By Farooq Awan
Pakistan’s economy has been severely impacted by the devastating floods that swept across the country between June and September 2025.
The country is facing losses of over Rs822 billion ($2.9 billion), which has led the government to revise its growth forecast for fiscal year 2026 to a lower range of 3.5 to 3.9 percent, down from the previous target of 4.2 percent.
This was revealed in the Preliminary Assessment of Flood Damages Report, released by the Ministry of Planning, Development, and Special Initiatives.
Unprecedented Floods Cause Widespread Destruction
The report describes the 2025 floods as “unprecedented and apocalyptic,” ranking them among the worst natural disasters in Pakistan’s recent history. Over 1,039 people lost their lives, more than 4 million people were displaced, and around 229,763 homes were either damaged or destroyed.
The floods also devastated agriculture, infrastructure, housing, energy, and social services, prompting the government to shift its budget priorities towards relief and rehabilitation efforts.
Agriculture and Infrastructure Suffer Major Setbacks
The report estimates that the damage to agriculture alone amounts to Rs430 billion. Meanwhile, the destruction of infrastructure has caused losses totaling Rs307 billion. Housing damage is valued at Rs92 billion, and the power sector suffered losses of approximately Rs25 billion.
The floods also disrupted transportation and supply chains across the country, contributing to economic output losses equivalent to 0.3–0.7 percent of GDP.
A Climate Vulnerable Nation Facing Crisis
Despite contributing less than 1 percent to global greenhouse gas emissions, Pakistan ranks among the world’s most climate-vulnerable countries. In 2022, the country topped the Global Climate Risk Index, making it the most affected by extreme weather events.
The recent floods highlight Pakistan’s ongoing struggle with “climate injustice,” with the latest disaster serving as a stark reminder of the country’s climate vulnerabilities.
Impact on Key Economic Sectors
The report indicates that the floods caused severe disruptions to agriculture and energy production in Punjab, Sindh, and Khyber Pakhtunkhwa. The agriculture sector, which was already struggling, is now expected to grow by only 3.0–3.8 percent in FY2026, a significant decline from the earlier target of 4.5 percent.
The industrial sector is also projected to grow at a slower rate of 4.1–4.2 percent, down from the original target of 4.3 percent.
Services are expected to slow down, with growth projections at 3.5–3.7 percent. Unemployment is predicted to rise by about 0.22 million workers in the current fiscal year.
Prime Minister’s Response and Government’s Plan
Prime Minister Shehbaz Sharif, in his message within the report, called the floods a “national tragedy” that has shattered lives and livelihoods. He pledged that the government would take a “build back better” approach, focusing on climate-resilient infrastructure and inclusive recovery.
“We will transform this moment of crisis into an opportunity to rebuild smarter and stronger,” the Prime Minister said.
Aid and Reconstruction Efforts
Although Pakistan has not yet made an international appeal for aid, relying initially on domestic resources, global organizations have already started offering targeted support. The report mentions that a more detailed damage and needs assessment will follow this preliminary analysis.
The Ministry of Planning emphasized that the post-flood recovery strategy will focus on infrastructure rehabilitation, housing reconstruction, and agricultural revival. It also stressed that fiscal policies would need to balance humanitarian needs with macroeconomic stability.
The document concluded with a call for coordinated action between federal and provincial agencies, the armed forces, and civil society to ensure long-term recovery and climate adaptation.
“Recovery will demand sustained investment and long-term climate adaptation,” the report mentioned.
Author Profile
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Farooq Awan is a meticulous finance correspondent focused on Pakistan’s growth engines.
His reporting, driven by State Bank data, details the services sector's resilience and 3% expansion as the primary force behind GDP recovery. Awan highlights the critical role of ICT and stable policy in driving this essential economic digital transformation.
