Islamabad– The Pakistani economy witnessed negative effects as a result of the recent military confrontations with India, which lasted 4 days in May.
Despite the announcement of the Pakistani Ministry of Finance that the direct financial impact was “small”, expert estimates indicate large and indirect economic losses and may be long -term.
During the outbreak of confrontations, the business circles in Pakistan warned that the tension threatens to abort the opportunities for economic recovery, and weakens the hopes of regional integration at a time when the global economy turns towards regional markets and commercial integration.
Direct effects
The crisis between India and Pakistan was reflected on the Karachi Securities Market, whose index has declined since the April 22 attack in the Bagham area in the part of India from Kashmir significantly, but when the confrontations stop the market most of its losses.
During the crisis, the Pakistani currency lost its stability, as the rupee exchange rate ranged between 280 and 284 rupees against the dollar in the open market, but it currently settled between 278 and 280 rupees per dollar.
During the crisis, Pakistan stopped bilateral trade with India, which affected vital imports such as cotton, and led to losses in local industries.
Tourism in Pakistan has also declined, and tensions have led to a decline in investor confidence and the flight of capital.
Despite the tensions, the International Monetary Fund agreed to disburse the second batch of a $ 7 billion loan to Pakistan, worth $ 1 billion, which provided important financial support.
A future look
While the ceasefire helped reduce tensions, economic challenges remain, the Pakistani economy needs political and security stability to attract investments and enhance economic growth.
Pakistani economist Shakeel Rami says it is known that the war brings negative consequences, and the same applies to the last war. However, fortunately, the effects were not dangerous on Pakistan and will be able to deal with the losses that occurred in its capabilities. This highlighted the Pakistani Finance Minister, Mohamed Orangezib, who stressed that his country will be able to manage the situation.
In an interview with Al -Jazeera Net, Rami explained that the losses were limited for several reasons:
- During the clashes, the industrial process in Pakistan was working normally, and there was no disruption in it.
- Pakistan kept the ways of trade with the outside open, so trade was continuing as usual.
- Commercial markets were working well, and there was no shortage of anything.
- The stock market remained stable and showed a sharp rise after the ceasefire.
Rami estimated the economic cost of the recent confrontations on Pakistan between one billion to $ 1.5 billion, noting that the largest part of the cost is related to expenditures on the war.
As air strikes, missile exchanges and drones escalated through the control line between the two cashmere, the financial and human costs of Pakistan increased rapidly.
Anxiety
For his part, the economic researcher at the Institute of Strategic Studies, Mian Ahmed Salik, said that after the confrontations between India and Pakistan, the Pakistani financial markets witnessed turmoil, as the Karachi Stock Exchange index decreased sharply with the decline in investor confidence in the days of confrontations, then he dramatically recovered, most of its losses after the announcement of the ceasefire on May 10.
Salik adds to Al -Jazeera Net that the Pakistani rupee was under pressure as a result of the escape of capital and inflation concerns. Economic anxiety was exacerbated by supply chains’ disturbances and energy fluctuation.
Although the Pakistani Finance Minister tried to calm the situation by saying that the impact of the confrontations on Pakistan is limited to economic, Salik is likely that the view of the Pakistani economy remains uncertain.
He added that the recent confrontations have exacerbated the structural weaknesses of an economy based on external support, warning of any new escalation even if it is limited that would undermine the ongoing reform efforts and expand the financial deficit.
Salik pointed out that on the ground, the costs on the ordinary citizen were great. For example:
- In Punjab (the largest Pakistani regions in terms of population), schools and universities were closed, examinations were postponed, and daily life was disrupted.
- The suspension of commercial airspace and the abolition of flights on a large scale caused another blow to trade, tourism and business travel.
- Defense spending witnessed a significant increase, adding unexpected pressure on Pakistan’s compressed finance.
- On other losses, Salik indicated that confrontations have lost investment opportunities in public services, infrastructure and social development, so money will not come to an unstable country.
Salik said that, in light of this complex economic scene, the decision of India “suspending” the bond water treaty came as an additional strike. Given that agriculture and food security in Pakistan depends heavily on the Sind River system, the suspension of the treaty is seen not only as a violation of diplomatic norms but as a direct threat to the country’s economic stability.
The two parties are loser
For its part, the economic analyst and political writer, the capital of Wadod, said that both India and Pakistan – despite the difference between the two economies – will face a financial impact of the war, with its high debts, the economic challenges of Pakistan will worsen.
Speaking to Al -Jazeera Net, the capital explained that India, which recently obtained a huge investment deal with the United States, must maintain the stability of the region to ensure the flow of investments.
She added that it is interesting that the economic impact of this war is not limited to these two countries only, noting that one of the greatest battles of warplanes has changed the dynamics of economics and military power globally.
The capital of Pakistan and India suggested that, following the recent confrontations of their defensive budgets, which would put pressure on the economy.
