Terrorism and Economic Growth: The Story of Pakistan


On December 16, 2014, terrorists killed 150 people, of whom at least 134 were students, while Taliban pirates attacked the Army Public School in Peshawar, Pakistan (Lewis 2019). In response to this, as well as other widespread threats in the country, the Pakistani government and military have carried out counter-terrorism operations, particularly in the North Waziristan region of Khyber Pakhtunkhwa, under the auspices of Operation Zarb-e -Azb. Crime is a major and complex issue in Pakistan; Pakistan’s Global Terrorism Index (GTI) in 2019 was 7,889 out of 10, making it the fifth most affected country by terrorism last year (Institute for Economics & Peace 2019). Terrorism poses a serious threat and is one of the main obstacles to the stability and growth of Pakistan. Terrorism has a negative impact on the economy, as it damages both the physical and the social, creates market uncertainty that creates suspicion among investors / businessmen, and urgently demands government spending on security and anti-terrorism facilities.

The level of crime and violence in Pakistan was particularly acute in the late 1970s and early 1980s. namely the Iranian Revolution, the Iran-Afghanistan war, the Soviet-Afghan war and the Cold War (Zahab 2002). These global developments affected Pakistan because of its politics and ideology. Currently, a number of internal factors are identified as causes of terrorism in Pakistan, racial inequality, illiteracy, financial inequality, inflation, population growth, unemployment, political instability, poverty, and injustice (Zakaria, Ahmed and Jun 2019).

Terrorism, whatever the cause, can lead to “crisis” that threatens the country’s economy, directly or indirectly (Ross 2019). Specifically, terrorists destroy the country’s infrastructure and destroy three major elements in production: land, labor and capital. All of this plays an important role in determining economic growth, but it is directly affected by terrorism. The complexity of the whole process, while seemingly insurmountable and impossible to calculate, is another kind of fixed price in the world. Alternatively, risks could reduce domestic and foreign investment, increase inflation, disrupt the market, increase unemployment, and boost government spending on security instead of economic and social development activities (Zakaria, Ahmed and Jun 2019) .

Fraud has a temporary and long-term impact on financial decisions, corporate practices, and government systems. First, it leads to uncertainty in the market. Uncertainty reflects the country’s image to investors, reduces temporary financial returns (Abadiea and Gardeazabal 2007), and shifts money that can be traded in areas with fewer terrorists or countries. As a result, business events and business downturns are reduced by terrorist offenses that occur over a period of time. Second, terrorism causes the government to spend more money on security and anti-terrorism programs. In many cases, the use of weapons is considered impressive, but the “broken window” – a metaphor used by economists to illustrate the economic crisis and devastation – leads to the devastation of economic terrorism (Ross 2019). The government’s overarching goal has shifted from economic and social development to not only contributing to economic prosperity but also to tackling the root causes of terrorism such as poverty, illiteracy, financial inequality, unemployment, and injustice. As a result, price opportunities – the benefits of choosing an alternative – to self-defense and development are very high, and, as in the industry, should be included in the national price.

A study titled “The Consequences of Violence in Pakistan’s Economic Growth: a dynamic analysis” (Zakaria, Ahmed and Jun 2019) analyzed three major categories, based on the events of 1972-2014, that were affected by terrorism. These were external to Foreign Investment (FDI), domestic finance and government spending. The results confirmed that terrorism at FDI and foreign investment was extremely difficult, while government spending was very good. The web results, however, are disastrous. We can expect that since terrorists require the government to respond promptly, the government’s response is encouraging. But changes in government systems can be challenged depending on the cost of security in place rather than development, as we have already mentioned.

The effects of terrorism on a country and its people may not be exactly the same as economics, but a comprehensive estimate can detect that terrorism is deeply entrenched in various economic sectors. Pakistan faces the threat of terrorism from within and outside. According to the Global Terrorism Database (GTB), of the 3043 crime incidents Pakistan experienced from 2001 to 2012, 2737 were pastoralists while 191 were ethnic (St. Louis Fed On the Economy 2018). Terrorism threatens Pakistan’s economy for two reasons. First, unlike developed countries, Pakistan fails to control terrorism without highlighting the economic crisis. Second, internal conflicts (domestic terrorism) – which are on the rise in Pakistan – have far more economic implications than international attacks (Hyder, Akram and Padda 2015). What must Pakistan do to counter terrorism to prevent a recession?

The study “The effects of terrorism on Pakistan’s economic growth: an interesting analysis” he said, based on what happened in 2002-2015, showed that there was a marked link between GDP and terrorists (suicide) in Pakistan, for example, when terrorism is low, economic growth is high and vice versa (Zakaria, Ahmed and Jun 2019). Considering the financial crisis of crime, a viable solution would be to reduce terrorism / long-term damage and help grow wealth instantly. Economic growth in education and health care around the world has proven to contribute to economic growth in developing countries and to reduce terrorism by eliminating its causes (Ritter 2016). Human wealth is defined as “knowledge, skills, abilities and socially constructed human beings that contribute to the stability of life, life and wealth” (OECD 2018). Pakistan’s Human Capital Index (HCI) is currently 0.39 out of 1 (World Bank Group 2018), indicating a significant change. Pakistan’s government and business organizations must continue to advance social development, especially in the areas of education, health and business, in order to achieve economic growth and fight terrorism at the same time.


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