IMPACT ON THE ECONOMY
most destructive earthquake in Pakistan's history
has given us an agonizing loss of thousands of
people. There is no doubt that the massive loss of
lives and property has shaken the roots of the
country. Here I'll approximate the monetary impact
of this earthquake on the economy.
Advisor to Prime Minister on Finance, Dr. Salman
Shah, has vividly mentioned that earthquake will
not affect the economy. The reason he gave was
that economy growth rate and growth in revenue
collection (expected to be Rs.690 billion this
year; and Rs.100 billion more than last fiscal
year) will absorb the shock. Another government
official, Asfaque Hasan Khan, head of debt
management and adviser to the finance ministry
said that "There will be some adverse impact
on the budgetary targets, but the growing economy,
resulting in higher revenue collection, will
absorb this shock."
The quake has destroyed the northern region of the
country where infrastructure was already very
poor. Most of the strategic installations are in
middle Punjab and Sindh, which remain unharmed.
The dams also remained unaffected. However,
government has to restore the highways and road
networks. After the early rescue operation will be
finished, government shall have to rehabilitate
the affected people which will require some
re-allotment of government's budget. International
community is expected to contribute in this
regard. World Bank has already extended a fund of
$40 million to help the victims of earthquake.
More aid is expected as entire world has become
very sensitive on the issue after a series of
calamities like Tsunami and Katrina.
The major industrial setup, present in Sindh and
Punjab, is not affected. The industrial sector may
experience a shortage of manpower in short run
because a proportion of labor force belongs to
northern areas. Such labor have already taken
leaves and left for their homes to help their
25% reduction in Eid shopping, which is the mega
event of the year and record peak shopping, is
AND INSURANCE SECTOR:
These sectors are working in mostly urban areas.
Northern areas are deprived of well-established
banking network. Moreover, usage of banking
facilities is also uncommon. Thus banks have not
faced any threat by destruction. Like banking
sector, insurance is also not a familiar thing in
affected areas. Insurance sector will not face any
claims and remain unaffected. It is interesting to
note that insurance companies are paying bulk
claims in USA after Katrina to cover losses.
Again, this sector is also not very active in
affected areas. In fact, few mobile companies have
not yet started their operation in northern areas.
Few small telecom installations are damaged while
fiber optic remained unhurt. The sector will bear
the loss of damage wires and have to re-install
The oil and gas installations are situated in
Balochistan and Sindh, which are not affected. Sui
Northern Gas Company (SNGPL) is operating in the
affected areas. Any damage to gas pipelines, if
found, will be acknowledged by the corporate
insurance cover. The petroleum retail outlets are
reported to have damaged. Once again, damages will
be covered by insurance.
Dewan Hattar, Kohat Cement, Fauji Cement and
Bestway Cement have plants in the affected areas.
No losses are reported from these companies yet.
Thus, it is assumed that they remain unaffected.
Moreover, after early rescue-operation, a new era
of development will start in the affected region.
For rehabilitation purpose, new housing units will
be built with the government and international
community assistance. Therefore, cement sector
will get boost in coming times rather than getting
any adverse shock.
ON LOCAL ECONOMY:
It is obvious now that GDP will absorb the shock
and growth of economy would continue as affected
areas are not considerably contributing towards
GDP. But if we consider the local economy of
affected areas, it will blow up the minds. The
complete destruction in the area implies that most
families have lost their financial supporters; the
survivors have lost their local jobs because whole
business setups are destroyed. It means millions
of people are now at high risk from monetary point
of view. One can imagine how people will keep with
their autonomous consumption in absence of jobs on
such large scale. Where they will get food and
shelter. Thus we predict that poverty will
increase in the country in future where already
one-third of population is living under poverty
expect that the GDP of the country will not be
affected in any way by the earthquake. The
development expenditures and re-habilitation cost
will be financed by the growth of revenue and
foreign aid. But it implies that the development
growth will slow down next year as the money
expected to finance few of the future mega
projects will be utilized in financing of current
development. If the hike in oil prices continues,
an adverse effect will be experienced by the
economy. In the mean time, I want to request Dr.
Shah and Asfaque Hasan Khan to consider issues of
local economies of the affected areas. We cannot
live happily only over the news that Pakistan's
economy will absorb the shock; we must do
something to revive the local businesses of
affected areas. Government should create job
opportunities for families who have completely
lost their financial shelters. This time can come
to anyone! Including us.