The economic toll of terrorism on Pakistan's economy over decades

ISLAMABAD: Terrorism in Pakistan has taken a heavy human and economic toll, with attacks affecting public infrastructure, investment, trade and government spending over decades.

According to the Pakistan Economic Survey 2017–18, Pakistan had suffered economic losses of $126.79 billion from terrorism and the spillover effects of the war in neighboring Afghanistan. By 2025, that figure had crossed $152 billion.

The economic damage came through multiple channels. Direct losses included the destruction of roads, bridges, schools, hospitals, markets and power infrastructure. Other costs came from reduced investment, slower business expansion, lost employment opportunities and disrupted economic activity.

Exports were among the sectors affected. Insecurity increased insurance premiums, raised transport costs and created challenges for exporters. Businesses faced uncertainty, while some investors avoided or withdrew from Pakistan.

The government also spent billions on rebuilding damaged infrastructure, supporting victims and increasing security operations. Reduced business activity affected tax collection, while additional security spending placed pressure on public finances.

The economic impact was also linked to uncertainty. Businesses delayed investment, hiring and expansion decisions because of concerns about security risks.

Government resources were directed toward security operations, intelligence, rehabilitation and law enforcement instead of areas such as education, healthcare, infrastructure and development.

Pakistan also faced additional pressure from hosting millions of Afghan refugees, affecting public finances, healthcare, education and infrastructure.

Many supporters of Pakistan’s counterterrorism efforts point to international assistance received during the War on Terror. Pakistan received about $33 billion in total assistance, including roughly $14 billion in reimbursements for costs already incurred, $11 billion in economic assistance and $8 billion in security-related support.

The Centre for Research and Security Studies (CRSS) estimates terrorism reduced Pakistan’s gross domestic product by almost 3% annually during the worst years. Terrorism reached its highest economic cost in 2011, when losses were estimated at nearly $24 billion in a single year.

The Pakistan Stock Exchange also reflected periods of economic pressure. Its market capitalization fell from about $100 billion in 2017 to around $27 billion in 2022 before beginning to recover.

The economic effects of terrorism extended beyond immediate destruction, affecting investment, exports, employment and long-term economic growth.