Published September 6, 2025
Islamabad:
At the same time, flooding in a western and two eastern rivers has flushed away from standing cash crops in the Agriculture Heartland of Pakistan in addition to influencing life and shelters of four million people so far in Punjab alone, mudding the beginning economic and pricing stability.
The disaster unfolds and the size is still unknown. Pakistan’s food security, which is now being treated on a par with national security, is under serious threat. Where the ongoing floods have submerged large countries in Punjab and are on their way to Sindh, they have also made the country’s macroeconomic views murky.
The comparisons of 2025 floods were drawn with the floods of 2022, which had flooded a third of the country, and fear has taken over what will happen to Pakistan’s new financial stability, relative price stability and the external sector that had just published its first profits in ongoing account for a few decades.
There has always been concern that the controlled improvement in the fiscal and external fronts may not resist any original, exogenous shock or a natural accident. The beginning economic recovery, which began last June and has not yet fully anchored, is now facing its first test in the form of the natural disaster that floods Punjab and Sindh.
The fiscal numbers agreed with the International Monetary Fund (IMF) in June, especially the Sacrosanct primary balance and provincial cash surplus, have become irrelevant days before the global lender’s review mission arrives at Islamabad. The external sector projections made three months ago, including deficits in ongoing account, import and export, have become the story of the distant past.
Provincial and district authorities in Punjab have indicated considerable destruction of houses and crops. The livelihood has been severely affected by rice, sugar cane, corn, cotton and other crops submerged under the tip harvest. Wheat sowing can be delayed and prices have already begun to skew over the past few days. Wheat flour is now a quarter more expensive than a year ago.
The Pakistan Bureau of Statistics released its first weekly inflation bulletin on September 5. The National Data Collection Agency reported a large increase in prices of tomatoes that burst 46% within a week, followed by wheat flour 25.4% and onion 9%. During the week, out of 51 items, prices rose to 23 items.
More pricing is also expected in the coming weeks, and Punjab’s provincial government had already issued instructions on control of the rates. This is an important step, but may not be sufficient to give relief to the people considering the size of the still unfolding disaster.
Library loss is undermining, which further undermines rural income. Many affected families are small farmers whose houses and fields are now underwater. Floods have affected housing, livelihood and assets over Punjab, Pakistan’s agricultural heart.
Pakistan Business Forum (PBF) has called for the immediate statement of an agricultural emergency. In a letter addressed to Prime Minister Shehbaz Sharif, the forum, preliminary assessments, indicated the loss of approx. 60% of the rice crop, 35% of cotton and 30% of the sugar cane in central and southern Punjab.
These losses will increase further as the flood water reaches Sindh. This would damage the export of rice and necessitate additional imports of cotton and sugar.
Pakistan Business Forum has sought immediate relief measures, including the supply of interest -free loans of up to RS2 million for small and medium -sized farmers in support of replanting and recovery efforts. It also called for the launch of critical channel infrastructure projects in Punjab and Sindh to improve water management and resilience to future floods.
Punjab, which was the least affected province of the floods in 2022 with only $ 1.1 billion injuries out of the $ 15.8 billion, is this time the hardest hit Federating Unit.
Khyber Pakhtunkhwa has already witnessed the destruction of mass scale, and Sindh is eagerly looking at the situation that develops in Punjab and will soon be at its doors with a constant rise in the flow of waters due to rain and waters flowing from India.
What we know so far is that Punjab saw the worst monsoon flood after 1988 due to unusually high floods in Sutlej, Chenab and Ravi Rivers. It is said to be for the first time that all three major rivers have reached a high level of flooding levels at the same time.
According to Provincial Disaster Management Authority, almost 4,000 villages are flooded, affecting over 4 million people throughout the province. As many as 1.8 million people have already been evacuated after their home was submerged in waters. A million animals have also been evacuated, which is a large number.
The government focused on this year’s economic growth on the revival of the agricultural and industrial sectors, but the results of the last few weeks indicate that at least there would hardly be any growth in the agricultural sector. The floods will also affect timely sowing of the wheat crop, and its implications could be felt across the provinces as Punjab produces three quarters of the total wheat.
One of the obvious results of the natural disasters in Pakistan had been the appeals to foreign loans and AIDS. But the experience of the past suggests that neither the foreign creditors are generous nor the federal and provincial governments had the ability to effectively exploit these loans. Pakistan’s Finance Minister recently admittedly admitted that governments could not provide investment projects to the lenders to spend the $ 11 billion obligations to cope with the floods of 2022.
The details showed that the World Bank promised $ 2.2 billion and has so far paid out $ 1.6 billion. The Asian Development Bank obliged $ 1.6 billion, but has so far released $ 513 million. Likewise, China and the Asian Infrastructure Investment Bank (AIIB) promised $ 1.1 billion, but so far gave only $ 250 million in the absence of credible financing projects.
The Islamic Development Bank promised to give $ 600 million but released $ 231 million. The Paris Club countries promised nearly $ 800 million but released $ 139 million. The United States promised to give $ 100 million and gave $ 70 million.
The government should not waste time appealing and waiting for the loans to be realized. People in Punjab have a desperate need for urgent financial assistance that the provincial government can provide because of its better tax position compared to the center.
However, the country has not learned its lessons from the flood of 2022, and there is fear that in the absence of enabling policies and institutional events for rehabilitation and reconstruction, the recovery process will be slow and painful. The delay in reconstruction and rehabilitation would also increase financial costs.
The federal and provincial governments have to devise a common strategy to deal with the question, as the quantum of injuries suggests that recovery would cost a lot of resources.
The IMF team reaches Islamabad in the third week of September to assess the nation’s progress with the implementation of 50 loan conditions and the future economic path before releasing the next $ 1 billion loan trades.
The government may need to open the macroeconomic goals of profits of primarily budget, provincial cash surplus and net international reserves. Pakistan had set aside approx. RS400 billion for emergency preparedness expenses in the budget, but the money had begun to exhaust even before the floods were hit. The emergency pool has been exhausted in recent weeks to accommodate other expenses where there were no allocations, including for paying subsidies for banks and for transfer schemes.
People seek immediate relief and rehabilitation. The provincial governments are trying to meet their expectations. But if the past is the guide, the bureaucracy gives a preference for numbers rather than souls.
Pakistan’s Prime Minister would soon have to appoint a strategy to rehabilitate millions of people whose lives and livelihoods are washed away. However, the floods should not be used as an excuse to postpone some of the structural reforms that remain pending since long and often ignored under various pretext.
The agricultural community immediately needs an exception to the payment of electricity bills and grants for rehabilitation of the lost agricultural infrastructure. The government may want to declare an agricultural emergency, and it should also take the question of postponing the introduction of agricultural income tax for a few years during the upcoming review interviews with the IMF.
