In lieu of unlawful violence to inculcate fear and increase coercion, terrorism has become a trending topic in the world today. Pakistan, a country in South Asia bordered by Afghanistan and India has been a country worthy of speculation due to the rate of terrorism and tribal wars that have quickly taken over the country. The sporadic effects of these attacks have begun to shatter what used to be one of Asia’s fastest growing economies.
Impact on GDP
Pakistan’s GDP has been one of the main economic factors that have been affected by the terrorism exposed to the country. Consumers who were used to going out on a regular basis and purchasing high volumes of merchandise have been afraid to do in the recent years. This has caused a large decrease in consumer spending, which in turn has had a negative impact on the Pakistan economy. “As the GDP growth rate has gone down from 8.40% in 2004-05 to 5.80% in 2007-08 and more recently it has reduced to 2.10% in 2008-09” (The Business Exchange). According to experience curves and studies that have been conducted, it has been concluded that it will take the Pakistan economy 33 years to double its size.
Impact on Exports
Pakistan conducts most of its trade with the United States and the European Union and furthermore, according to sources, 50% of its exports are to these two locations. However, due to terrorism threats on and from Pakistan, foreign governments have discouraged its citizens to visit Pakistan. Several big companies who have had interest in procurement of textile (Pakistan’s largest export product) have taken their business to neighboring countries such as: India, Hong Kong, and Singapore. Pakistani business men have been denied a visa or scrutinized greatly before they have been granted access to travel abroad and this has had a huge effect on their exports. “The foreign buyers have exploited the situation to procure goods at lowest values. Pakistani knitwear is better in quality than its competitors but fetch the lowest rates due to the denial of direct contact with outside businessmen” (Pu.edu). Exports are said to have gone down from $19.22 billion to $6.1 billion dollars amidst the reduction of imports. The trade balance/deficit is -4.5(billion $) and one of the reasons for this is because of the public global image that has been portrayed of Pakistan.
Impact on FDI
In the country where macroeconomic indicators are plunging as a result of political turmoil and terrorism, it is obvious that not only foreign investors but local investors will be petrified about investing to get profit. As a result of this, the Pakistan FDI has reduced by about 1.475 billion or 52.8% during its last fiscal year(Pakistan News Watch). Some of the reasons that have been stated for this sharp decline are as follows: future uncertainty, poor law and order, and power shortages.
Other Effects of Terrorism on the Pakistan Economy
* The exchange rate has gone up from 60.5(Rs/US$) to 84.5 (Rs/US$) which has a bad effect on the economy. * According to recent surveys, it cost Rs340 billion on terrorism which has caused the economy more than $35million in lost export, revenue, opportunities e.t.c. * The inflation rate is currently at a high of 18.85%.
* Pakistan tourism industry suffered a loss of 44 milion dollars in the past year and has gone down by 6% despite various campaigns. EFFECTS ON PAKISTAN:
Afghan refugees US military strikes the NWFP influences. Taliban are increasing. Taliban elements and their mentors Al—Qaeda, moved into the major cities.
It has forced the state to station many divisions of army for law and order at the cost of earning the opprobrium of “use of force” against terroists in SWAT and FATA. The loss of foreign direct investment and tourism. Visa and job opportunities for Pakistan is from these areas to the Middle East are being increasingly curtailed.
The rugged border terrain of...