Pakistan’s Economic Misery – Breeding Ground For Terrorism

Terror does not spare even those who use it as a tool of state and foreign policy. Pakistan is a classic case. While Islamabad is facing an all-round deterioration in its economic conditions, it is increasingly getting exposed to insecurity and terrorism.

The country is facing a very difficult phase in its history marked by a mix of all-round failure on economic front, volatile politics and heightened terrorist threats.

Due to flawed priorities and debt dependent economic growth model, Pakistan had been unable to break the vicious cycle of poverty. It remains a low income, low saving, low capital formation, low growth economy which has repeatedly reinforced itself in a circular path in the past.

The result is incidence of a high level of poverty. About 40% of the people are below the poverty line in Pakistan. Poverty is the most fertile breeding ground for terrorism as evidenced in the country. Many of the misled suicide bombers who offered their services to the Jihadi organizations were prompted to do so due to frustration, hopelessness and fatalism bred by their deprivation and dehumanized existence rather than devoutness to religion.

There is ample literature that shows that terrorism affects developing countries much more severely than developed ones, as terrorism leads to reallocation of scares resources away from production, infrastructure building and public welfare. This is what is happening to Pakistan in the last few decades and it continues.

Though terrorism is nourished by fundamentalist religious groups and sectarian indoctrination, the seeds lie in economic deprivation, social injustice, absence of rule of law and insufficient opportunities. To blur these inequalities, and quell discontent, political class in Pakistan chooses to flare up religious fundamentalism and sectarianisms to distract and cajole people.

However, this eventually leads to disillusionment and provides a breeding ground for terrorism. Terror mindset is separated by a very thin line from sectarianism and fundamentalism, which provide ground for indoctrination.

Pakistan was severely impacted by terror attacks in 2022. A report by Pakistan Institute for Conflict and Security Studies found that militants carried out 376 attacks in which 533 of its citizens were killed, stating that the attacks in 2022 were the highest. And recently the Sydney based Institute for Economics & Peace’s Global Terrorism Index – 2023 also confirmed this. It stated that Pakistan had faced an increase in terrorist threats by 120% in the year 2022 over the previous year.

The case of Pakistan is unique. It first allowed terror to grow freely for its Afghan cause and war of attrition with India on Kashmir, now it has become victim of the same. Its economy has been under serious pressure due to leakages of resources for its war against terrorism. While the human cost of terrorism is devastating, the economic cost is much larger than most policy makers realize. According to Pakistan’s Economic Survey (2017-2018), direct and indirect cost of terrorism incidents to Pakistan was USD 126.79 billion. Some media sources also estimated huge loss of human lives as high as 60,000 people including civilians, security force personals and terrorists have been killed during 2000 to 2019.

Terrorism will not only cause primary economic impact, but will also produce considerable secondary or indirect impact. It also damages financial markets and local economy in the long term. Lack of conducive business environment, peace and poor law & order and governance are some of the factors that have been impinging the Pak economy in several ways.

For years, Pakistani leaders have underinvested in human capital. Gallup Pakistan estimates that 21.8 million of the 58.6 million young people, aged between 15 and 29, are not enrolled in school, training programmes, or working in any job. The military, which wields tremendous power in Pakistan, has warped economic policy by prioritizing rivalry with India taking away significant chunks of the country’s narrow resource base.

Pakistan, for example, faces drain of human resources, especially intellectuals due to terror activities. Pak authorities estimate that 832,229 Pakistanis left their country in 2022 because of the ongoing economic crisis, political instability, and a weak law & order situation.

Pakistan’s young people said that they would like to work and study overseas and 50% would not like to return to their homeland. This is alarming as educated and talented manpower could have made a substantial economic contribution which is being lost. According to a survey conducted by the Pakistan Institute of Development Economics (PIDE), 62% of young Pakistani men between the ages of 15 – 24 wish to leave the country.

Observers point out that Pakistan is a country that is not backward due to the shortage of natural resources or manpower, but due to a handful of selfish and corrupt rulers and military & civil officers. The only aim of these greedy and ruthless persons is to accumulate as much wealth as possible and launder it outside the country.

Many of them have built assets overseas and sent their wards for education and employment to greener pastures abroad. On the other hand, millions of people are living in a pitiable condition in slums and unventilated homes with no access to food, drinking water, primary health care and education.

The COVID-19 pandemic has had a significant impact on Pakistan’s economy, leading to a decline in GDP growth, job losses and increase in poverty. And now, the economic recovery is facing an unprecedented shortage of forex resources and inflation.

The condition has further worsened due to Russia-Ukraine war and uncertainty caused by the failure of big banks in the West. Even while the economy has come on the brink of default, instead of focusing on development of the economy, Islamabad is pursuing regressive ideological goals. The jihadi activities are now catching up, threatening the very existence of the country and people.

Pakistan’s political and economic troubles are intertwined with its inconsistent treatment of terrorists. For decades, Pakistan has allowed some terrorist groups to operate freely while cracking down on others. Observers point out at the sympathy for jihadis among the public and within law enforcement and intelligence, along with inaction by members of the political class are the factors which have allowed domestic militant groups to operate with impunity and fearlessly as the country has chosen to remain a safe haven for them.

In turn, these terrorist activities have also made it difficult to attract investment in Pakistan. Pakistan is a no go area for foreign investors and businessmen and many of them did not even like to visit the country.

Islamist groups recruiting in Pakistan cited hadith that prophesied a great battle. Pak establishments thought that radicalization through religion could help break the deadlock over Kashmir and empower Pakistan’s allies in Afghanistan.

The strategy instead turned Pakistan into a battleground of competing interpretations of radical Islamist ideas. The fading line between good and bad terrorists has swept deep in the society as well as people’s mindset. This now poses a new and serious challenge for the whole country.

This mixing up of terror with state policy and failure to curb terror has eroded Pakistan’s international credibility. Taliban’s takeover of Kabul with Pak support in 2021 has seen an uptick in terrorist attacks in various parts of Pakistan. Mohsin Dawar, a lawmaker from North Waziristan said, “I believe that instead of finding strategic depth in Afghanistan, Pakistan has handed over a strategic depth in Pakistan to the Taliban.” The resurgence of domestic terrorism in Pakistan is now a bitter harvest for Islamabad. It never imagined that its support to Afghanistan could eventually boomerang and undermine its own security.

Many observers including the World Bank warn that if Pakistan government and establishment do not opt for a change of mindset, the coming days would lead to social tension and instability. Domestic militant threats are expected to intensify amid a toxic cocktail of economic deprivation, social marginalization, heavy-handed security, ethnic nationalism, and tribalism.

Afrasiab Khattak, former President of the Human Rights commission of Pakistan said that as Pakistan becomes increasingly militarized against internal foes, ignoring broader regional and global developments, a descent into civil war is possible. Across the country, terror attacks are on the rise, Baloch and Pashtun nationalists are chafing against forced disappearances and extrajudicial killings.

How a country uses its scare resources matters. While Pakistan’s terror attacks increased, its development priorities were marginalized. Political managers failed to see the dichotomy of opposites in terrorism and development.

Pak administration avoided reform while arguing that Pakistan is too big to fail as they get abundant assistance/aid from the US and the Middle East as well as expensive debt laden projects from China. Islamabad had received good amount of assistance from multilateral agencies for development as well. Besides, there is thriving illegal money in the economy from drug trafficking, etc. Furthermore, there is zakat contribution, a kind of people’s contribution in the name of religion which is about 7% of GDP. But all these resources are used inefficiently and even channeled to non-state players who carry out terrorist activities designed by the ISI.

It is time for Pakistan to realize that terrorism in any form is obstacle for development’. It eats precious economic resources, vitiates business environment and causes many direct and indirect losses to the economy and society. Good governance could raise the living standard of the people and promote peace and prosperity. Terrorism does no good either to state or to people in long term. The million dollar question is that would Pakistan realize?

(The Pakistan Military Monitor)