Refugees from Pakistan’s Swat Valley have been leaving the embattled North West Frontier Province for many months. Economic aspect of the crisis can’t be ignored as it is going to affect the region long after the conflict ended. IDPs had lost their crops of wheat and fruits. Plum, apricots, cherry, almond and peaches are popular fruits of North West region but they are short in the market this season, if available prices are high.
Such a massive human exodus has served to compound the already growing economic trouble in Pakistan. Inflation rates jumped from 7.7 percent in 2007 to 24.4 percent in 2008, paralleled by a shrinking rate of economic growth. (It’s projected to be 2.5 percent in 2009, compared to about 6 percent for each of the last four years.)
The Swat Valley itself accounts for nearly 10 percent of Pakistan’s economy, stemming mainly from its large mining industry and the notoriously beautiful region’s tourist attractions. Since the conflict exploded last winter, tourism in the region has stopped altogether and industry has almost completely shut down. In addition, the China Post reports that instability in the region has led to a substantial decrease in small-business lending over the last few years because of the region’s instability.
The Wall Street Journal notes that the armed conflict has already cost Pakistan about $35 billion. And the UN High Commission for Refugees estimates that at least $543 million is needed to maintain minimum health standards for those currently displaced. While foreign investors have shied away from Pakistan for months due to political turmoil and security concerns, the economy has so far avoided recession in the global downturn and Karachi shares have gained this year. This could dry up the country’s already meager tax revenues, sending Islamabad back to the International Monetary Fund and other donors for another bailout.
The NWFP sits directly to the north and west of the capital Islamabad and is already being used by the Taliban as a staging area for attacks in Punjab and Sindh. The government is heavily dependent on tax receipts from those provinces, with the country’s manufacturing and economic base concentrated around the main cities of Karachi and Lahore. Continued militant activity is disrupting investment and job creation, increasing the chances that Pakistan could soon face another fiscal crisis like the one that forced it to ask for IMF help months ago.
TIME notes that when the humanitarian costs are tallied up with the costs of weapons, ammunition and the economic toll the conflict has taken on business and tax revenue, the hill Pakistan has to climb is incredibly steep.