The International Monetary Fund has issued a stark warning about Pakistan's escalating water crisis, emphasizing that effective water resource management has become more critical than ever for the country's economic survival.
Pakistan's Dual Water Challenge
Mahir Binici, IMF Resident Representative in Islamabad, highlighted the severity of Pakistan's water situation during his address at the closing session of a four-day conference organized by the Sustainable Development Policy Institute (SDPI). His remarks come at a time when Pakistan faces a dual challenge: water aggression by India and climate change causing abrupt disturbances in normal river flows.
According to Binici, Pakistan experiences extreme water fluctuations throughout the year. The country faces water scarcity during certain periods while dealing with excessive water during other seasons. This imbalance was dramatically demonstrated when three rivers flooded last summer, causing nearly Rs1 trillion in damages to infrastructure.
Mega Dam Projects and Financing Hurdles
The federal government is actively searching for Rs3.3 trillion to complete mega dams by 2029-30. During recently held sessions, the government presented this massive financing requirement to provincial governments, hoping to share the fiscal burden.
However, sources indicate that no consensus has been reached between the federal government and provinces regarding financing sources. The federal government believes provinces should contribute significantly, though it has also considered reprioritizing its Public Sector Development Programme (PSDP) by excluding politically motivated development schemes.
Discussions have also focused on WAPDA's role in constructing critical water infrastructure. According to the Ministry of Water Resources, completing the Mohmand Dam would take approximately 15 years, while finishing work on the Diamer-Bhasha Dam would require over 20 years at the current pace of budget allocations.
IMF Recommendations and Economic Implications
Binici stressed that Pakistan needs to invest 1% of its GDP in resilient infrastructure to mitigate the economic impact of disasters like the 2022 floods. Such strategic investment not only limits output losses but also accelerates recovery, helping the economy return to a growth path much faster than otherwise.
The World Bank's country representative to Pakistan, Bolormaa Amgaabazar, revealed the staggering economic impact of recent climate disasters. The 2022 floods caused damages estimated at $30 billion, while more recent floods have resulted in $2.9 billion in damages.
Dr. Abid Qaiyum Suleri, Head of SDPI, noted that participants from regional countries, particularly Bangladesh, opposed India's attempts to weaponize waters and urged enhanced regional cooperation to address shared water challenges.
Broader Economic Reforms Required
The IMF country head also addressed Pakistan's broader economic challenges, noting that the country has a very large state footprint absorbing scarce resources. This comment came amid government plans to build a Rs213 billion hospital and a five-star hotel in Islamabad using public funds.
Binici emphasized that Pakistan must address its weak revenue base, governance issues, and narrow export base for sustainable economic development. Under the IMF program, Pakistan needs to increase its tax-to-GDP ratio to 13.5% by 2027.
The IMF wants Pakistan to build sufficient fiscal and external buffers by September 2027 to ensure the country remains on a sustainable development path. As part of IMF conditions, starting from next year's budget, the government will improve project selection under the PSDP to better address climate-related challenges.
Private sector involvement was also highlighted, with Jason Avancena, Managing Director of Nestle Pakistan, announcing that his company has invested over $30 million in climate resilience and promoting renewable energy initiatives.
