ISLAMABAD: The Asian Development Bank (ADB) has stated that Pakistan is on top in terms of an absolute amount of loss of any country in the CAREC region with an annual average loss associated with floods of around $1.5 billion and due to earthquakes of around $614 million.
The ADB in its report on “Narrowing the Disaster Risk Protection Gap in Central Asia” noted that both floods and earthquake risks are significant in Pakistan. Floods are associated with an annual average loss (AAL direct loss) of around $1.5 billion and earthquakes with around $614 million. This rises to $1.6 billion and $644 million with the inclusion of indirect losses.
This is the highest absolute amount of loss of any country in the CAREC region and across the two perils direct losses amount to 0.20 per cent of GNI, the fourth-highest losses as a percentage of national income of any country in the region. Floods are expected to cause greater losses than earthquakes for events of the same return for return periods of up to (at least) 1 in 200 years.
The floods are expected to cause a further 234 deaths each year with more than 678,000 people expected to be severely affected by flooding. Respectively, these are the second highest and highest numbers for this peril in the CAREC region’; whereas, the number of people expected to be severely affected by earthquakes is just under 165,000, also the highest figure in the region.
The proportion of the population living in multidimensional poverty is much higher in Pakistan than in many other countries in the CAREC region, with more than 50 per cent of the population in Balochistan, Khyber-Pakhtunkhwa, and Sindh meeting this classification.
There is an urgent need to enhance the current disaster risk finance approach in Pakistan as risk retention mechanisms are insufficient to cover the losses associated with even the most frequent of flood and earthquake events.
Previous disaster events for example, floods in 2010 and 2015 caused an estimated Rs32.6 billion ($326 million) losses to farmers in Punjab. To support the affected farmers, the government of Pakistan had provided Rs6.7 billion ($67 million) –amounting to only 18.5 percent of the required amount.
There would appear to be a need to increase the coverage and depth of the existing risk retention instruments for high-frequency events, through enhanced functioning of the national and provincial disaster management funds.
This could be complemented with the use of risk transfer instruments that might support either the emergency response cost and/ or the support the reconstruction of assets damaged or destroyed by lower frequency, higher intensity events. These actions are consistent with the identified work plan of the Disaster Risk Financing Unit of the National Disaster Risk Management Fund.
The report pointed out that even before the impact of the Covid-19 crisis, Pakistan was in a challenging fiscal position with limited fiscal space. It suffers from both high levels of public debt and a large fiscal deficit with the government already borrowing heavily to finance day-to-day expenditure. Its credit rating is among the lowest of any country in the CAREC region.
As well as the expected impact of Covid-19 on the size of the economy – estimated to have contracted by 1.5 per cent in the 2020 financial year – the pandemic has interrupted the government’s fiscal consolidation efforts as part of the IMF-Extended Fund Facility (EFF). This interruption has exacerbated fiscal imbalances and further damages the government’s finances.
On recent occasions, Pakistan has had to reach bilateral arrangements with creditors to extend repayment of maturing debt. The IMF has assessed the overall risk of debt distress in the country as high and its debt carrying capacity as weak.
Copyright Business Recorder, 2022