrastructure.
The inflation is projected to hover around 20 percent on annual basis, but there will be some spike in the coming months on a short-term basis.
Inflation in August 2022 touched a new height and reached 27.3percentt, which was 47 years high since 1975. The CPI based inflation may cross thee 29percentt mark in the coming months.
The last flood that hit the country in 2010 had caused damage in 78 districts, but the veracity of recent floods could be gauged from the fact that it had caused damage in 118 districts of those areas which are major hubs of economic activities.
The government will also make assessment that how much the severe flood has impacted prevalence of poverty and unemployment in Pakistan.
The State Bank of Pakistan was using its model to assess exact damages and found that this time the floods hit those areas of the country which possessed major economic activities.
It has, so far, been estimated that the country’s Gross Domestic Product (GDP) is projected to evaporate by 2pc and will be standing at 3pc of the GDP against the desired target of 5pc for the current fiscal year 2022-23 in the post-flood scenario.
The IMF has recently projected a GDP growth rate of 3.5pc. The SBP has been asked to come up with a projection of the Current Account Deficit (CAD). The state minister for finance, when contacted, told a select group of reporters that the initial assessment was underway and it would be firmed up soon after which it would be made public.
She said that the assessment of damages on the economic front would be shared with the donors.
The government has also directed the authorities concerned to come up with the projection of assessment of the possible increase in non-performing loans (NPLs).
The government envisaged an agriculture growth target of 3.9pc for the current fiscal year. The initial assessment shows that the agriculture growth would face a loss of 1.8pc, reducing it to 2 percent of the GDP.
The services sector will face a loss of 2pc of GDP and will be standing at 3.1pc of GDP against the envisaged target of 5.1pc for the current fiscal year.
Federal Minister for Finance Miftah Ismail when contacted in his office on Thursday said that the international donors were providing funds off the budget to provide relief in flood-hit areas.
He said that the government did not contact the IMF so far, but options were under consideration to seek the IMF loan under the Large National Disaster Window as the country would be eligible to get 80pc of its quota share.
He said that he would contact the IMF formally once the government finalized its exact estimates on the losses, faced by the economy in the aftermath of the floods.
Sources said that the Rapid Financing Instrument (RFI) has been another option that can be explored to get financing from the IMF.
Pakistan may also seek relaxation on tough structural conditions and benchmarks under the existing Extended Fund Facility (EFF), provided the authorities come up exact losses estimate
