Floods 2022: Early Assessment of Infrastructure Destruction

The great floods of 2022 have wreaked havoc across the length of the Indus river, wherein at a particular point, the river has essentially become a one hundred kilometer wide lake given the massive downpour of torrential rains, which was more than five times of long-term average.  This was potentially a tail-risk event, with a human, social, and economic cost that is still to be ascertained.  Total economic loss and reconstruction cost is estimated to be more than US$ 13 billion, and is expected to increase further as the true extent of the destruction emerges once the water level recedes.

It is estimated that more than 30 million people have been displaced, as the accumulation of water reached a level that made their houses inhabitable.  Early assessment of the damage suggests that more than one million houses have been partially or fully damaged thereby making them inhabitable till the time water recedes, and reconstruction can gradually begin.  Almost 85 percent of all homes partially or fully destroyed are in Sindh, where the floods have hit the hardest.  It is estimated that more than 5 million people have simply lost their houses in Sindh, making this a severe humanitarian crisis.

The early assessment also suggests that more than 5,000 kilometers of roads have been destroyed.  As roads are still inundated in Sindh, Balochistan, and southern Punjab, it is extremely difficult for relief supplies to reach the hardest hit areas, further constraining supply chains in an already disaster-laden environment.  Similarly, complete destruction of the road network particularly in Balochistan, which is the fruit basket of the country would make it difficult for any fruits to be sent across the country as supply chains break down, resulting in heavy economic losses for the people in the region.  A complete breakdown of the supply chain due to the destruction of road networks would continue to negatively affect recovery.

It is also estimated that more than 250 bridges have also been destroyed, mostly in Gilgit Baltistan, and Khyber Pakhtunkhwa, making already remote areas, more isolated.  The connectivity of many communities in remote areas is through such bridges.  Destruction of the same means that many communities are cut off, thereby making a rescue, and rehabilitation activities more difficult.

The economic loss that can be attributed to households is staggering.  As the ravaging floods have destroyed more than a million houses, it is estimated that there has potentially been a wealth erosion of more than US$ 1.6 billion, as people lost not only their houses but also many of their belongings.  Almost US$ 1.2 billion from this has been the erosion of wealth in Sindh, the highest among all provinces.

 

It is essential to understand that these were already the most vulnerable segments of the country, most living at subsistence level, and often below the poverty line.  Such a massive negative wealth effect would push many households back for years, till the government, multilaterals, or other organizations step in to rehabilitate, and reconstruct.  Reconstruction of these houses is estimated to cost roughly US$ 2.5 billion, which implies a massive cost to households who have already lost a substantial portion of their wealth, and capital base.

Similarly, it is estimated that roughly US$ 2.5 billion will be required to reconstruct roads, of which more than 5,000 kilometers have been completely destroyed.  This activity needs to be initiated on a war footing, as roads would remain critical in ensuring connectivity, and supply of rehabilitation goods, as well as reconstruction.  Any delay in the same would further compound the crisis, and further extend the suffering.  The sooner reconstruction of roads is initiated, the sooner misery of people can end.

More importantly for areas in the mountains, and for communities in remote areas, reconstruction of bridges would be critical to enable access and kickstart reconstruction activities.  It is estimated that more than US$ 1 billion would be required to construct more than 250 bridges that have been destroyed by the flood.

An early assessment suggests that reconstruction activity would require at least US$ 6 billion would be required over the next twelve months for reconstruction activity.  Although almost 70 percent of this amount would have a PKR component, but it remains critical that the government plans for the same on a war footing such that a fiscal stimulus can be redirected towards the hardest hit areas to rehabilitate, and reconstruct better.

The country needs a grand infrastructure plan.  It needs planning and construction which is climate resilient, and which can withstand extreme weather events, and all of this needs to be done on a priority and accelerated basis.  The ability of the government to reconstruct better, and faster remains critical, and will be put to test in the days to come.

Ammar H. Khan
The writer is the chief risk officer for Karandaaz Pakistan, an organisation that seeks to promote financial inclusion in Pakistan. He has previously worked at several financial institutions in Pakistan, both in commercial banking and capital markets

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