Pakistan's Economic Outlook for 2010-11

Karachi -- Pakistan's economic growth in 2009-10 was helped by supportive monetary and fiscal policies and some good fortune in the shape of declining international prices, which decelerated inflation, leading to a modest improvement in consumer and business confidence. Improvement in domestic demand and pick-up in export demand in the latter half of the year drove the industrial recovery, which eventually led the demand for services. However, for agriculture, fiscal year 2010 did not bear the most favourable weather; as severe water shortages last winter are believed to have reduced agricultural yield. Resultantly, the 4.1 percent GDP growth seen in the outgoing fiscal year was essentially led by the secondary and tertiary sectors of the economy. This growth momentum was likely to continue into fiscal year 2011, and to be augmented by a strong agricultural harvest. However, the macroeconomic targets set out for fiscal year 2011 have suffered a serious setback early into the year as large areas of the country were devastated by widespread rains and unprecedented floods. Agriculture, the backbone of Pakistan's economy, was severely impacted as a significant proportion of the Kharif (summer) crops and livestock was damaged in the floods. The Ministry of Food and Agriculture estimated losses to agriculture crops to around Rs. 281 billion. Industrial supply networks were disrupted, and the country's largest refinery had to shut down because of the deluge. Road networks, bridges, telecommunication infrastructure, and the electricity and gas supply network broke down in many of the flood-hit areas. But more importantly, hundreds died, and thousands other were left homeless. All in all, this year's floods have drained a substantial part of our national wealth. While the government has initiated a process, with the help of the World Bank and the Asian Development Bank, to make an assessment of the damages and the needs, this will take some time. However, a cursory assessment of the damages indicates that the relief and rehabilitation task that lies ahead is huge.