2025 floods inflict $1.4 Billion loss on Pakistan’s economy.
The catastrophic monsoon floods of 2025 have inflicted significant economic damage on Pakistan, with initial estimates placing the total loss at Rs. 409 billion ($1.4 billion), equivalent to 0.33% of the country’s GDP, according to a report by Arif Habib Ltd.
The agricultural sector has suffered the main force of the disaster, accounting for nearly three-fourths of the total losses, as vast swathes of farmland remain submerged, threatening food security and rural livelihoods.
Agricultural sector suffers Rs. 302 billion damages
According to a report by Arif Habib Limited, the agricultural sector alone has suffered damages exceeding Rs. 302 billion ($1 billion), with key crops such as sugarcane, rice, and cotton severely impacted.
Punjab, the country’s agricultural heartland, has seen over 1.3 million acres of farmland inundated, while Sindh has reported catastrophic losses, including the destruction of nearly 80% of Bahawalnagar’s cotton crop.
The ripple effects of these losses are expected to drag GDP growth down by 29 basis points, with agriculture growth projections slashed from 2.2% to just 1.1% for FY26.
The transport and communication sector has also been hit hard, with damages valued at Rs 97.6 billion ($333 million).
The destruction of roads, bridges, and communication networks has not only disrupted connectivity but also delayed relief efforts and hindered the movement of goods, compounding the economic strain.
Housing-related damages, though smaller in financial terms at Rs. 8.95 billion ($31 million), carry significant social consequences, directly affecting thousands of displaced families.
Livestock losses, while relatively minor in aggregate at Rs. 0.5 billion ($2 million), have dealt a severe blow to rural households, where animals often serve as critical assets. Over 6,000 livestock have perished, further exacerbating food insecurity in affected regions.
The floods are also expected to widen Pakistan’s trade deficit by $1.9 billion in FY26. Cotton shortfalls could push imports up by 737,000 tons, costing $1.06 billion, while export losses in textiles, rice, and sugar are projected to total $861 million. This dual impact of higher imports and reduced exports threatens to strain the country’s already fragile external account.
Inflationary pressures are another looming challenge. With shortages in essential commodities such as rice, sugar, and vegetables, food inflation is expected to spike, potentially raising the Consumer Price Index (CPI) to 7.2% in FY26, up from the pre-flood estimate of 5.5%.
Early signs of this strain are already evident, with sharp price increases reported for wheat, tomatoes, and onions.
On the fiscal front, the government faces an uphill battle to finance rehabilitation and reconstruction efforts. The cost of rebuilding infrastructure alone is estimated at Rs. 107 billion ($364 million), with roads and bridges accounting for the majority of expenses.
When combined with agriculture-related losses and social support measures, the fiscal burden is expected to rise significantly, necessitating supplementary budget allocations and increased reliance on international aid.
As Pakistan grapples with the aftermath of the floods, the economic toll underscores the urgent need for climate resilience and disaster preparedness.
With the full scale of the damage yet to be determined, the final cost is likely to climb, posing a formidable challenge to the country’s recovery efforts.
