KARACHI: Pakistan’s central bank warned this week recent torrential rains and flooding could weigh on the country’s fragile economic recovery by straining public finances and hurting farmers’ ability to repay loans.
The State Bank of Pakistan (SBP), in its mid-year review of the banking sector, said while inflation had eased and the currency had stabilized, the impact of climate shocks was now a major concern.
“Recent torrential rains and flooding could pose some challenges to the economic recovery, and may exert pressures on the fiscal account,” the report said.
The floods, which have swamped parts of Punjab and Sindh provinces, are expected to hit the agriculture sector hardest. Farmers dependent on seasonal harvests face the greatest repayment risks.
“The recent heavy floods may weaken the repayment capacity of agri borrowers,” the SBP said, though it noted agriculture loans form a relatively small share of bank lending.
