The floods in Pakistan have affected one-fifth of the country (an area roughly the size of England) and engulfed large parts of all four provinces—Punjab, Balochistan, Sindh and Khyber-Pakhtunkhwa (formerly the North West Frontier Province). The vast scope of the damage makes this a truly national disaster with long-term economic and political consequences. With waters still rising, it is far too early to assess the economic costs; a proper assessment will be made in time by the Government of Pakistan, assisted by the UN and the World Bank. But on the basis of early indicators, a preliminary and admittedly impressionistic view of the damage can be formed.

The immediate impact on the population is truly staggering—20 million people affected with 8 million in need of water, food and shelter; 1,500-2,000 killed; 4 million left homeless; and 15 million displaced. The devastation has hit virtually all sectors of the economy. The Pakistan government estimates total economic damage to be near US$15 billion, or about 10 per cent of GDP. Damage to infrastructure alone (roads, power plants, telecommunications, dams and irrigation systems, and schools and health clinics) amounts to around US$10 billion. Agriculture, which represents 25 per cent of the Pakistan economy and provides employment to 50 per cent of the workforce, is extremely hard hit. At least 30 per cent of the cotton crop has washed away, which is bound to devastate the textile industry, the mainstay of Pakistani manufacturing and exports. Adding to this is the loss of wheat, rice and maize crops, and about 10 million head of livestock. Altogether agricultural production this year could fall by as much as 15 per cent.  Even next year’s production is likely to show a further decline because the spring wheat crop that needs to be planted in October-December this year will not be possible.

The overall growth of real GDP, which prior to the floods was projected to be in the 3-4 per cent range for 2010, will now turn negative. Estimates of the fall in real GDP are in the 2-5 per cent range, although it is conceivable that the decline could be far greater as more information on the losses of both physical assets and production becomes available. Reconstruction activity could provide some boost to the growth rate, but it is likely that any positive effects will only show up in 2011 and beyond, and even then it may not be sufficient to bring the growth rate back to the 2009 level of 4 per cent for several years.

Inflation, which is already in double digits, will rise with the increase in food prices and the destruction of the food supply distribution networks. Furthermore, the government will need to finance the reconstruction effort, and absent sufficient foreign assistance and with an inability to divert domestic revenues towards reconstruction, the increased expenditures will necessarily widen the fiscal deficit to well above the government’s budget target of 6 per cent for this year. As is customary in Pakistan, this deficit will be financed by borrowing from the central bank, leading to an expansion of the money supply, pushing inflation higher. Indeed inflation could very easily touch 20 per cent by the end of this year.

This is a dismal macroeconomic scenario.

The current IMF program, which was already in serious trouble before the floods, will have to be abandoned and a new program based on a completely different economic reality will have to be negotiated. The United States aid program, under the five-year Kerry-Lugar Bill, will also now need to be reframed; aid must be front-loaded to speed up relief and reconstruction work.

The political consequences of the floods are no less dire. Since Pakistan’s provinces are largely language-based and contain different ethnic groups, they are riven by tensions that sometimes erupt into violent conflicts. Sectarian conflicts concentrated in central and southern Punjab are certain to be exacerbated by the economic hardship the floods have produced. The central government led by the Pakistan Peoples’ Party (PPP) of President Asif Ali Zardari is weak and often seen as ineffective. But it may survive the turmoil caused by the floods if the opposition remains divided on regional grounds, and the largest opposition group, former Prime Minister Nawaz Sharif’s Muslim League, remains largely a Punjabi party. This is Pakistani politics as usual. And as the politicians bicker and fight, the army’s position in the polity strengthens and it gains more public support for its flood relief activities.

The country’s weak central coalition government, often accused of inefficiency and corruption, will need to prove that it can manage the flow of flood-related aid. It must ensure that aid is equitably distributed and effectively used at the provincial level. This may be difficult for a government that has been loath to decide quickly on tough political and economic issues. Even weaker coalition provincial governments will face similar tasks, and will have to clamor for more of their share of resources.

The floods have dealt Pakistan a severe body blow while it was still reeling from the economic crisis, political infighting, and the war against terror. The diversion of resources and attention to the flood relief and reconstruction work will undoubtedly affect social spending and the drive against the Pakistani Taliban, whose fighters have been dislocated from their tribal bases in the Northwest Frontier region and have taken the war back into the Pakistani hinterland.

How quickly the country recovers from the floods will depend not on the generosity of foreign donors, although this will be important, but on the ability of the Pakistan government to generate the domestic resources and public support to undertake massive reconstruction. Even if all goes well, it will still take several years for full recovery to be achieved. If not, the country will limp along in a semi-crisis state both economically and politically, an undesirable prospect for Pakistan and for the world.

Shuja Nawaz is Director of the South Asia Center at the Atlantic Council. Mohsin Khan is Senior Fellow at the Peterson Institute for International Economics in Washington DC. This article was originally published in The Australian. Photo credit: AP.

Shuja Nawaz, director of the Atlantic Council’s South Asia Center, appeared on a broadcast of the CNN Newsroom on August 22 to discuss the upheaval, natural and political, caused by the flooding in Pakistan. The following is a transcript of Nawaz’s segment.

DON LEMON, CNN ANCHOR: Well, hundreds of thousands of Pakistanis are still fleeing rising floodwaters, many more are fighting disease. Nearly 1 million people are sick with diarrhea, the skin disease scabies, malaria or respiratory infections. That’s from the World Health Organization, all of that information.

Floodwaters cover one-fifth of the country and has disrupted the lives of 20 million Pakistanis. More than 1,500 people have died. Money to help, however, has been slow to arrive, especially when compared to how Americans have given to catastrophes of similar proportions.

Why? Could there be a bias against the country? Fear of what the funds could ultimately support?

Pakistan native Shuja Nawaz joins us now from Washington, D.C. He’s a director of the South Asia Center at the Atlantic Council of the United States. It’s a bipartisan public policy group.

Mr. Nawaz, thank you for joining us.

I want to be sure you know there have been terrorist leaders found in Pakistan. So, the question that some may be asking here is: how do I know my contribution won’t end up working for an anti-American cause?

SHUJA NAWAZ, ATLANTIC COUNCIL: I think this is really the big test for the government of Pakistan and I think they are up to it because there’s a commitment to have a very transparent and a very effective mechanism for the aid, particularly from the United States. And the ground for this was laid by the Kerry-Lugar bill legislation because the United States Congress insisted that this aid be given directly to the government and that it be monitored and audited.

LEMON: So, we’re seeing reports that the Taliban is helping with the floods. It could just be militants. I don’t know if you know more about that — but they are helping the flood victims where the government is not. Could this worsen the relationship the United States has with Pakistan?

NAWAZ: Well, just to be correct, it is not the Taliban per se, but it is their affiliates perhaps in the northwest of the country, and a lot of the groups are the Punjabi militant groups that are from the heartland that have repositioned their people for evangelical purposes and they have social services groups that quickly come into action.

Unfortunately, when the flood hit, the government was asleep at the wheel and it took quite a while for the government to get its act together. That is the gap that these people filled, but it’s not a nationwide problem and it has not yet become a nationwide problem, although it could.

LEMON: OK. So, listen, I know the United States has promised $150 million in aid to help Pakistani flood victims and, you know, the U.S. aid, all of that’s written right on, we’re told, the aid and many people — so the people there know where it’s coming from.

Do you think that this will help the relationship between Pakistan and the United States? And if so, how do we get that message across? NAWAZ: Oh, absolutely. I think it’s not just the $150 million, another $200 million or $250 million out of the Kerry/Lugar money is probably going to be directed for flood relief work, too. And there could over time, perhaps, a front loading of some of the Kerry/Lugar finance for the flood relief.

Now, what the U.S. is doing different and what it should do differently from previous times is to actually not only help distribute the aid, but also put its mark on the aid so that the people receiving it know where it’s coming from. In the past, particularly in the northwest and the border region with Afghanistan, the U.S. has been reluctant to put its mark because it didn’t want people distributing the aid to be the target of the Taliban. This is now changing. I think over time, people should realize that this mistrust between the U.S. and Pakistan cannot be removed overnight.

LEMON: Mr. Nawaz, thank you for your time.

NAWAZ: Thank you.

This highlight is part of the series Pakistan Floods: Hope from Tragedy. To find a series description and links to related posts, please click here.

Shuja Nawaz, director of the Atlantic Council’s South Asia Center, was recently featured on the Canadian Broadcasting Corporation podcast “The Sunday Edition.”

The slow response to the Pakistan floods has been blamed on Pakistan’s so-called “image problem” and that may be true. But on the other side of that coin, many observers have suggested that the disaster presents the west – particularly the U.S. – with the opportunity to make political gains in a strategically-important part of the world where the Americans themselves have the “image problem.” On top of that, inside Pakistan, nearly every side of the fractured poltical and military power structure has an interest in appearing to be one delivering help – and in discrediting opponents. In the podcast, Nawaz provides his take on these issues.

For audio and a text description of the segment featuring Nawaz, please click here.

This highlight is part of the series Pakistan Floods: Hope from Tragedy. To find a series description and links to related posts, please click here.

Shuja Nawaz, director of the Atlantic Council’s South Asia Center, was recently featured on Australian Broadcasting Corporation National Radio. Nawaz discussed the current state of affairs in Pakistan, and the growing controversy over how aid for flood victims is being distributed.

The segment featuring Nawaz can be listened to using the audio player below.

This highlight is part of the series Pakistan Floods: Hope from Tragedy. To find a series description and links to related posts, please click here.

The current flood in Pakistan is the worst ever-natural disaster to strike that country even as it is fighting an existential threat from a major Taliban insurgency inside its Western border. The grim situation: 20 million homeless, a fifth of the country affected by floodwaters, and a government that was unprepared, despite warnings from its own National Disaster Management Authority.

Introducing a detailed and comprehensive National Disaster Response Plan issued in March 2010, that, among other things, listed the threat of floods during the monsoon season, Prime Minister Yousaf Raza Gilani stated “I hope that the guidelines set forth by the N.D.R.P. will be observed by all concerned.” As former Secretary of State George P. Shultz famously remarked, “Hope is not a policy!”

It took almost a week for the both the central government and provincial administrations to begin coping with the rising floods. And government has been playing catch-up ever since. Parts of Khyber-Pakhtunkhwa were still waiting for civilian aid three weeks after the flood.

Residents told visitors that provincial government phones were off the hook when they called for help. From Sukkur, in Sindh province, a relief volunteer reports, "Camps need drinking water supply, latrines and food supplies – the very basics, which are somehow missed by our government." This has created an opportunity for the military to step in and for civil society to step up, including the social services arms of Punjabi militant groups, some of whom have been franchisees of Al Qaeda and the Taliban.

Though their numbers are small and they are restricted to certain inundated districts in Khyber-Pakhtunkhwa and Central and Southern Punjab, they offer a public relations counterweight to the generous United States aid package and the rapid response of the Pakistan army.

Most Pakistanis have by now heard that the United States is their largest aid donor and is leading the charge to get other “friends of Pakistan,” in Ambassador Richard Holbrooke’s words, to “step up to the plate.” The real risk is not that aid will not come. The real risk is that the U.S.’s main partner in Pakistan, the civilian government at the center and in the provinces may fail to deliver effectively and efficiently the aid that does arrive.

If that happens, then the men, women and children who are homeless today and who will be struggling to rebuild their lives in years to come will not be thanking a distant America. They will be cursing their own government. Or worse, joining the militancy that is gnawing at their social fabric.

This must not be allowed to happen. The enormity of the challenge facing a fledgling democratic system in Pakistan is huge. Even while the United States keeps a wary eye on Islamic militant relief groups, it must help in strengthening the civilian governance in Pakistan, its main partner in fighting the effects of this 100-year flood. President Asif Ali Zardari, pronounced at a press conference with Senator John Kerry last week “I am the governance” (shades of Louis XIV). Now that he has owned up to that weighty charge, his government must deliver on his promise by making flood relief rapid, transparent, and effective.

Shuja Nawaz is director of the South Asia Center at the Atlantic Council. This critique appears as part of the New York Times’ Room for Debate series entitled "Can Flood Aid Weaken the Taliban in Pakistan?" Photo credit: AP.

This article is part of the Atlantic Council series Pakistan Floods: Hope from Tragedy. To find a series description and links to related posts, please click here.

On August 19, the Atlantic Council’s South Asia Center hosted a roundtable discussion with a group of Pakistani high school students visiting Washington, DC as part of the 2010 EDLINKS Pakistan-US Student Exchange. Approximately twenty young people met with South Asia Center Director Shuja Nawaz for an informal conversation about a variety of topics relating to the work of the Center. The students, with the support of their chaperones and supervisors from KZO Education, asked questions about the status of US-Pakistan relations, the Kerry-Lugar bill, recent flood relief efforts, and the differing perceptions of Pakistan among the American public.

Shuja Nawaz, Director of the Atlantic Council’s South Asia Center, was interviewed on The Takeaway morning radio news program on the Pakistan flood situation. Nawaz also commented on how the flooding presents the United States with an opportunity to restore shaky relations with Pakistan.

Click here for audio and a text summary of the program.

This highlight is part of the series Pakistan Floods: Hope from Tragedy. To find a series description and links to related posts, please click here.

Shuja Nawaz, Director of the Atlantic Council’s South Asia Center, appeared on PBS NewsHour on August 18. Nawaz discussed the extreme flooding in Pakistan and its ramifications on stability of the region.

Video of the news segment can be seen below. To find time and channel information for PBS NewsHour in your area, visit http://www.pbs.org/newshour/airdates.html.

Last week an opinion piece written by Nawaz on this subject entitled “Hope Amid Pakistan’s Tragedy” appeared in the Washington Post.

This article is part of the series Pakistan Floods: Hope from Tragedy. To find a series description and links to related posts, please click here.

On August 14, Atlantic Council’s South Asia Center Director Shuja Nawaz spoke with NPR’s Weekend Edition on the recent torrential flooding in Pakistan, and the opportunity relief efforts offer for improvement in U.S.-Pakistan relations.

Click here to read a transcript of Nawaz’s interview and listen to the audio.

This highlight is part of the series Pakistan Floods: Hope from Tragedy. To find a series description and links to related posts, please click here.

The fierce flooding in northwest Pakistan is a catastrophe that’s killed more than 1,000 people, left thousands homeless and millions more in desperate need of aid. Does the disaster also create an opportunity for Pakistan and the United States to win hearts and minds with food and assistance? NPR’s Scott Simon talks with Shuja Nawaz, director of the South Asia Center at the Atlantic Council.

SCOTT SIMON, host:

The fierce flooding in northwest Pakistan is a catastrophe that’s killed more than 1,000 people, left thousands more homeless and hungry, and millions in desperate need of aid. The floods have struck an area that’s also been a battleground between the government of Pakistan and the Taliban. Does this disaster also create an opportunity for Pakistan and the United States to win hearts and minds with food and assistance?

In an op-ed piece in the Washington Post this week, Shuja Nawaz, director of the South Asia Center at the Atlantic Council, writes about the chances of building trust in Pakistan. Mr. Nawaz joins us in our studio. Thanks so much for being with us.

Mr. SHUJA NAWAZ (South Asia Center, Atlantic Council): Thank you, Scott.

SIMON: Tell us about what you see as a window of opportunity.

Mr. NAWAZ: Well, first I see the tragedy, which is the worst in Pakistan’s history and the worst since the last 80 years. But I also see an opportunity because the United States and Pakistan have been on and off allies over the years, and there is still a level of distrust between them that is still deep. And perhaps when Pakistanis see the United States actually on the ground helping ordinary people, there will be the grounds for removing this distrust.

SIMON: You write that the sight of U.S. helicopters, which might alarm some people, is now reassuring in Pakistan.

Mr. NAWAZ: Absolutely. And this harkens back to the U.S. assistance during the 2005 earthquake when the same type of helicopters, the Chinooks, were being referred to as angels of mercy. And they see Americans doling out this assistance, standing side by side with Pakistani soldiers. I think that means a lot to the ordinary people.

SIMON: Recent opinion polls have been cited, a lot in both countries, that show almost 60 percent of the Pakistani public considers the U.S. to be some kind of adversary. But in this welter of polls you have noticed another statistic.

Mr. NAWAZ: Yes. Something like 64 percent of the Pakistanis polled by the Pew Global Attitude survey that was released recently indicates that 64 percent of the people polled actually want to improve relations with the United States. I see that as an opportunity. Not just for the United States but for Pakistan too, because Pakistan needs to be a member of the polity of nations, working with states like the United States and other trading partners.

And if it can build on this kind of collaborative arrangement, rather than simply a kind of patron-client relationship, which has been the characteristic in the past, then perhaps there is some hope.

SIMON: Now, we have also read that the Taliban has been trying to be of assistance.

Mr. NAWAZ: Not the Taliban so much as the Panjabi military groups that are allies of the Taliban. They have been very active through their social services groups. They were active in the earthquake zone too, and in fact in many cases worked in the same areas that the U.S. was providing assistance – very ironic.

They have been active, and that’s largely because the government, unfortunately, has been very inept and slow. And when government creates a vacuum, then these groups fill it with social services. So I think this is a warning for the government now that particularly as the aid starts flowing into Pakistan, the government had better get its act together and the government better show its face on a regular basis and not the kind of sporadic hit and run, which government leaders have been doing.

I mean, it was very sad and noticeable that the president of Pakistan was out of the country.

SIMON: He was in London.

Mr. NAWAZ: He was in France and then in the U.K. throughout the period that the flood sort of ravaging his country, came back and went for essentially a photo op into one province in Sinth(ph).

So while these meetings may be important, I think the people would want to see their leaders share their misery in the sense that they can see what the people are going through and see what the government is trying to do to help.

SIMON: Shuja Nawaz is the author of "Pakistan in the Danger Zone: A Tenuous U.S.-Pakistan Relationship." Thanks so much for being with us.

Mr. NAWAZ: My pleasure.

Shuja Nawaz is director of the South Asia Center at the Atlantic Council. This is the transcript of a conversation broadcast on NPR Weekend Edition – Saturday. Photo credit: AP.

The audio version of the conversation appears below.

This article is part of the series Pakistan Floods: Hope from Tragedy. To find a series description and links to related posts, please click here.