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World Bank: Flood hit Pakistan to see high inflation, low growth

The World Bank update on Pakistan’s economy says that the country’s inflation is likely to reach 23 % while the growth is expected to dip to only two percent. It says the national poverty rate may go up and push  another 6 to 9 million people into poverty

Staff Correspondent
October 7

The devastating floods in Pakistan are going to hit the country’s economy and push another six to nine million people into poverty. The World bank has said that the country’s economy is expected to grow only by 2 percent and inflation is likely to see a steep incline.
“The recent floods are expected to have a substantial negative impact on Pakistan’s economy and on the poor, mostly through the disruption of agricultural production,” said Najy Benhassine, the World Bank’s Country Director for Pakistan.

“The Government must strike a balance in meeting extensive relief and recovery needs while staying on track with overdue macroeconomic reforms. It will be more important than ever to carefully target relief to the poor, constrain the fiscal deficit within sustainable limits, maintain a tight monetary policy stance, ensure continued exchange rate flexibility, and make progress on critical structural reforms, especially those in the energy sector.”

The report says that poverty in the hardest-hit regions of the country will likely worsen in the context of the recent flooding. It says the preliminary estimates suggest that  “without decisive relief and recovery efforts to help the poor, the national poverty rate may increase by 2.5 to 4 percentage points, pushing between 5.8 and 9 million people into poverty”.

This World Bank update on Pakistan’s economy says inflation is expected to reach around 23 percent in the fiscal year 2023. 
“(This reflects) flood-related disruptions to the supply of food and other goods, higher energy prices, and difficult external conditions, including tighter global monetary conditions,” the report says. “The high inflation will disproportionately impact the poor”.

Highlighting that the energy subsidies in past have benefited the better-off households, the report says that flood relief measures should benefit the poor. 

“While relief measures are needed to cushion the impacts of flooding, it will be critical to ensure that these are targeted towards those most in need,” said Derek H. C. Chen, author of the report. 

“Pakistan has previously resorted to energy subsidies, but our analysis shows that such measures disproportionately benefit better-off households while imposing unsustainable fiscal costs. Going forward, the priority should be to tame inflation through sound macroeconomic policies,” the report noted. “These should be accompanied by measures to provide targeted relief to those hit hardest by rising prices, including through expanded social protection programs, and to address the distortions that discourage trade and productivity.”

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