By Ijaz Nabi
The floods of August 2022 could not have come at a worse time for Pakistan caught up in deep macroeconomic and political turmoil. A ballooning trade deficit, impending debt service obligations, and fast-depleting reserves had put a lot of pressure on the exchange rate, which had depreciated 24 percent in 21-22. Inflation was at an all-time high (27 percent year on year). Already in an IMF program (the fifth since 2000) with stringent fiscal targets, there was little room to fund large unanticipated expenditure. Nearly $31 billion concessionary capital, which would help create the fiscal space needed to respond to any exogenous shock, was tied up with the continuation of the IMF program. To make things worse, the coalition government that had ousted the previous government in a vote of confidence resisted tough conditionality and the program was on hold. A general election was around the corner and removing the monstrous energy subsidy carried a huge political cost.
Pakistan receives 70 percent of its rain in the monsoon months of July and August. Low pressure over the Tibetan plateau attracts water-laden winds from the Arabian sea and the Bay of Bengal. The winds travel westward along…