ISLAMABAD: Pakistan’s central bank is facing a new inflationary threat that interest rate hikes cannot contain, which is climate-driven crop failures. As extreme weather events devastate food supplies, the State Bank of Pakistan (SBP) confronts a policy blind spot; monetary tools cannot manage supply-side shocks. Millions of farmers have been displaced or financially ruined by floods. Yet recovery efforts remain fragmented, swinging between short-term subsidies and emergency imports without a long-term climate-inflation strategy. “Pakistan has reached a critical juncture where climate adaptation and inflation management must urgently converge,” said Omar Butt, President of the Pakistan Business Network. He warned that without immediate and cohesive action, inflation will remain elevated and food insecurity will worsen. Butt recalled that the 2022 floods destroyed over two million acres of farmland. Three years later, a similar devastating event has struck again, costing billions of dollars. The Pakistan Economic Survey 2024–25 shows major crops contracted 13.5%, shaving 0.6 percentage points off GDP growth. In Khyber Pakhtunkhwa alone, over 57,000 acres were affected and thousands of livestock killed, Omar Butt said. Cartels in the sugar, flour, and cooking oil sectors exploit such crises by hoarding and market manipulation, causing more inflation than the floods themselves. Weak regulation allows artificial shortages and price spikes, trapping consumers in prolonged high-cost cycles.
