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Floods and the Economy

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Floods and the Economy
Floods and the Economy

Floods and the Economy

We recently celebrated 75th anniversary of our founding as an independent state. During the course of these seven plus decades, we as a nation haven’t been able to put ourselves on the map of the world economic scene in any significant manner, or let alone, making a formidable impact, as has been achieved by India and China. Both these countries, one of which got independence two years later, have followed consistent economic policies, with a long-term view. Their policy makers acted as architects of their future, while we behaved with a traders’ mentality, of short-term policy for short-term gains.

Regrettably, our approach to the economic wellbeing has been a tragic and woeful tale of events, with each successive government, experimenting and testing new (falsely believed) models of economic structures. We had unalloyed capitalism; followed by socialist tendencies, that led to a massive decline in efficiency and productivity; this was followed by the deregulation and privatisation.

A large part of the later exercise of opening up the economy was self-serving. The economy was being managed for a decade by way of Statutory Regulatory Orders or popularly known as SROs. A narrow, limited in horizon mode of thought, was the basis upon which the economic plans were developed. There was no long-term thinking. Consequently in the short run, building of dams is not the job of a single government, but it is about the project that must be owned by successive administrations. This wasn’t done. Hence, no new dams were built. Lo!

We are facing climate change and we remain unprepared. This is and will be at a major cost to the overall economic development of the country, as we tread towards our 100th independence anniversary.

Climate change is here to stay. We must embrace its reality. The economy, going forward, has to be planned in accordance with the expected changes in the pattern of climate, seasons and its impact upon the various segments of the economy. We are among the top 10 countries to be severely affected by the climatic changes; albeit we contribute less than 2 per cent to carbon emissions, but the brunt is more likely to be upon us, in terms of its negative fallout. We must prepare. Now.

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The current floods were not totally unexpected. The forecast for heavy rains and flooding was done in April, or even earlier. Karachi alone received rainfall that was five times more than its annual average for the last two decades. Similarly, the Northern Areas were expected to have more than the usual average annual rainfall. The government was caught napping or many may think it was callous not to be able to foresee, especially against the hindsight of the 2010 floods; admittedly current floods are more severe, but what lessons were learnt from that painful episode? Possibly, none. The masses; hence, take the hit.

The losses to the economy at this point in time in my view are inestimable. One political leader says the loss could be of $1 billion, the other says, it could be $5 billion. Some ballooned it with their Helium of imagination to over $35 billion. Actually from where they quote these estimates is to begin with unknown, it is mostly a shot in the dark. To score a political point they pull out of their untrained economic minds a figure that they feel will create an impact. How much more can the priorities be misplaced!

The media has quoted that a little over 1,000 precious human lives have been lost, almost a million homes have been either swept away or have been severely damaged, 40 dams have either broken down or have been seriously breached, 200 or more small and large bridges have collapsed; in all 116 districts of Pakistan are an unfortunate victim of the great deluge. These again are guesstimates at best. The real damage is unknown, at this point in time. The families affected and displaced are facing a complete breakdown of basic infrastructure. There is no drinking water available. The food supplies have been badly impaired. The heart wrenching scenes on the social media on the plight and sufferings of the people, particularly, women and children, make it difficult for the ordinary citizens to break bread, one; therefore, wonders, that those who sought by way of their vote, to be responsible for them, can manage to have parties, fanfare, with no guilt to strike their hearts into pieces. They have audacity to compare the disastrous standing water in Sindh to the beauteous canals of Venice. This is callousness at its zenith.

The supply chain relating to all the sectors of the economy, going forward, will be badly impacted. The movement of goods will get delayed. Raw materials movement will be affected, consequently, the end products too. Exports will see a decline, adding to our woes of foreign exchange shortages; this will mean that the rupee despite the International Monetary Fund bailout package will remain under stress. This leads to increased costs of imports, and if the import be of an ingredient for the export industry, our problems will only get multiplied. The shortage in everyday food supplies had already begun to skyrocket the prices; essential eatables are expensive by a good 100 per cent in comparison to a few weeks back prices. The loss of cattle and sheep will spiral the prices. Inflation, which was already raging like a growing wildfire at 42 per cent, will head northwards perpendicularly. With the earnings capacity not finding an equal growth, there obviously will be a major decline in the demand. The consumptive capacity of the common man is hugely under stress. This has all the makings of powder keg for social unrest.

The colossal damage provokes a question what the National Disaster Management Authority was doing? Twiddling thumps. Lying in wait to see the misery and grief their callousness has resulted in. Similarly, the government appears to be either in a state of shock or they are seriously paralysed in their thought and action. The economic malaise was already routing the economic indicators, hurting the general masses, the grief and misery is now doubled by their indifference.

We are so poor in learning from experience. The earthquake of 2005 is a case in point. When the deadly quake struck, we had no heavy earth moving equipment to undertake recovery and rehabilitation work. Even torches used were meant for domestic use. The global community helped us in restoration efforts. Machines were imported on post-haste basis. I am certain those machines must be in unusable conditions today. For certainly, it is not only the geologists who know, but every common citizen of this country knows that our Northern Areas that house the Himalayan ranges are extremely prone to quakes, so shouldn’t the government be prepared for any, God forbid eventuality? There is general lack of preparedness in every area of activity. Ad hocism is beset in our system and process.

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To reiterate, we have again been caught on the wrong foot. The whole country knew that the floods were imminent given the unusual rainfall that far exceeded the annual average for the country. Most of Sindh, Balochistan and Khyber-Pakhtunkhwa, present a picture of pathetic helplessness, less KP, but more so in other provinces. The devastation presents Sindh and Balochistan as remains of ruins of antiquity. The major cities, forget the towns and villages, look to have been converted into Mohenjo-daro. The infrastructure is destroyed completely.

Regretfully, we are turning again towards friends in the Middle East, alongside our traditional friend China for assistance, both financial and material. By way of sheer generosity they are coming forward to help. But shouldn’t the people and the government do some soul searching, on why we have to lay out a bowl before others, despite being an independent sovereign country for the last 75 years. The nation needs to ponder. We have to think deeply and act wisely. In togetherness is our ability to harness challenges, in disunity, we can only descend into more chaos. We have to develop the economic tenacity to meet the challenges arising out of the natural disasters that may come our way, as the climate change takes further roots, in upsetting the current natural balance.

In such situations, what should be the role of politicians? It cannot be just to appeal for funds from the already cash-strapped populace, who are heavily burdened by the increased cost of living. They must inspire the people by announcing what their personal contribution is to the relief fund. Only a few have done. The politicians and all parliamentarians must as a minimum donate their one month salary. Others will follow their leaders. Charity must begin from the top and not from the poorest sections of the society.

Almost 70 per cent of the country is inundated. The crops have been destroyed. Meetings are not a solution, but action is. The political parties must join hands and galvanise the people in uplifting their morale because the tragedy is undoubtedly calamitous. The streets of the commercial and financial capital of the country present a picture of utter ruin. The movement on the roads is akin to wading through lakes. We would soon face health issues, which again will be a major burden on the state. The railway structure is non-functional on so many lines. The tracks have been uprooted. The outcome of the floods is all around damaging.

The losses arising are being estimated at over $10 billion. The banking and finance industry will take a longer time to assess the damage done to their borrowers industries. In other words, more challenges are on the way. The non-performing loans book will only grow, if concessions are not put on the table. In the reconstruction work, we will witness either shortages or severe price hikes of materials like cement, iron and steel, sanitary ware, electrification products, etc. This will damage the house building initiative that Imran Khan’s government had successfully launched.

All economic plans, if any, will take a back seat. The scarcity of resources is likely to put us behind economically by at least eight to 10 years. The infrastructure, both new and repaired can’t be built overnight.

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The damage is humongous. It will take us at least a full year to financially assess the losses and damages caused by these floods. Rebuilding will take an even longer time. We have on the flip side of all that is negative, proven to ourselves and the world that we are a resilient nation that has both willingness and capacity to bounce back. We will build that which will last, and not of the quality that it will easily flow to become part of the Arabian Sea.

All we need is honest leadership with clarity on the sense of economic direction, the nation must take.

(The writer is a senior banker and freelance columnist)

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