Pakistan fourth most vulnerable to El Nino economic impacts

LONDON: Pakistan faces heightened vulnerability as the fourth most susceptible country to El Nino’s impact this year, research by the Standard Chartered Bank has found.

This comes after the country is already grappling with the aftermath of last year’s floods and erratic rains, exacerbated by record-high inflation and a severe financial crunch.

El Nino, a natural climate phenomenon that triggers heatwaves and floods worldwide, significantly affecting emerging markets. The World Meteorological Organisation predicts a 90 per cent chance of its continuation into the second half of 2023.

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Pakistan’s agricultural sector is particularly at risk, given its heavy dependence on farming and the potential damage that sudden changes in rainfall or temperature can have on crops. The rise in food prices, forming a substantial part of the Consumer Price Index baskets in emerging markets directly impacts inflation.

India and Egypt also rank high in vulnerability, due to their reliance on the primary sector and the share of food in inflation baskets.

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Changes in rainfall patterns may affect hydropower output, leading to potential power rationing in some countries. Energy prices, including gas and coal, could surge due to decreased hydropower generation, further exacerbating food inflation. Food insecurity is a significant concern in regions like Southern Africa, Central America, and parts of Asia.

The situation also poses challenges for Latin American central banks in their efforts to control rising prices, as they may need to consider the impact of El Nino on agricultural production and electricity generation.

Countries with weaker economies and historical vulnerability during previous El Nino periods are most at risk, research says.