The floods in 2025 seem much less devastating compared to the crisis the country faced in 2022. However, they are severely straining fragile economic stabilization, with macroeconomic implications that are multifaceted, impacting inflation, growth, employment, fiscal balance, and the external account.

These floods are unusual. Their timing is off, arriving at the tail end of the monsoon season. Punjab has been hit the hardest, with the last similar impact occurring in 1988.

To protect cities, authorities have diverted water toward villages, affecting around 4,000 villages and 4 million people. It is still too early to assess the full extent of crop damage, as the water may recede before completely ruining the harvest. So far, the worst effects are seen on rice crops and livestock.

Farm income is already under pressure due to the government’s move away from supporting wheat prices, deliberately allowing prices to fall through imports and stock releases in the last two harvesting seasons. Floods add another layer of strain that could test........

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