Effect of Terrorism on Pakistan Economy

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Arshad Ali *

The world is currently confronting terrorism in different manifestations. After the 9/11 terrorist events, the phenomenon of terrorism has abruptly changed the socioeconomic and geopolitical situation of the world. Terrorist groups have linkages with each other and are utilising each other‟s areas for recruitment and training, exchanging illegal weapons, engaging in joint planning and ventures, and also providing administrative and other logistic support. Pakistan is also facing the menace of terrorism which is eroding the country‟s social structure, economic development and political system. The acts of terrorism are threatening Pakistan‟s law and order situation, violating human rights of the citizens, damaging basic infrastructure and economic opportunities.

The immediate costs of terrorist acts are loss of human lives, destruction of property and infrastructure and curtailment of short-term economic activity. Additionally, terrorism creates uncertainty, reduces confidence and increases risk perceptions; leading to lower rates of investment and lower economic growth. In fact, Pakistan has not only lost precious lives and infrastructure; according to official estimates, it has also suffered a loss of around $ 35-40 billion since 2001-2002.

Pakistan‟s economic growth came to a near halt at around 2.00 per cent in fiscal year 2009, not only as a result of the global financial crisis, but also because of internal issues. These included a war on terror launched by security forces in the North West Frontier Province (NWFP) and the Federally Administrated Tribal Areas (FATA) bordering on Afghanistan, and the resultant displacement of some three million people from their homes. Both the war on terror and the rehabilitation of the internally displaced persons (IDPs) consumed a big chunk of the government‟s financial resources, thus widening the fiscal deficit and halting economic growth....
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