The economic costs of Pakistan’s rising insurgency
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While the new government led by PML-N is focusing (and rightly so) on ensuring short to medium term economic stability with the support of the International Monetary Fund and friendly countries, the socio-economic dents to the economy caused by a rising insurgency across the country and particularly in Balochistan and border areas of Khyber Pakhtunkhwa, and Karachi have gone unnoticed.
The attack on Chinese nationals should have prompted the federal economic management team to quantify the future risks to the economy or at least discuss them at the National Security Council meeting. The NSC did meet but only to discuss and rule out a foreign conspiracy behind the ouster of the PTI-led government.
This reminds us of the aftermath of 9/11. Once Pakistan started receiving coalition support funds from the US, no need was felt to discuss the damage which Afghanistan and a difficult border area was incurring. It was only when the funds from the US started to dwindle that the Ministry of Finance, more than a decade later, estimated direct and indirect losses accruing due to the war on terror around a whooping USD 135 billion. These losses, according to the Ministry of Finance included damage to physical infrastructure, foreign investment, industrial production, exports, revenues of the state, and prolonged compensation to affectees. What we could never estimate is the social and phycological costs faced by the affected and marginalized segments of the population.
Today the stakes are much higher. Pakistan’s ambition of connecting with Central Asia, timely implementation of China Pakistan Economic Corridor (CPEC) pipeline projects, development of Special Economic Zones, and even retaining existing foreign investment in the country often becomes a question mark. Announcements by select militant groups vowing to increase attacks on Pakistan’s security forces increase the anxiety of even local businesses – many of whom end up scaling back their expansion plans.
The attack on Karachi’s largest university had indicated the evolving nature of terrorism. Young and educated terrorists are targeting mosques, marketplaces, weddings, schools, public parks and hospitals. This calls for serious introspection. The millions of dollars spent in Balochistan and Khyber Pakhtunkhwa with the aim to provide youth with opportunities of social engagement and networking require immediate evaluation. Several donor and government funded efforts that made Pakistani youth the subjects of experimentation aimed at de-radicalization in the most conventional sense and often following the one-size-fits-all approach have come under question.
This reminds us of the aftermath of 9/11. Once Pakistan started receiving coalition support funds from the US, no need was felt to discuss the damage which Afghanistan and a difficult border area was incurring.
Dr. Vaqar Ahmed
After the takeover of Taliban in Kabul, the PTI government had estimated costs of possibly dealing with a large influx of Afghan refugees. According to 2021 estimates, the government had informed that approximately a million individuals may be affected out of which 700,000 could enter Pakistan. A Cabinet presentation had put the expense of dealing with this situation at over USD 2 billion for a two years period which may not be possible to cover for Pakistan from internal resource and could result in Islamabad sending requests to development partners.
Even at that point, the federal government had not anticipated that despite a more conducive set-up in Kabul, the border areas could see intensified skirmishes owing to anti-Pakistan miscreants. Also, it was not anticipated that refugee related expenses are not the only costs in any Afghan endgame. The real casualty could be the trade, investment, and job creation inside Pakistan. Fragility in the region could give rise to informal and illicit trading activities which will have its own longer-term implications for sustainability of formal businesses in the country. Contraband detection and control which has been strengthened in view of directives from the Financial Action Taskforce (FATF) could also come under stress and could delay Pakistan’s exit from the grey list.
The above mentioned and diverse nature of threats to Pakistan’s next generation are difficult to measure. Several unofficial estimates put the share of Pakistani youth ‘not in education, employment, or training’ to be in the vicinity of 40%. For a country that boasts one of the largest share of youth in population across the globe this should be worrisome. Around 64% of the population is under the age of 30 while 29% falls in the age bracket of 15 to 29 years. With weak economic expansion expected during the medium term and a subdued job market, this demographic dividend could easily pose challenges of unsurmountable nature for the state.
The research by Sustainable Development Policy Institute (SDPI) has shown that one answer for keeping youth falling in the hands of evil lies in a vibrant local level private sector with a stake in development and engagement of youth. Several case studies indicated how resources mobilized by indigenous private sector mitigated violent conflicts well before the state could move in and restore peace. It is this often micro and small-scale private sector at the grassroots level that the PML-N led coalition needs to facilitate through a progressive fiscal policy.
– Dr. Vaqar Ahmed is an economist and former civil servant. He tweets @vaqarahmed
