Floods inflict $43bn damage: PM

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Floods inflict $43bn damage: PM

* Gilani tells cabinet meeting economic growth will drop to 2.5% in current financial year, down from predicted 4.5%
* Budget deficit is expected to climb to 6-7% of GDP

ISLAMABAD: The damage inflicted to the country’s economy by the floods is estimated at $43 billion, Prime Minister Yousaf Raza Gilani said on Wednesday, adding that due to the devastating floods, the country had suffered Rs 350 to Rs 500 billion worth of damage to infrastructure, livestock and crops.

The country’s economy grew by 4.1 percent during last year and was expected to grow by 4.5 percent during the current fiscal year 2010-11, he said, adding that the damage caused by the floods would bring down the real GDP growth to 2.5 percent for 2010-11.

Chairing a federal cabinet meeting, which reviewed every aspect of the flood situation and relief efforts, Gilani said approximately $200 million would be required for recovery/relief efforts, whereas repair costs of key damaged infrastructure could exceed $1 billion. He said that over 1,645 people had lost their lives while 2,479 had been injured to date.

Gilani said this economic loss would translate into massive job losses and incomes of thousands of families, adding that consequently it could have serious social implications.

The PM informed the cabinet that in order to finalise a national strategy on the rehabilitation of the flood-affected people, a meeting of the Council of Common Interests (CCI) had been convened to take collective decisions in consultation with the provinces on ways and means to rehabilitate the flood-affected people.

He urged the nation and the relief operation authorities to expedite efforts to help their fellow countrymen.

Gilani said one-fifth of the country’s irrigation infrastructure, livestock and crops had been destroyed.

The PM said the inflation target of 9.5 percent for FY 2010-11 would be missed and it had been apprehended that it might hit the range of 15-20 percent. He said inflation would occur in daily use items such as vegetables, spices, lentils, fruits, meat and milk products.

Budget: The budget deficit before the food crisis had been estimated to reach 4.5 percent of the GDP, now it had been estimated to be as much as 6-7 percent of the GDP, he added. “Performance of agriculture will be consequently much lower this year and the year ahead. This loss will have a snowball effect on manufacturing, services and export sectors. Food security of the country is also under threat,” he said. app

Daily Times - Leading News Resource of Pakistan

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Economic growth likely to suffer for four years: Experts

Thursday, September 02, 2010

ISLAMABAD: Pakistan economic growth is most likely to continue to suffer for three to four years as the growth in the large-scale manufacturing (LSM), textile, cellular and other industries are highly dependent on the demand from the most of agriculture areas of the country, which has now eroded in the wake of the devastating floods, experts said on Wednesday.

During the last two years, agriculture growth remained stable and acted as a driving element for the GDP growth, owing to which the income of rural people had increased enough to generate demand of mobile phones, motorcycles, cars and other electronic appliances, but due to the havoc played by the unprecedented floods, major crops valuing $2.8 billion and livestock of around $1 billion were washed away, they said.

The livelihood of the rural dwellers have also ruined due to which unemployment would swell manifold, the experts said, and feared that the youth in the rural areas may play at the hands of the criminal or terrorists, keeping in view the fact that in southern Punjab, Taliban militants are gaining strength and in case the government fails to come up with a package to generate jobs for the youth, they would prove a fuel for terrorist to use against the country.

At a roundtable on floods and food insecurity - challenges ahead arranged by the Centre for Research and Security Studies (CRSS) Federal Flood Commission Chairman Zarar Aslam, Principal Economic Adviser to the government Sakib Sherani and Dr Abid Suleri, Executive Director, Sustainable Development Policy Institute (SDPI), came up with their presentations on flood management, its adverse impact on the economy and increase in food insecurity incidence due to devastating deluge, respectively.

Speakers were of the view that cascading effect of the annihilating flood would not only increase the poverty incidence in the flood-affected areas, but also accelerate poverty in urban areas as some textile, leather, football, and gloves manufacturing industry depends upon cotton produce and skins of livestock would be affected, owing to which unemployment in urban poverty would further inflate.

The speakers also highlighted the post-flood challenges such as to reclaim the top soil, particularly in Khyber-Pakhtunkhwa that has washed away by the deadliest waives of the flood and to conduct exercise of the land titling in the food-hit areas.

They also urged the government to provide seed to the farmers free-of-cost for the next crop after proper soil testing.

“Protection of river embankments is a false sense of security in Pakistan having a widespread river system,” observed Zarar Aslam, Chairman Federal Flood Commission (FFC).

Aslam also explained that the FFC organisation had little to do with the management of floods or maintenance of river embankments as it is a provincial subject.

“We are only supposed to collect data of river flows for onward dissemination to provinces and arrange funds for any water management projects planned by provinces, Aslam said, adding that the provincial irrigation departments are responsible for managing 6,800 kilometres of protective embankments along rivers.

Speaking about impending food insecurity in the country after the floods, Suleri said that 80 out of 131 districts of the country are facing food insecurity.

“Unfortunately, the districts which were already food insecure across the country experienced worst floods further precipitating an already volatile situation,” Suleri said and pointed out that food insecurity has surged from 37 percent to 48.8 percent (before the floods) over the last six years.
Pakistan faces extreme individual insecurity, which can take the country to social instability, he said, and underscored that “individual security must be ensured through good governance for stability of state, region and the globe”.

In order to improve food security in the current crises, the SDPI Executive Director suggested that food items can be imported from Indian Punjab through Wagah and export of live animals banned.

Other experts and panelists also express their concerns about moratorium on development and the diversion of over Rs250 billion Public Sector Development Programme (PSDP) to the flood-affected areas would entail serious infrastructure development consequences for districts not affected by the floods.

The panelists also agreed that the impact of unprecedented floods will continue to be felt for several years and the situation, therefore, demanded that effective medium- to long-term strategies be put in place and the governance structures improved to cope with the future challenges such as food inflation, unemployment and poverty, farmers’ depleting incomes, and replenishing the livestock lost to floods.

In this context, the experts also warned of the crushing impact on the common man as a result of loss of physical assets such as grain and seed savings, as well as livestock.

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Growth to decline to 2.5 percent

ISLAMABAD (September 02 2010): The Cabinet has been informed that GDP will decline to 2.5 percent, from projected 4.5 percent, for the current fiscal year (2010-11) as a result of damage to various sectors of the economy by floods. The Minister for Information, Qamar Zaman Kaira, told media here on Wednesday at a news conference after the Cabinet meeting that budget deficit might touch 6 to 7 percent of GDP for the ongoing fiscal year and inflation 15 to 20 percent.

He said that the scale of devastation by floods had disturbed all macroeconomic indicators of the country and would be revisited after damage need assessment. He said that a significant increase in inflation is expected in the short run ie, 1-3 months in the face of short supply due to crop destruction. However, the government would make every possible effort to control it.

The Cabinet meeting, he said, was informed that prices of daily use items such as vegetables, spices, lentils, fruits, meat, and milk products will go up considerably. The meeting was also told that medium-term inflation for 4 to 8 months would increase due to spike in prices of wheat, rice and sugar until the next harvest.

The Minister said there is a possibility that the government might get relief in debt servicing but how much and for how long can not be predicted at this point in time. He said that reservations of provinces with respect to their share from the foreign assistance would be discussed in the forthcoming meeting of the Council of Common Interests (CCI).

He said that the Prime Minister informed the Cabinet that to finalise a national strategy on the rehabilitation of the flood affected people, the Council of Common Interests (CCI) meeting has been convened on Friday for approval of the strategy that was finalised in consultation with the provinces. He said that the economic loss by floods would translate into massive job losses and incomes of thousands of families along with serious social repercussions. The overall performance of agriculture would be affected for the current as well as for the next fiscal year.

Kaira said that the meeting was told that this loss would have a snowball effect on manufacturing, services and export sectors and consequently most of the families would be facing real risk of income and employment. He said that the devastation is likely to affect revenue collection and increase expenditures, which will widen the budget deficit. The flood damage would also adversely affect textile and sugar sector and ultimately the balance of payment and external resource stability.

The Cabinet meeting was told that manufacturing may also considerably decline below the target of 5.6 percent. He said that services sector (including wholesale and retail trade) constituting more than 50 percent of GDP, dependent on agriculture, manufacturing, imports, exports would also be affected.

Additionally, he said, shortages and increased demand of construction materials, fertilisers and pesticides would contribute to hike in non-food inflation. The Minister said that government priorities would have to be re-determined in the wake of the floods. He said that expenditures would have to be cut down, funds have to be diverted and belts have to be tightened to meet the needs of reconstruction and rehabilitation of the flood affectees.

The government would also mobilise external and internal resources to meet expenditure on re-construction at least for the next 3 years, he added. The Cabinet was told that based upon the Damage Need Assessment (DNA), the Economic Affairs Division (EAD) would organise an international donors' conference in late October/November to muster financial support of the international community for the reconstruction.

The government is also planning to build medium and small dams on priority basis to harness the excesses of water. Some of the planned mega dams like Diamir-Bhasha will also be prioritised for construction. The Cabinet reviewed the status of implementation of Cabinet decisions pertaining to Sports and States & Frontier Regions.

The Cabinet also reviewed the decisions taken by Economic Co-ordination Committee (ECC) of the Cabinet in its meetings held on July 20 and 29, 2010. The Cabinet decided to renegotiate the Pakistan-Australia Agreement on Promotion and Protection of Investments. It also reviewed the signing of Grant Agreement with the Government of Japan for the Project "Extension of Water Supply System in Faisalabad".

The Cabinet approved, in principle, to start negotiations on MoU for grant of $1.4 million from government of Brunei Darussalam for earthquake affected areas. The Cabinet also approved the signing of agreement on Economic, Scientific and Technical Co-operation with Romania.

The Cabinet also approved the ratification of Saarc Convention on Co-operation on Environment. The Cabinet reviewed the agreement between Ministry of Agriculture, Government of Tajikistan and Ministry of Food and Agriculture, Government of Pakistan about co-operation in the field of Agriculture. The Cabinet reviewed the MoU between Government of Tunisia and the Government of Pakistan on Agriculture Sector and ratified approved Additional Protocol to the Agreement Concerning the Organisation of Pakistani Manpower Employment in the State of Qatar.

The Cabinet also ratified the MoU signed during the visit of Chinese Vice Premier, Zhang Dejiang, as well as Convention between Government of Pakistan and the Government of Serbia for the avoidance of double taxation with respect to taxes on income. The Cabinet approved a Bill to provide for establishment of Shifa Tameer-e-Millat University at Islamabad, replacement of bank notes of Rs 5 denomination with Rs 5 coin and demonetisation of Rs 500 old design of banknote.

Business Recorder [Pakistan's First Financial Daily]