The Economics of War on Terror

The outgoing year has roughly been tough for Pakistan economy and full recovery is far from the sight. The official data for the FY 09/10 suggest, agriculture sector grew an estimated 2%. Live stock grew 4.1%, industrial output 4.9% and the services sector 4.6 %. The overall economy, however, grew by 4.1 % (provisional estimate). According to the latest Labor Force Survey 08/09, the unemployment rate has increased to 5.5% from last year figure of 5.2% and urban unemployment 7.1% from 6.3%. Analysts believe that the unemployment rate is running into double-digit, however, and the government’s figures are hard to buy. The good news is that overall headline inflation measured by the CPI, however, declined to 13.3 % from 25% in October 2008, albeit, has remained very high by any standard. The outlook of the economy, in near terms, seems fragile as suggested by the Economic Survey of Pakistan (ESP) 09/10.

One cannot disagree with government’s claim that it really finding it difficult to give any stimuli package now. The main impediments to this effect are rising debt and spending on security, inflationary pressures, and overall slowdown in the economy. The ESP comments that given the long-standing constraints, mentioned above, Pakistan cannot afford an expansionary policy stance at this stage without meeting the requisite reserves or fiscal space.

Nonetheless, the main constraint to growth has remained deteriorating security situation of the country. Indeed, post 9/11 scenario has brought more problems for Pakistan if any relief. As per the National Crisis Management Cell, Ministry of Interior, during 2002/10 period a total 8,141 incidents of terrorism have occurred causing 8,875 deaths, and injuring over 20,000 people who is a c...

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...egulatory Authority reckons that the commissions and kickbacks, in awarding government purchases and contracts including defense, costing the economy around US $ 8 billion every year. And going forward, instead of crying on TV talk shows and advocating the nation about VAT benefits, the FBR officials must put its house in order first to check RS 500 billion worth of leakages. Finally, if proper monitoring and controlling, with transparency embedded into the system, is running through the chain of command and the corrupt government officials are given exemplary punishment in no time, it is expected that such measures can save the economy around US $ 4 billion and the nation would not need to go to the IMF/World Bank and finally will be free to carry out its homegrown economic policies and not that of the IMF. The cure lies within us and not before and after.