The Economic Fallout From Pakistan's Taliban Troubles

The Economic Fallout From Pakistan's Taliban Troubles

Picture of a refugee camp for Swat Valley civilians. Photo: <a href="http://www.flickr.com/photos/aljazeeraenglish/3559310232/">Al Jazeera English (flickr)</a>
Picture of a refugee camp for Swat Valley civilians. Photo: Al Jazeera English (flickr)

Pakistan’s Swat Valley is currently at the epicenter of an armed conflict between the Pakistani military and the Taliban insurgents. While the Pakistani government predicts victory is imminent, the economic and humanitarian impact of this violence is likely to be felt for years to come.

Refugees from Pakistan’s Swat Valley have been leaving the embattled North West Frontier Province for many months. The situation reached a breaking point last December when Pakistani forces lost control of the region to Taliban fighters. Approximately 2.4 million are currently displaced, numbers that prompted the UN to warn that the situation is becoming "the world's most dramatic displacement crisis since the Rwandan genocide of 1994."

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 Swat Valley also borders the Sindh and Punjab provinces — the two most important revenue sources for the Pakistani government. In order to protect these areas, the government has placed nearly 70 percent of their military around their borders with the North Western Frontier Province, where the Swat Valley is located.

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.

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.

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