‘Flash floods in Pakistan have destroyed thousands of acres of crops in Punjab, the country’s largest producer. About 60 percent of the province’s rice crops and 30% of its sugarcane have been lost, while cotton production is expected to decline by 35 percent compared to its production target for the year, according to preliminary assessments by the Pakistan Business Forum.

Flood-related damages may worsen fiscal pressures and disrupt food supplies, the finance ministry warned in its latest monthly economic report. Wheat harvests stored in Punjab’s warehouses have also been damaged and may lead to the need for additional imports… Prices of the crop have gone up by 20% in the past few weeks due to lower output, supply chain disruptions brought by the rains and lack of government controls…’ – An excerpt from a September 2, Bloomberg published article ‘Pakistan’s flash floods damage rice, sugar in key areas’

As the article rightly points towards production losses of important crops, along with substantial damage done to infrastructure, as far as the rural economy is concerned, there is an added negative impact of floods in terms of significant loss to livestock.

Whereas such large-scale damage, primarily to rural economy, which holds a significant share in gross domestic product (GDP, or simply national income) is likely to bring down an already feeble economic growth rate forecasts for the current fiscal year, whereby downward revision may pull it back below the 3 percent plus forecasts, and in line with overall medium-term performance of economic growth rate around the population growth rate of around 2.6 percent. Having said, more precise estimates are likely to come to fore in the coming months as floods recede, and there is better understanding of damage.

One important impact, which is very much expected is the rise in inflation, which although is quite low currently – where CPI for August year-on-year stood at 3 percent — is likely to pick up strong pace; where a significant jump could be seen by the end of September. It should be understood very clearly that increase in inflation will be basically due to aggregate........

© Business Recorder