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The Costs of Pakistan's Floods

Author: Jayshree Bajoria
August 10, 2010

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The deadliest floods in Pakistan's sixty-three-year history have killed over 1,600 and affected nearly fourteen million people. The devastation is sorely testing the government's capacity, and setbacks are likely in its efforts toward economic growth and development, fight against militancy, and the country's civil-military relations. It also carries implications for international development assistance and the ongoing war in Afghanistan.

The immediate challenge is an emerging food crisis, with millions of acres of farmland destroyed. The World Food Programme says at least six million people are at risk of going hungry and food shortages are expected to rise. Agricultural production in Pakistan, Asia's third-largest grower of wheat and the fourth-biggest producer of cotton, may decline by 10 to 15 percent (Bloomberg). This has serious implications: Even though agriculture constitutes 22 percent of the economy, it employs two-thirds of the country's population. Analysts at Citigroup predict that a contraction in agricultural production could lower GDP growth rate (PDF) for 2011 from an estimated 4.4 percent to 3.1 percent. The Economist Intelligence Unit says Punjab, in particular, is crucial for growing both wheat and cotton; widespread destruction of cotton would affect the textile industry, a mainstay of the national economy.

The trade deficit is expected to worsen, as Pakistan will need to increase imports of food and other necessities. The flooding is aggravating inflation (AP), which remains high at 12.7 percent, and spending on rehabilitation and reconstruction could cost about $5 billion (Dawn), according to Pakistan's former federal finance minister Salman Shah. The increased government expenditure will exacerbate the fiscal deficit (RGE), already weighed down by high defense and security spending. This will also make it near impossible for the government to meet the International Monetary Fund conditions to cap fiscal deficit at 5.1 percent of GDP (PDF). The conditions are part of the $10.66 billion emergency loan that Pakistan took out from the IMF in November 2008 to avert a balance of payments crisis. To help Pakistan meet its economic challenges, aid from its international partners and an additional loan from the IMF will be imperative in the next twelve months, says Arpitha Bykere, a senior research analyst at Roubini Global Economics.

Meanwhile, the political fallout from the floods is threatening a weak government and a fragile civil-military balance. As the government faces growing public anger for its poor response and an ill-timed trip to Europe last week by President Asif Ali Zardari, the country's powerful military establishment has been earning kudos (McClatchy) for its emergency relief work. Farzana Shaikh, an associate fellow at the London-based Chatham House, says the international community must not "look the other way should the military in Pakistan use this national calamity to further its political fortunes" (Independent).

Analysts also express growing concerns that the floods could open the door to a Taliban resurgence (WashPost), especially in the flood-hit restive areas in the northwest, as the army's attentions are diverted toward relief efforts. Reports suggest Islamic charities (LAT), some with links to banned militant groups, have already stepped up aid efforts in areas where the government and international aid has failed to reach. This intensifies pressure on Islamabad and Washington, which have been struggling to win Pakistan hearts and minds through their own assistance programs.

Washington has promised a $7.5 billion civilian aid program over the next five years and has announced $35 million in emergency assistance following the floods. "It's a race to see who can provide more help," writes Marc Ambinder on the Atlantic's website, adding: "The U.S. needs a big footprint." But aid efforts will not be easy. The latest events will slow down U.S. development efforts (Reuters) "already facing gargantuan uphill battles," says Brian Katulis of the Washington-based Center for American Progress.

Analysis:

An editorial in Dawn says donors' lack of confidence in the Pakistani government's ability to spend aid money effectively and honestly should not keep it from helping the suffering millions. "The money," it argues, "can be channeled through credible international and local organizations."

In this Daily Times column, Syed Mohammad Ali writes that to win the support of the Pakistani masses, and to prevent their exploitation by extremist groups, the international donors and the Pakistani government must distribute aid in a way that benefits the poor.

Kamila Shamsie writes that the Pakistani state has failed its citizens (Guardian), and now the country is unprepared to deal with the floods.

Background:

This CFR Analysis Brief looks at Pakistan's governing capacity and stability, and how it affects the region and the U.S.-led war in Afghanistan.

This PBS slideshow shows the devastation caused by the floods.

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