Floods in Sujawal, Pakistan: Because of disruption in economic activity, pressure on country’s budget, balance of payments is expected (photo: Asif Hassan/AFP)
NATURAL DISASTER ASSISTANCE
The sum will be disbursed immediately under the IMF’s Emergency Natural Disaster Assistance (ENDA) policy, which provides rapid and flexible financial assistance for countries with an urgent balance of payments need caused by a natural disaster.
“The $451 million will be provided directly to the country’s budget to be used on food, shelter, and health support for people directly affected by the floods,” said Adnan Mazarei, IMF mission chief for Pakistan. “This emergency assistance, which is being provided to the government without any conditions, comes in addition to the $8½ billion that the IMF has already disbursed to Pakistan under the Stand-By Arrangement.”
Deteriorating outlook
Pakistan’s economic outlook has deteriorated sharply as a result of the floods. The agriculture sector, which accounts for 21 percent of GDP and 45 percent of employment, has been hit particularly hard.
Initial and preliminary assessments suggest that real GDP growth is unlikely to exceed 2¾ percent in 2010/11, mainly because of sharply lower agricultural output. Because of the disruption in economic activity, pressure on the country’s budget is expected as well as a weakening of the balance of payments position.
“We expect the Pakistani authorities will need to revise their budget this year to take into account the spending that is needed for rehabilitation of the affected areas,” Mazarei said. IMF management and staff have expressed the hope that this disbursement would catalyze financial support from other donors.
An updated estimate on the economic impact of the floods will be available after the World Bank and the Asian Development Bank complete their damage and needs assessment in the coming weeks. An IMF mission will meet with the authorities to discuss the modified program once this assessment is finalized.
