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The economic costs of drought could rise by more than one-third in the next 10 years without urgent reforms to water policies and irrigation systems, especially in resource-limited countries, according to new analysis.

Every dollar invested in drought resilience could avert up to ten times as much in future losses, says the Organization for Economic Co-operation and Development (OECD) in its , published Tuesday (17 June).

"Climate change has increased the land area exposed to droughts and worsened the impacts on communities and economies," said Jo Tyndall, director of the OECD environment directorate.

"We estimate that the economic impacts of an average drought today can be up to six times higher than in 2000, and costs are projected to rise by at least 35% by 2035," she added.

The report offers one of the most comprehensive recent assessments of the growing burden of drought on economies and ecosystems and lays out actionable policy recommendations.

It says the amount of land exposed to drought globally doubled between 1900 and 2020, with droughts becoming more frequent and severe in recent decades.

Aladdin Hamwieh, Egypt coordinator for the International Center for Agricultural Research in the Dry Areas (ICARDA), told SciDev.Net: "This report provides scientific validation of the daily challenges we observe on the ground, especially in environmentally fragile regions like the Middle East and North Africa.

"What is particularly valuable here is the link it draws between drought as a climatic phenomenon and its direct economic impacts—something we urgently need to guide policy decisions."

Abdelhamid Kleo, assistant professor of geomorphology at Mansoura University in Egypt, said the analysis confirms what scientists have been observing for years—accelerating drought and a tangible decline in the resilience of natural and human systems.

"Drought is no longer a periodic weather event," Kleo told SciDev.Net. "It has become a geomorphological crisis—disrupting surface processes, changing erosion patterns, and accelerating soil degradation in vulnerable landscapes."

Losses

The OECD estimates that a single drought event could cost between 0.1% and 1% of a country's Gross Domestic Product, depending on how dependent its economy is on agriculture or hydropower.

Drought lowers productivity, raises prices, exacerbates poverty, and drives displacement —particularly in rural areas.

Key sectors such as agriculture, energy, transport, and public health are especially vulnerable.

The report identifies agriculture as the most at-risk sector, consuming around 70% of the world's freshwater. Rising temperatures and shrinking water availability are expected to further undermine yields, degrade soil quality, and increase production costs.

High-risk regions

The report highlights major disparities in drought preparedness, with drought-vulnerable regions such as Sub-Saharan Africa, South Asia, and the Middle East and North Africa suffering from weak infrastructure and limited adaptive capacity.

In countries such as Ethiopia, Sudan, Madagascar, and Yemen, ensuring access to irrigation and drinking water is becoming increasingly difficult, threatening livelihoods and heightening the risk of migration and resource-based conflict.

"Our field observations in ICARDA, especially in Egypt, Tunisia, and Sudan, clearly show a drop in crop productivity as rainfall patterns shift and drought periods lengthen—even in areas that were previously relatively stable," said Hamwieh.

Kleo added that countries located in arid and semi-arid belts, such as North Africa and the Horn of Africa, "are paying the highest price for climate change, with underinvestment in adaptation systems and the absence of integrated geographic planning for water management."

The report cautions against overreliance on short-term fixes like desalination or excessive groundwater extraction, warning that such measures can compound economic and ecological stresses.

Water-saving tech

The OECD outlines three interlinked strategies for addressing drought. First, it calls for improving irrigation efficiency by expanding the use of technologies such as drip or sprinkler systems in place of flood irrigation—potentially cutting water consumption by up to 76% in some areas.

Second, it recommends reforming water pricing by adopting realistic, value-based pricing mechanisms that reflect the economic and environmental costs of water use. This includes removing ineffective subsidies and promoting responsible use through tools like taxes or smart incentives—while ensuring that low-income communities are protected.

Third, the report urges countries to integrate water into their national climate adaptation plans through comprehensive strategies that align agriculture, energy, and urban planning policies. It says this process must rely on accurate data and involve local communities in decision-making.

"Drip irrigation, graywater reuse, and fair water pricing have all shown partial success," said Hamwieh.

"But the lack of institutional support and long-term financing hinders their widespread adoption. The report rightly shifts the focus toward managing demand, not just expanding supply."

Kleo views these solutions not as optional tools, but as geographic necessities.

"We must redraw the relationship between water resources and population demand if agricultural communities are to survive," he said.

The report also emphasizes nature-based approaches such as restoring forests and wetlands or adopting agroecological practices, which can help recharge groundwater and regulate river flows.

Meanwhile, it encourages wider adoption of modern technologies—including satellite imagery and data analytics—to forecast droughts and direct resources more proactively.

"Drought resilience cannot be left to climatic chance," added Kleo.

"It requires institutional intervention based on spatial science, and a fundamental rethinking of the balance between water availability and human demand. Otherwise, we risk facing waves of desertification and climate migration more disruptive than any traditional economic crisis."