KARACHI: The devastating monsoon floods of 2025 are set to inflict losses of around Rs409 billion ($1.4 billion) on Pakistan’s fragile economy, equivalent to 0.33% of GDP, according to initial estimates by Arif Habib Limited (AHL).
Agriculture, the backbone of the economy, is expected to absorb the heaviest blow, with damages of nearly Rs302 billion ($1 billion) — almost three-fourths of the total. AHL warned that the sector’s vulnerability to climate shocks is once again threatening food security and rural livelihoods.
The floods have submerged 1.3 million acres of farmland in Punjab, wiping out vital crops such as rice, sugarcane, cotton, and maize. “Millions of acres of farmland across the country have been crippled, severely undermining output and threatening livelihoods,” the report noted.
Growth and inflation outlook hit
The economic fallout is expected to dampen Pakistan’s recovery, with AHL revising down its FY26 GDP growth forecast to 3.2% from 3.4%. Agriculture growth has been cut sharply from 2.2% to just 1.1%, with crop losses in affected regions projected to slash national output by 15–20%, dragging down GDP growth by 0.5–1 percentage point.
Secondary effects — including rising soil salinity, irrigation disruptions, and supply chain breakdowns — are expected to intensify pressure, driving food inflation higher by 20–30%. Import requirements for essential commodities such as wheat and cotton could rise by 10–15%.
Trade sector under strain
The trade balance is also set to weaken by an estimated $1.9bn in FY26. Cotton imports alone may surge by over $1bn to sustain the textile industry, while export earnings are forecast to fall sharply: rice shipments could decline by $278m, sugar by $283m, and textiles by around $300m.
With shortages looming in meat, rice, vegetables, and sugar, AHL revised its annual average inflation forecast for FY26 to 7.2%, up from a pre-flood estimate of 5.5%.
Losses could rise further
Analysts cautioned that the headline figure of 0.33% of GDP may understate the damage, as indirect effects become clearer in the coming weeks. “The final tally is likely to be higher once secondary repercussions fully play out,” the report concluded.
