Sep 9 – Pakistan’s economy, long under an IMF-supported stabilisation programme, had begun to show tentative signs of recovery. However, since July, relentless monsoon rains have unleashed catastrophic floods across Punjab, Khyber Pakhtunkhwa and Sindh provinces — including major urban centres such as Lahore and key crop-producing regions — setting back those gains.
The floods have worsened existing vulnerabilities in agriculture, infrastructure and human capital that have been under stress for years. Hundreds of lives have been lost, millions displaced, and millions more are at risk of falling into poverty due to the ongoing disaster.
Severe Agricultural Losses
The agricultural sector — contributing around 24 percent of GDP, employing half the labour force and serving as Pakistan’s largest source of foreign exchange earnings — has suffered catastrophic losses. In Punjab, the country’s breadbasket, flash floods have reportedly destroyed 60 percent of rice crops, 30 percent of sugarcane and 35 percent of cotton fields, according to the Pakistan Business Forum.
These losses threaten both domestic food security and export revenues. Last year’s extreme weather had already damaged Pakistan’s rice crop, undermining its competitiveness against Indian Basmati in European markets. Farmers and millers in Punjab were expecting a strong harvest this year, but the devastation has wiped out those hopes.
“The hoarders are already preparing to buy rice, which will make the supply difficult for those engaged in the export market,” warned Abdul Waheed, a rice miller in Punjab’s Kasur district. He added that while no one can yet reliably confirm crop losses, early reports point to another difficult year for export revenue.
Food Prices and Inflation Risks
Satellite images show thousands of acres of cropland inundated nationwide. Food prices are expected to rise in the coming weeks, potentially reigniting inflation that had only recently eased. Shortages could drive up domestic prices while eroding the competitiveness of Pakistan’s exports.
Infrastructure and Humanitarian Crisis
Beyond agriculture, the floods have crippled logistics and trade, damaging more than 661 kilometres of roads, hundreds of bridges, and washing away thousands of villages. Punjab’s Disaster Management Authority reports that more than 3,300 villages and 3.36 million people have been affected by severe flooding in the Ravi, Sutlej and Chenab rivers.
Even urban centres have not been spared. In Lahore, floodwaters from the Ravi inundated upscale housing societies, forcing residents to evacuate homes — a previously unimaginable scenario. Thousands of houses have sustained significant damage and may now be uninhabitable due to structural issues.
Fiscal Strain and Governance Challenges
The humanitarian crisis is placing intense fiscal pressure on government resources. Calls are growing for compensation for lost homes, livelihoods, crops, livestock and farms. While authorities have promised to accelerate rehabilitation, Pakistan’s fiscal constraints and IMF-mandated reforms make large-scale relief and compensation difficult.
This disaster, the second major flood in three years, underscores Pakistan’s vulnerability to climate change-related disasters and threatens to expose governance failures. Expected reconstruction costs are estimated in the billions of dollars, forcing funds to be diverted from productive investments and prolonging recovery timelines.
Emergency aid demands will likely inflate the budget deficit in the medium to long term, increasing the country’s reliance on international donors amid rising debt.
Urgent Need for a Climate Response
Pakistan’s climate crisis is no longer approaching — it has arrived. Analysts warn that the country must declare a climate emergency, bringing political and institutional stakeholders together to craft a comprehensive plan to address the crisis on a war footing.
The 2025 floods highlight the urgent need for climate-resilient infrastructure, diversified agriculture and global support to safeguard Pakistan’s economic trajectory. Without decisive action, climate shocks could cripple the economy, undermine social stability and trigger an agricultural collapse.
