The World Must Act To Help Pakistan’s Poor

The World Must Act To Help Pakistan’s Poor
As a team of SKY News, a UK TV channel, covering the floods in Pakistan, drove through the district of Dadu, one of the worst affected areas in the Sindh province, they saw an entire village of people wading through the water. They had tied their beds to tyres as makeshift rafts. Abandoning their homes, they salvaged what they could. While passing, a man told them: "We don't even have a boat to save our belongings. We've just picked up what we can and carried it ourselves. We've been ruined, we're homeless".

According to the Economist, “The volume of rainfall is staggering. Some 700mm (28 inches) have been dumped on the south-eastern province of Sindh, nearly six times the 30-year annual average. Balochistan, a vast, arid province normally untouched by the monsoon, has received five times its annual average.”

According to the United Nations, some 33 million people have been affected in 116 of the country’s 160 districts. At least 1,136 people have been killed, one-third of them children. Over 993,000 homes, 157 bridges, and over 3,500 kilometres of roads have been damaged and over 700,000 livestock have been lost. Balochistan, Pakistan’s largest province by area, has been cut off from the rest of the country.

"The extent of this disaster is already many times larger than 2010's once-in-a-century flood," said Isabel Bogorinsky, Welthungerhilfe's head of the program in Pakistan.

Rains and deadly floods have damaged rice and cotton crops, along with vegetables like onions and tomatoes. They also threaten wheat planting in the coming months at a time when the world can ill afford another disruption to grain supply.

As much as half of Pakistan’s cotton crop has been damaged by the torrential rains, according to preliminary estimates. Pakistan is the fifth-largest cotton producer, accounting for 5 percent of the global output. The damage could further shrink the world’s cotton supply.

Pakistan’s largely impoverished and working-class population was already reeling from high energy prices and the fourth highest inflation in the world, and the highest since 1975. The consumer price index which reports inflation of around 27 percent understates the impact of rising prices on a vast majority of people.

The Sensitive Price Indicator (SPI), an inflation measure based on a basket of essential items like vegetables, pulses, meat, electricity, and transport, is around 45 percent, its highest level ever. Food costs have jumped in Pakistan, with tomato prices surging fivefold and onions tripling since last month. The floods could not have come at a worse time.
The 2010 floods mostly hit the rural areas but the recent floods have hit cities as well, disrupting economic activity at a much greater scale.

The country has been rocked by a triple whammy of a bruising political confrontation between former Prime Minister Imran Khan and the military establishment, the world’s energy crisis that took it to the brink of default, and now a calamity of almost biblical proportions.

On August 29, the IMF approved the seventh and eighth reviews of Pakistan’s $7 billion bailout programme, and released $1.17 billion in funds to the cash-strapped country. The programme was negotiated before the floods hit the country. It was based on assumptions, such as around four percent GDP, 10 percent inflation, and a primary budget surplus of 0.4 percent of the GDP, which was $383 billion in the last fiscal year.

The scenario has completely changed due to the massive losses caused by the floods. The 2010 floods caused an estimated $9.7 billion in damage to infrastructure, farms, and homes, as well as other direct and indirect losses, according to the Asian Development Bank (ADB) and the World Bank (WB).

The recent floods have inflicted a loss of at least $10 billion according to Minister for Finance Miftah Ismail, who said these were the initial assessments that might escalate after conducting surveys on the ground. The 2010 floods mostly hit the rural areas but the recent floods have hit cities as well, disrupting economic activity at a much greater scale.

Pakistan is facing "a monsoon on steroids", said the UN's secretary general António Guterres, and urged the world to come to Pakistan's aid as he launched a $160 million appeal to help the tens of millions affected in the disaster. He blamed, "the relentless impact of epochal levels of rain and flooding".

While a few hundred million dollars would help in meeting the immediate needs, they will not be anywhere near to what Pakistan needs to rebuild homes and infrastructure, and help recover its already weak economy.

According to the World Bank, Pakistan faces some of the highest disaster risk levels in the world, ranked 18 out of 191 countries by the 2019 Inform Risk Index. Pakistan also has high exposure to flooding, including, riverine, flash, and coastal, as well as some exposure to tropical cyclones and their associated hazards, and drought. Disaster risk in Pakistan is also driven by its social vulnerability.

Pakistan is responsible for less than 1 percent of the world's planet-warming gases, the European Union data show, yet it is the eighth most vulnerable nation to the climate crisis, according to the Global Climate Risk Index. It's paying a hefty price, not only with lives but destroyed schools, homes, and bridges.

Maira Hayat, an assistant professor of environment and peace studies at the University of Notre Dame, told the BBC about how Pakistanis may rightly be focused on holding the state accountable but that citizens of the Global North needed to reflect on how their countries have contributed to the climate crisis.
Pakistan needs the help of the international community. As the world’s fifth largest country, most of its over 225 million will suffer tremendously if the world doesn’t help on a scale that is needed due to the nature and scale of the calamity that has devastated nearly 15 percent of its population.

For decades developing countries have asked richer ones to provide funding for the costs they face from heat waves, floods, droughts, sea-level rise, and other climate-related disasters. The issue has become a flash point in global climate negotiations. In the landmark 2015 Paris agreement on climate change, countries agreed to recognize and “address” the loss and damage caused by those dangerous climate impacts, according to the Washington Post.

The developed countries failed to make good on their 2009 promise to provide $100 billion of climate finance a year to their developing counterparts by 2020. The UN Climate Change Conference in Glasgow (COP26) in November 2021 saw “deep regret” at not getting there and a new effort to get there by 2025. However, in the months since Glasgow, there has been little evidence of those funding levels increasing.

John Hickel, an economist and a fellow at the London School of Economics, said, “The only appropriate response to the climate catastrophe in Pakistan is to unconditionally cancel the country's external debts. These resources should be used to support people and ecosystems rather than to service foreign capital. It is a minimal first step toward reparations.”

Although it is unlikely that the United States, China, and the European Union would agree to pay compensation, they must consider some form of debt relief to the most vulnerable and worst affected countries such as Pakistan.

Pakistan’s external debt is around $130 billion or about 34 percent of its GDP, but its debt servicing is estimated at around $18 billion during the current fiscal year, representing about 58 percent of its last year’s total merchandise exports, which are likely to suffer from a worldwide slowdown. The additional burden of devastation from the floods will hit the agriculture – one-fifth of the economy - sector hard.

Likely, Pakistan’s economy will not grow much this year and the inflation will stay at high levels, pushing millions more into poverty. The government just doesn’t have the means to help them. It would be nearly impossible for Pakistan to meet the fiscal targets set by the IMF programme, which now must be reviewed.

There is no doubt that the successive Pakistani governments have failed to reform Pakistan’s protectionist rent-seeking economy. But, at this point, Pakistan needs the help of the international community. As the world’s fifth largest country, most of its over 225 million people will suffer tremendously if the world doesn’t help on a scale that is needed due to the nature and scale of the calamity -- that has devastated nearly 15 percent of its population.

The writer is former head of Citigroup’s emerging markets investments, and was responsible for managing investments and macro-economic strategy across 40 countries in the emerging markets, covering Asia, Latin America, Eastern Europe, Middle East and Africa.