Economic Affect of Flooding on the Pakistan Economy

Topics: Economics, Inflation, Supply and demand Pages: 2 (561 words) Published: December 3, 2010
Economic affect of flooding on the Pakistan economy
The floods in Pakistan have amounted to an economic disaster for the country. The scale of the human tragedy is enormous. To put it in some perspective, the flood waters have submerged one-fifth of Pakistan; roughly an area the size of Florida culminating in 1600 dead, about 20 million people displaced and 17 million acres of farmland destroyed. Pakistan’s towns, villages, crops, livestock, personal possessions and infrastructure have been completely washed away. Beyond the obvious social and political fallout is the economic consequence. There inevitably will be economic fallout from the evolving situation. In a country where a quarter of the economy is dependant on agriculture for food and jobs, it is obvious that economic growth will be effected. The scarcity in food and textile supplies for both internal use and exporting is the biggest impact on the economic growth potential of Pakistan.

An impact to the Pakistan economy will be the shortage of agricultural goods. With large scale damage to agriculture and billions of dollars worth of crops and livestock destroyed, the economy took a major hit. The results of such a catastrophic event will shape the countries supply and demand chain. The supply of food will decrease which will drive up demand. Price of goods and services will begin to increase; consequencely, resulting in an increase in inflation rates. The income effect will decrease the quantity demanded lowering the purchasing power of consumers. This will cause a decrease in quantity supplied which will have a snowball affect on manufacturing.

The scarcity of resources in the country will largely affect manufacturing and exports in Pakistan. The flood waters destroyed the countries infrastructure like bridges, irrigation canals, homes, roads and railway tracks and six power plants that supply electricity to factories. Pakistan will have to borrow in order to finance the...
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