Climate-driven floods push Pakistan inflation to 44.5%

September 1, 2022|Written by Graham Caswell|State Bank of Pakistan

Widespread flooding in Pakistan, described by the country’s prime minister as a “climate catastrophe”, have caused supply disruptions and  pushed the year-on-year price of essential consumer items up by 44.58%, according to figures released by the country’s Bureau of Statistics.

Inflation measured by the sensitive price index (SPI) has reached the highest level in history as disruption following record rainfall adds to price increases caused by spiralling fossil fuel costs. The price instability compounds a humanitarian disaster which has already affected 30 million people.

The SPI measures the price movement of essential consumer items on a weekly basis and includes data on food, energy and basic hygiene supplies. It shows that skyrocketing food costs are largely behind the current inflation spike.

Unprecedented flash floods have killed at least 1,136 people, over a third of them children, with the death toll expected to rise as rescue workers reach areas that are currently cut off. Roads, crops, bridges and other infrastructure have been washed away and a third of the country is currently under water, with further flood warnings in effect.

Rainfall during August was five times higher than average across the whole of Pakistan and nine times higher in Sindh province. While scientists have yet to determine the extent to which anthropogenic climate change has contributed to the current disaster, the connection is likely to be significant. More intense rainfall is a recognised consequence of increased temperatures, as warmer air holds more water.

Attribution studies of previous record flooding in Pakistan showed a strong connection to global heating.

“Pakistan has never seen an unbroken cycle of monsoon rains like this,” said Pakistan’s climate change minister Sherry Rehman. “We are on the front of an unfolding climate catastrophe.” Prime minister Shehbaz Sharif also pointed to climate change as the cause of what he called the “toughest moment” in the nation’s history. “We are suffering from it, but it is not our fault at all,” he told a press conference on Tuesday.

Pakistan’s per capita CO2 emissions are 1.06 tonnes per person, contrasting sharply with those of the United States (14.24 tonnes), China (7.41 tonnes) and the EU (5.84 tonnes).

The State Bank of Pakistan has previously highlighted the potential economic and financial effects of extreme weather events associated with climate change. Agricultural losses could affect the manufacturing and service sectors, it said in its 2021 financial stability report, with impacts on defaults and credit portfolios.

“Stress at a systemically important financial institution or correlated strain across smaller institutions could transmit the pressure throughout the financial system,” it warned.

In response to the current catastrophe, the central bank has issued a series of IBAN numbers for donations to a flood relief fund.

This page was last updated September 1, 2022

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