Islamabad: Floods have ravaged Pakistan's economy, the prime minister said yesterday, with massive job losses and soaring inflation expected to hurt a nation whose stability is vital to the US war against militancy.

Briefing the Cabinet on the worst floods to hit Pakistan in over 80 years, Prime Minister Yousuf Raza Gilani also expressed concerns over food security due to the prolonged damage to agriculture and said the social impact of the disaster on his impoverished country was "serious".

"The floods have inflicted damage to the economy which may, by some estimates, reach $43 billion [Dh158.1 billion], while affecting 30 per cent of all agricultural land," he said. Agriculture is the mainstay of the economy, with cotton the main cash crop, and the sector is one of the biggest sources of employment.

Facing the prospect of long-term economic pain inflicted by the floods, Pakistan hopes the Internation Montery Fund (IMF) will soften the terms of an $11 billion loan. Pakistani and IMF officials are meeting in Washington to work out the impact to the already fragile economy from the floods. "This economic loss will translate into massive job losses affecting incomes of thousands of families, which may have serious social implications," said Gilani, whose government was heavily criticised for its slow response to the catastrophe.

"The overall performance of agriculture consequently will be much lower this year and the next year. This loss will have a snowball affect on manufacturing, services and export sector. Most families face a real risk of income and employment losses."

The next wheat harvest is at risk after the floods destroyed more than 500,000 tonnes of seed stocks in Asia's third-largest wheat producer, the UN's food agency said.

Grim outlook

Pakistan's budget deficit is expected to climb to 6-7 per cent of gross domestic product in the fiscal year 2010/2011, compared to an earlier forecast of 4.5 per cent, said Gilani.

Pakistan is also likely to miss its annual inflation target of 9.5 per cent for the same fiscal year, with inflation likely to range between 15 to 20 per cent, he said.

Standard Chartered Bank also has a grim outlook for Pakistan's economy, lowering its growth forecast to 2.5 per cent from 4.5 per cent in the fiscal year ending in June 2011.

Many Pakistanis, who have lost homes, families and livelihoods in the disaster, are furious at the government for not doing enough to help them.