Floods are undoubtedly nature’s scathing catastrophe whose devastating impact on a country’s economy is long-lasting. They trim down the national income and economic opportunities in any nation whether developed or passing through the developing phase. Floods cause many disasters to land, property and people. The destruction they cause upon the crops and livestock limits or completely eliminates their contributions to the economy. They also destroy road and railway networks in the affected area which consequently affects the transportation of goods and people in an adverse manner. This causes the economy to suffer. They obliterate buildings, factories, warehouses etc which often results in closing down of work in these places due to which not only the common workers suffer but also the industries endure. Also, the government has to invest huge amount of funds and manpower in rehabilitation of people and industries, which also causes the economy to suffer at the national level.
Following simple example would illustrate an off-putting impact of floods on the economy.
"Destruction brought upon the rice crops results in shortage of rice supply in the market. Consequently, an exorbitant increase in the subject crop’s prices would be experienced."
Although the above mentioned example does not portray the large-scale damage caused by floods to the economy, it does provide a basic notion of how this natural cataclysmic event could possibly have far reaching grave consequences in the short run as well as the long run.
The floods that wreaked havoc on the northwest province of Khyber Pukhtunkhawa and displaced more than a million people are testing an administration heavily dependent on foreign aid and which has a poor record in crises management -- whether fighting Taliban insurgents or easing chronic power cuts. National Disaster Management Authority reported the number of people affected so far at 12 million, with 650,000 homes destroyed over some 132,000 square kilometers. The official death toll is 1,600 and rising. Hundreds of thousands of people are still stranded without shelter or supplies of food and clean water.
It is quite apropos to mention here that these floods have caused losses both to the GDP and to the capital stock and has thus hampered the growth potential of our country. Economic hardships are being faced due to for e.g. temporary decline in tourism, rebuilding costs, food shortage leading to price increase etc, especially to the poor. Moreover, these losses would unfortunately also have long-term impacts on the macro-economy which would be two-fold :
o Capital damages induce a lower GDP in subsequent years to the extent of investment losses; and
o Output losses (caused during the flood-affected year of 2010) lower incomes and possibly, reduce savings available for financing investments.
According to the Associated Press of Pakistan Corp (APPC) which is our country’s premier news agency, the ravaging floods have inflicted a loss of Rs. 35 billion on agricultural sector of the Khyber Pakhtunkhwa province as standing crops of maize, rice, sugarcane, fruit orchards and vegetables on 470,000 acres have been washed away. The worst-ever floods in the history of Pakistan, following heavy monsoon rains, which have left more than three million people without food or shelter, have exacerbated the economic situation. The damage to crops, supply disruption of essential food commodities and the impact of reconstruction and rehabilitation costs on government finances have significantly increased inflation risks. Inflation in June 2010 stood at 12.69 percent in Pakistan. Average inflation in the year starting July 1, 2010 may be as high as 12 percent. The rising prices threaten to amplify misery in a country where many residents were already struggling with poverty and food insecurity before the worst flooding in Pakistan's history struck in July, 2010, killing 1,600 people and leaving millions more begging for help. The prices of basic items such as tomatoes, onions and potatoes have in some cases quadrupled in recent days, putting them out of reach for many Pakistanis who have been struggling to make ends meet even before the floods hit.
Determining the overall costs of the floods will not be possible until relevant authorities survey areas where the floods have swallowed up entire villages. But the disaster is likely to have a crippling effect on the economy. At least 1.3 million acres of crops have been destroyed in the Punjab agricultural heartland alone.
Taking into account share prices, stock rates of major companies have fallen at the Karachi Stock Exchange as investors hungrily sought news about the fury of the floods endangering major companies of the fertilizer, cement, oil & gas exploration and refineries. Following heavy rains and flash floods, the mighty waves of the world’s best river network tore through the ancient shrines and city of Kot Addu in Sindh after inflicting incalculable loss to life, property and human misery in Khyber Pakhtunkhwa and Punjab.
Let us peruse the reception of foreign aid in the form of emergency aid and relief operations from across the globe. In a statement released by Saudi Arabia, the government announced the establishing of an air bridge to ferry relief supplies to Pakistan. In total Saudi Arabia has allocated US $100 million for the relief operation. The Chinese government announced that it would provide emergency aid worth 10 million Yuan ($ 1.5 M) to help the flood victims. The Australian government announced a A$5 million aid package, including A$2 million of humanitarian assistance and a further A$3 million to assist with recovery and rebuilding. Denmark has contributed 10 million DKr. The Canadian government also announced that it would donate $2 million worth of emergency aid.
United States of America has promised a meagre amount—lifting the initial pledge of $US 10 million to just $US 25 million. By contrast, the US Congress has recently approved an additional $60 billion for military operations in neighboring Afghanistan - A fact to ponder upon.
The latest disaster faced by Pakistan is another tragic demonstration of the incompatibility of the profit system with the basic needs of ordinary working people. The only solution is an internationalist and socialist one—the independent mobilization of workers in Pakistan and throughout South Asia and the globe to eradicate capitalism and replace it with a planned socialist economy that will consciously allocate the resources necessary to minimize the impact of natural events such as floods and earthquakes.
Tehsin Shah
Sept, 2010
Sept, 2010
No comments:
Post a Comment