Impact of 2022 Floods on Pakistan’s Exports

Abstract

This study examines the effect of the floods that took place in Pakistan in 2022 on the performance of Pakistan's trade, in particular on aggregate trade export, and the balance of trade as well as sector based export outcomes. Using annual data from 2010 to 2024, the analysis uses time series regression, sectoral panels estimation and Difference in Differences framework to quantify the flood related trade disruptions. The results show aggregate export both declined by about USD 1.84 billion in the flood year, and the trade balance worsened by almost USD 3.92 billion, which shows concurrent losses of export and higher import requirements. Flood effects are highly heterogeneous and result in sectoral analysis. Agriculture based exports and textile, and apparel exports saw the high largest declines with estimated losses of USD 1.12 billion and USD 0.98 billion respectively, while manufacturing and surgical goods had a relative resilience. Difference in Differences estimates also support the fact that the high exposure sectors experienced an extra export loss of about USD 1.74 billion as compared to the low exposure sectors during the flood year. The persistence and stability of those results is supported by robustness checks on the persistence of the results with alternative ways of measuring flood exposures as well as lagged specification. Overall, the evidence shows extensive and disproportionate costs of 2022 floods for Pakistan in terms of trade resulting in significant vulnerabilities of climate sensitive export structures to extreme weather events.