Effects of Terrorism on the GDP of Pakistan

Since 1947, the country of Pakistan came into existence. Prior to 1947, it had been a
playground for major powers like US, India, China, Russia and Iran. All of those countries made
one mistake and that is instead of giving people employment or business they keep spreading
terrorism with weapons of war. In the last 10 years, the country is facing a civil war against
terrorism, which has hurt the economy very badly. In my comments about this article, I will take
a review of few facts and figures.

Terrorism in Pakistan cost the country a 6% cut in its GDP in 2009-10 with a figure of 9000
people killed in the last 8 years. Lives, homes and incomes have decreased and education is
detracted very badly in the northern parts and tribal areas of Pakistan. A decline in GDP growth,
reductions in investments, fewer exports, increasing unemployment, increasing number of
disable people, growing inflation and exchange rates are mostly affected areas.

Pakistan’s GDP growth rate was 6.10% in 2005, which is now 2.70% in 2010.

In 2008 fiscal deficit surpassed Pakistan’s target of 4% of GDP. This was due to the low tax
collection and an increase in spending. Inflation is a great problem; in 2007, inflation was
recorded 7.7%, which jumped up to 20.8% during 2008. Those all factors raised prices of
commodities and necessities of life. Pakistan GDP was calculated to be 94.80 billion during
2003-2004. This amount had gone up to 132.95 billion by financial year 2008-09.

Although lot of steps have been taken to improve the economic conditions by donor countries
but still the economic growth rate has not increased due to terrorism. Let us take a review of
the points that how terrorism has affected the country.

1- Difficult in maintaining economic growth.

2- Rising demand of new institution to counter terrorism burden on the economy.
3- Overall economy of the country is in trouble due to rising inflation, low GDP and high
debt.
4- Rise in cost of production
5- Fall in business and investment confidence.
6- Effects on trade balance due to the falling value of the currency.
7- Fall in exports because of decrease in trade competitiveness.

Recommendations:

As a Macroeconomics student, what I can recommend the following steps to improve the
economy:

1- Involve in bringing foreign investment from other countries toward the technical sector.
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 2- Should make tax-free areas to develop industry.
3- Build infrastructure for the mining sector in the far away areas.
4- Make export easy and less expensive.
5- Develop tourism to get more foreign exchange and new investors.
6- Promote development of corporate farming to grow cash crops.
7- Build new dams in the country to produce more electricity for the industry.

This topic belongs to our book chapter 5 “GDP and the standard of living”. Although the topic
terrorism is not included in our book but because terrorism has a deep effect on the lives of
Pakistan’s people and the country’s GDP that is why I made terrorism a reason which effects
Pakistan’s economy.

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