Pakistan: Disaster Risk Financing

Disasters pose macro critical fiscal risks to Pakistan, with average annual losses from floods estimated at about 1 percent of GDP and severe events generating large financing needs of several percentage points of GDP. While existing budgetary mechanisms are generally sufficient for immediate disaster response, recovery and reconstruction costs create significant macro fiscal pressures and risk crowding out development spending. Strengthening disaster risk reduction, integrating disaster risks into macro fiscal planning and debt sustainability analysis, and improving federal–provincial coordination are essential to enhance fiscal resilience. A rules based cost sharing framework, better use of social protection systems, and carefully designed financial sector interventions would help contain future fiscal liabilities and safeguard long term growth.