KARACHI, Sept. 15 — Pakistan’s fragile economy has been dealt another blow as the devastating 2025 monsoon floods caused losses estimated at $2 billion, sparking warnings of rising inflation, pressure on the current account, and fiscal stress.
Pakistan faces a defining moment with devastating floods destroying 60% of rice crops, 35% of cotton, and 30% of sugarcane while displacing 4 million people and affecting 40% of the labor force. GDP growth projections have fallen from 3.4% to 3.2%, with a USD 1.9 billion trade… pic.twitter.com/cKhhL2VMTQ
— Economic Policy & Business Development (@EPBDT) September 12, 2025
Key Highlights
- Floods during June–August caused damage worth $2bn, the report says.
- Major crops — cotton, rice, sugarcane, maize, wheat — hit badly.
- Food inflation may rise to 7.5–8%, up from the earlier 6.5% forecast.
- Exports of cotton and rice are expected to fall; wheat and cotton imports may widen the deficit by $1.8bn.
- IMF programme limits fiscal flexibility; targeted global aid advised.
- Despite floods, PSX index rallies past 156,000 points, showing resilience.
Agriculture Bears the Brunt
The JS Research report noted that while 2025 rainfall was lower than the catastrophic 2022 floods, crop losses remain severe. Damage to cotton and rice could cut exports, while the need to import wheat and cotton may push the current account deficit higher.
Food supply disruptions are expected to lift inflation again, reversing recent relief for households. The report projects CPI inflation climbing to nearly 8% in FY26.
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Fiscal and Market Outlook
With Pakistan still under IMF programme restrictions, unplanned spending on relief and rehabilitation may strain the federal budget. The report urged mobilising targeted international support instead of raising distortionary taxes.
Interestingly, the Pakistan Stock Exchange has largely shrugged off the crisis, with investors focusing on long-term stability rather than short-term climate shocks.
A Hard Lesson for Policymakers
Once again, floods have exposed Pakistan’s economic vulnerabilities. While markets may show resilience, ordinary families and farmers face real hardship. The challenge now lies in balancing urgent relief with fiscal discipline — and proving that Pakistan can rebuild stronger in the face of climate adversity.
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