Abstract

The ability to achieve sustainable recovery after a disastrous calamity remains an uphill task for an economy like Pakistan, owing to inefficiencies of the systems and the ineffectiveness of the policies in such economies. The floods in 2010 to 2011 have imposed a substantial adverse impact on the economy. As the effect on various macroeconomic parameters essentially depend on the policy that the government adopts, it would be difficult at this juncture to provide an absolute quantitative assessment of the impact of floods on the economy. However, the government is faced with a set of macroeconomic tradeoffs and has to choose an optimal policy that will mitigate the impact of floods in the shortest period of time, while keeping alive the long-run objectives of sustainable economic stability and growth. Nevertheless, progress in the recovery of the system is stained by prevailing security and economic conditions. While rising flood-related expenditures with continued power sector subsidies and security issues are one aspect of the problem, a narrow tax base and a declining tax to GDP ratio are bigger issues in magnifying the fiscal challenges. This research is an effort to understand and analyze the economic and political impacts of the disastrous floods in July 2010 to 2011.

Key words: Floods, economy, Pakistan, inflation.