The economic cost

[Neo]

The economic cost

Tuesday, 27 Apr, 2010


Thousands have lost their lives or suffered permanent or temporary destruction of property. –File Photo Business

IMF board likely to meet mid-May on Pakistan IMF board likely to meet mid-May on Pakistan The World Bank’s Global Monitoring Report 2010 has acknowledged the economic and financial costs Islamabad has incurred due to the security situation in the country. The report places Pakistan among the conflict-affected countries where political uncertainty and fighting continue to disrupt economic activity.
Two other countries in the region — Afghanistan and Nepal — have found a place in this category. Compared to other nations in South Asia, the report says, these three are expected to face more moderate growth outturns. The report also places Pakistan among those countries whose economic growth has been the weakest because they entered the global crisis with large internal and external imbalances. Countries that entered the crisis with stronger economic fundamentals, such as Bangladesh, Bhutan and India, faced up to the problems better.

Pakistan’s internal security problems have worsened in the aftermath of 9/11. It has experienced more violence, particularly acts of terrorism, in recent years than elsewhere in the region. A recent research paper published by the Lahore University of Management Sciences points out that the per capita incidents (of violence) in Pakistan have increased far more rapidly in the last five years than anywhere in the region, mainly because of the insurgency in the northwest of the country. Even Sri Lanka, once considered to be the most violence-prone nation in South Asia, has recently seen its internal security situation improve after the successful quelling of the Tamil separatist movement.

Islamabad has paid a huge economic price for its role in the war on terror. The direct costs of economic disruptions include rapid increases in internal and external security spending at the expense of education and health. Thousands have lost their lives or suffered permanent or temporary destruction of property. Indirect costs include a slowdown in economic growth and manufactured exports. The country’s image has suffered enormously. Foreign buyers are reluctant to travel here and investors have lost confidence in the country. A government estimate puts the direct and indirect costs incurred by the national economy from 2002-2008, because of the war on terror, at just below $5bn. Concessionary funding from multilateral lenders or grants from friendly countries are no solution to Pakistan’s problem. This kind of assistance only encourages consumption, adding to internal and external imbalances. What we need is investment in our energy sector and manufacturing. We need market access in developed countries for our exports. Our economic woes will not go away unless fresh investments are made in the power and manufacturing sectors for job generation and sustainable growth. But before all that we need to formulate sound policies to restore the investors’ confidence.

http://www.dawn.com/wps/wcm/connect/...nomic-cost-740