Pakistan’s Annual Loss Due to Water Misuse is Two Times Higher Than Latest IMF Bailout

The economic costs to Pakistan from poor water and sanitation, floods, and droughts are conservatively estimated at 4 percent of the GDP, i.e. around $12 billion per year, states World Bank’s report “Pakistan—getting more from water”. In comparison, Pakistan’s latest IMF bailout package is worth just $6 billion over a period of more than 3 years.

The loss to economy is driven from inadequate water supply and sanitation, flood damage to property, and water scarcity in agriculture. Other water-related economic impacts, such as loss of ecosystem services and the indirect costs of water-related disasters are additional, suggesting the total economic costs of water insecurity are even higher.

The costs are associated with healthcare, lost work time due to water-related illnesses, lost work time due to a lack of improved water supply and sanitation, and premature mortality. These losses are about three times higher than the estimated economic costs of water scarcity for agriculture, salinity, and flood damage combined, suggesting that inadequate water services are the biggest water-related drag on the Pakistani economy.

According to the report, flooding causes direct financial losses because of infrastructure damage and temporary reduction in agricultural and business productivity. The 2010 flood caused losses estimated at $10.5 billion, or 6 percent of the year’s GDP. Post-flood reconstruction and recovery can, however, stimulate economic growth, and estimates of the average annual economic losses associated with floods range from $800 million to $1.8 billion as per World Bank report 2015; considerably less than 1 percent of GDP.

The economic costs of water scarcity to agriculture are significant – estimated to be at least $600 million annually, considering the impact on irrigation production and not rainfed production and ignoring the likely significant indirect economic losses. The cost of soil salinity to agriculture is also significant; estimates for 2004 alone suggest losses of $250 million to $700 million (World Bank 2006). Soil salinity is worsening and poses a serious long-term threat to agriculture.

Degradation of the Indus Delta has been estimated to cost over US$2 billion annually because of foregone ecosystem services. Environmental degradation in Sindh alone costs an estimated 4 percent to 6 percent of provincial GDP. Around half of this is agricultural loss caused by water-logging and salinity, and half lost to delta ecosystem services (including from mangrove forests and fisheries).

The national costs of water-related environmental degradation are likely to be of a similar magnitude, given the economic costs of groundwater depletion, land subsidence, widespread water pollution, and inadequate environment water allocations for rivers and lakes.

Pakistan is Water Stressed Country

Pakistan is commonly considered to be both water-scarce (low water availability per capita) and water-stressed (high water withdrawals relative to water availability). However, in each case, important aspects of Pakistan’s water situation are commonly overlooked.

Most water scarcity assessments ignore that 24 percent of the total resource is internally generated (including rainfall recharge to groundwater). Average availability has been declining with the rising population for many decades, but also varies annually with climate fluctuations.

Surprisingly, the average annual water withdrawal per capita is currently around 885 cubic meters in Pakistan, compared to around 600 cubic meters in India, 420 cubic meters in China, and 560 cubic meters in Turkey. For Pakistan, this value includes a significant double-counting error between surface and groundwater. Adjusting for this indicates net withdrawal per capita is around 655 cubic meters.

There are 32 countries with less water per person than Pakistan. Across these countries, the average per capita gross domestic product (GDP) is 10 times that of Pakistan. Only six of these 32 water scarce countries are poorer than Pakistan, which include all African nations with little irrigation investment and a heavy reliance on traditional rainfed agriculture.

What is the Solution?

There is no single simple solution to address water security in Pakistan. It will take a concerted effort on many fronts by all governments and water users over many years. Large infrastructure gaps must be addressed, which require significant financial resources. Provincial-level water sector financing has increased in recent years, but federal financing has declined significantly in proportional terms.

Collectively, sector financing is well below recommended levels. This is the case for major infrastructure, reforms, and institutional strengthening; urban services; flood mitigation; and environmental management.

Pakistan’s National Water Policy (2018) outlines many of the required reforms and investments to improve water security. It can provide a platform for increased sector dialog, especially between the provinces, but also among diverse stakeholders within the provinces. Establishing an implementation plan for the National Water Policy that identifies agreed priority actions with clear responsibilities is critical.

The National Water Council should establish long-term social, environmental, and economic objectives for the management of the Indus Basin water resources in the national interest that guide cooperative basin planning as well as provincial water management.