Economic cost of terrorism in Pakistan

Pakistan is a country which has been facing a devastating form of terrorism for two decades, in which thousands of innocent people, hundreds of soldiers and security officials were killed. The menace has not only ruined the life of the nation in the form of bloodsheds but also made Pakistan the worst nation among the international community in terms of peace. It also created a large number of Internally Displaced People (IDP), thus increasing unemployment in the country. Terrorism is considered as one of the biggest threats to the economy of the country. A decline in the GDP growth, reduction in investment, lost exports, unemployment and the depreciation and inflation of incomes and exchange rates are the most affected areas of Pakistan’s economy. It has limited the foreign direct investment (FDI) in the country as investors felt the threat to invest in the country. FDI is very crucial for the economic growth of Pakistan. It increases employments, strengthens industrial sectors, improves the balance of payment, finances development projects, improves foreign exchange reserves and in a nutshell FDI is the main source to achieve high economic growth. Due to the war against terrorism, Pakistan is unable to attract more inflows of FDI. Terrorism cost Pakistan more than $43 billion between 2001 and 2010, the ministry reported. Foreign investment declined from $1.4 billion to $910.20 million in the fiscal year 2008-09. Due to the decline in investment, poverty jumped from 37.5% to 41.4% in 2008-09.It also increased the expenses of the security forces thus Pakistan has received total disbursements of $1,199 million from US under the Coalition Support Fund (CSF). The price of security-related and civil relief operations, for instance, demonstrates the magnitude of terrorism’s direct costs: Pakistan has spent an additional $4 billion or 2.4% of the average GDP since 2007,the ministry reported. The government has also spent $600m during this fiscal year to help more than three million people displaced by terrorism and counterterrorism operations. Terrorism has also promoted smuggling along the porous Pak-Afghan borders. According to US-Pak business council report (2009), Pakistan suffered a huge loss of $35 billion due to the instability in Afghanistan. It has terribly damaged the infrastructure making the foreign and domestic trade impossible. Due to security issues the tourism departments are in great loss. Due to terrorism, every year a large number of businessmen migrate to different European, American and many Central Asian countries in order to start their businesses there. This indirectly affects the industrial sectors of the country. The government bodies should struggle together to up root the mess of terrorism from the country. They should plan many successful economic policies to meet the needs of the nation. The policymakers should take some tangible measures in order to reduce the cost of war against terrorism and improve the security conditions in the country. Government should try to attract more foreign countries by improving the political environment of the country, which may lead to increase inflow of FDI. Finally, the exchange rate of Pakistani rupee should be strengthened in order to attract foreign investors so we might be able to gain economic stability. The writer is a student at the Institute of Management Sciences, Peshawar.]]>