The devastating monsoon floods of 2025 have caused extensive economic damage across Pakistan, with initial estimates placing total losses at Rs. 409 billion ($1.4 billion), equivalent to 0.33% of the country’s GDP, according to a report by Arif Habib Ltd.
Agriculture: The Hardest-Hit Sector
The agricultural sector has absorbed nearly three-fourths of the total losses, amounting to Rs. 302 billion ($1 billion). With vast tracts of farmland still submerged, food security and rural livelihoods remain under severe threat.
- Punjab, the country’s agricultural hub, has seen over 1.3 million acres of farmland inundated.
- Sindh has reported catastrophic crop losses, with nearly 80% of Bahawalnagar’s cotton crop destroyed.
- Key crops such as sugarcane, rice, and cotton have been severely damaged.
These losses are expected to drag down GDP growth by 29 basis points, with agriculture’s growth forecast for FY26 cut from 2.2% to just 1.1%.
Transport and Communication Losses
The transport and communication sector has recorded damages worth Rs. 97.6 billion ($333 million). The destruction of roads, bridges, and communication networks has disrupted connectivity, slowed relief operations, and hindered the movement of goods, amplifying the economic strain.
Housing and Livestock Damage
- Housing-related damages are estimated at Rs. 8.95 billion ($31 million). While smaller in monetary terms, the destruction has left thousands of families displaced.
- Livestock losses, valued at Rs. 0.5 billion ($2 million), have dealt a heavy blow to rural households, where animals serve as vital assets. More than 6,000 livestock have perished, further deepening food insecurity.
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Trade and External Account Impact
The floods are expected to widen Pakistan’s trade deficit by $1.9 billion in FY26.
- Cotton shortfalls may force imports of an additional 737,000 tons, costing $1.06 billion.
- Export losses in textiles, rice, and sugar are projected at $861 million.
This dual effect of higher imports and lower exports poses a serious threat to Pakistan’s fragile external account.
Rising Inflationary Pressures
Food shortages are expected to drive inflation higher. The Consumer Price Index (CPI) for FY26 may rise to 7.2%, compared to the pre-flood estimate of 5.5%.
Early signs of pressure are visible, with sharp price hikes reported in wheat, tomatoes, and onions. Shortages of rice, sugar, and vegetables are expected to further stoke inflation in the coming months.
Fiscal Strain and Reconstruction Costs
Rebuilding the country’s infrastructure presents a major fiscal challenge.
- Infrastructure reconstruction alone is expected to cost Rs. 107 billion ($364 million), with roads and bridges making up the bulk of expenses.
- Combined with agriculture recovery and social support programs, the fiscal burden is projected to climb sharply.
The government is expected to rely on supplementary budget allocations and international aid to finance rehabilitation.
The Road Ahead: Climate Resilience and Preparedness
The 2025 floods have highlighted Pakistan’s vulnerability to climate change and natural disasters. As the full extent of damages is still being assessed, costs are likely to rise further, posing a serious challenge to recovery and economic stability.
Experts stress the need for long-term climate resilience measures, improved disaster preparedness, and sustainable infrastructure investments to mitigate the impact of future catastrophes.
