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Pakistan’s stock market ended 7 percent lower on the week as cautious investors sold amid continued militant attacks across the country. The World’s Katy Clark looks at the economic impact of the fight against terrorism in Pakistan.
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MARCO WERMAN: The near-daily attacks aren’t just shaking nerves in Pakistan. They’re undermining what had been one of Asia’s fastest growing economies. The World’s Katy Clark reports.
KATY CLARK: Former Pakistani president, Pervez Musharraf, instituted a number of economic reforms after taking office in 1999. Those reforms helped push Pakistan’s stock market index up more than a thousand percent by 2007, and annual GDP growth to a healthy average of six-and-a-half-percent. But there’s been massive capital flight since those days, and the rupee < has lost a third of its value. Moeed Yusuf is a fellow at Boston’s University’s Pardee Center.
MOEED YUSUF: Pakistan was doing really well macroeconomically in the past six to seven years. But now after the global financial crisis, the oil prices hike, and domestic governance issues most importantly, clearly its economy is in dire straits. It’s no doubt about that
CLARK: Since President Musharraf resigned a year ago, the new administration in Pakistan has gone on the offensive against Taliban forces, first in the Swat Valley and now in south Waziristan. Yusuf doesn’t think the economic crisis drove the government’s decision to take on the militants, but he says it was a clearly a factor.
YUSUF: The military as well as the government understands if this instability continues, there’s no way country can get back on the trajectory of economic growth that it was under the Musharraf regime. The driving force is the law and order and public sentiment, which is now, you know, against the Taliban and wants the military to go in and take care of the problem.
CLARK: The problem, though, isn’t likely to go away any time soon, and it’s tough to bring economic stability to a country under siege. Paula Newberg runs the Institute for the Study of Diplomacy at Georgetown University. She says Pakistan’s insurgency hurts the country’s economy in a number of ways.
PAULA NEWBERG: For one thing, what you see is massive movements of people from various areas of the country to those that are safer. So for example with the action in Swat you saw large, large numbers of people leaving Swat, a place that was actually once quite vibrant within a rural economy, but has become quite devastated, and its economy therefore pretty much implodes.
CLARK: Newberg says violence in the border areas between Pakistan and Afghanistan has also interrupted vital trade between the two countries. And as instability has spread across Pakistan in recent weeks, Newberg says transportation lines, key for maintaining a healthy economy, are also being disrupted.
NEWBERG: Under the conditions I’ve just described, it’s very hard for any country, any state to be able to continue to develop and strengthen its economy.
CLARK: The United States has recently authorized seven-and-a-half-billion dollars in aid to Pakistan over the next five years. Past aid money was directed at the military. This time, however, the money’s being earmarked for civilian use, things like health, education, and energy infrastructure needs. That last one is a big problem in Pakistan. Many factories there don’t have a steady supply of electricity and have been forced to shut down, adding to the country’s already significant problems. For The World, this is Katy Clark.
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