Pakistani PM: Floods Slow Growth, Raise Inflation

Pakistan's economic growth will plunge 2 percentage points because of the floods and lead to "massive" job losses, the prime minister warned Wednesday in a speech that predicted a grim couple of years for the already fragile country.

Yousuf Raza Gilani said one-fifth of the country's irrigation infrastructure, livestock and crops had been destroyed.

"Performance of agriculture consequently will be much lower this year and the year ahead. This loss will have a snowball effect on manufacturing, services and export sectors," he said in a speech to his Cabinet. "Food security of the country is also under threat."

The floods began over a month ago in the northwest after extremely heavy monsoon rains and surged south along the Indus River and its tributaries. The army, along with international aid agencies, are struggling to reach the some 8 million people who are still in need of emergency assistance.

The scale of the disaster has raised concerns about the stability of the country, which was already struggling with an anemic economy and relentless attacks by the Taliban and al-Qaida. Gilani warned the floods may yet have "social implications," but did not elaborate.

Gilani said economic growth would drop to 2.5 percent in the 2011 financial year, down from a predicted 4.5 percent this year. Inflation, currently predicted to hit 9.5 percent next year, would likely be in the range of 15 percent to 20 percent.

"This economic loss will translate into massive job losses," he said.

The floods have receded in parts of north and central Pakistan but are continuing in the south. The waters are expected to remain for several weeks, prolonging the misery of millions desperate to return home and rebuild their lives.

Foreign countries have pledged hundreds of millions of dollars to help Pakistan respond to the floods. Even the country's archenemy, India, has offered assistance and announced Tuesday that it was increasing its aid from $5 million to $25 million.