Budget 2016-17: War costs receding

Updated 19 Nov 2016


ISLAMABAD: With Pakistan expected to face a loss of around $5.55 billion during the outgoing financial year, the Ministry of Finance has estimated that the cumulative loss to the national economy has reached $118.32bn since 9/11 due to the impact of war in Afghanistan.

“Pakistan continues to be a serious victim of terrorism, including foreign-sponsored terrorism from our immediate neighbourhood,” says the Economic Survey 2015-16 in its dollar estimates of the losses suffered by the economy due to the fighting.

The survey says the increase in violent extremism and terrorism in Pakistan was a fallout of instability in Afghanistan. The situation not only caused serious damage to the economy but has also been responsible for widespread human suffering due to indiscriminate attacks agai­nst the civilian population, it added.

“During the last 14 years, the direct and indirect cost incurred by Pak­istan due to incidents of terrorism amounted to $118.31bn equivalent to Rs9.86 trillion,” the survey said.

However, the expected loss of around $5.55bn for the outgoing fiscal year is significantly less, compared to $9.24bn in the fiscal year 2014-15. Both direct and indirect losses to the economy resulting from terrorism are on the decline.

The government has estimated 10 heads that account for the economic loss. One head called ‘expenditure overrun’ was estimated at $620 million in the survey last year, but the final figures came out to be $400m this year.

The analysts say that higher expenditures against the fight against terror were expected after the APS attack in December 2014.

“Security-related projects were envisaged after the enactment of the National Action Plan and it was expected that heavy expenditures would be incurred — such as establishment of Quick Response Force, etc,” Amir Rana, Director of Pakistan Institute of Policy Studies, said.

He added that most of these projects did not materialise and, therefore, the overall the expenditures remained subdued.

The estimate of loss to exports is around $800m in 2015-16, compared to $1.08bn in the previous fiscal year. Physical infrastructure loss is estimated at $70m in the outgoing fiscal against $120m last year.

Meanwhile, some of the estimates are unclear and seemingly based on assumptions such as loss to ‘tax collection’ due to low economic output, which has been estimated at $2.32bn in 2015-16, compared to $2.94bn in the previous fiscal year.

The government has said that ‘foreign investments’ worth $2.04bn have been lost due to the impact of war in Afghanistan, and the cost of uncertainty has been calculated at $10m. There is no information on how these figures have been derived.

The Economic Survey has said that conflict and instability in Afghanistan in the aftermath of 9/11 attacks and their regional implications had very negative repercussions for Pakistan. The years following the US invasion of Afghanistan not only saw a huge influx of Afghan refugees across the border into Pakistan, but also saw a sudden spike in the frequency and scale of terrorist attacks in Pakistan.

The government has said that peace and stability in Afghanistan and the region are vital for the complete revival of Pakistan’s economy and to keep stability in the system.

Published in Dawn, June 3rd, 2016