If incompetence and corruption of the ruling elite were not enough to derail the economy, Pakistan’s sustained bout with terrorism did the rest.

Recent research shows that in the absence of terrorist violence, Pakistan’s economy would have grown much faster than it actually did.

A paper by Sultan Mehmood in Defence and Peace Economics tabulated the impact of terrorism on Pakistan’s economy. The author estimated Pakistan’s real (inflation adjusted) GDP per capita would have grown by 177 per cent during 1973 and 2008 (instead of 119 per cent) in the absence of terrorist violence. Thus, the cumulative economic loss due to terrorism is around 33 per cent.

Over the years, several agencies, including the IMF and the government of Pakistan, have tried to guess terrorism’s devastating impact on Pakistan’s economy. A systematic estimate of the impact, however, had been lacking till now.

Also read: 12-year war on terror cost $100bn, says Dar

Sultan Mehmood relies on time-series econometrics to develop estimates of the impact of terrorism on the GDP, FDI, domestic investments, and remittances from expatriate workers. He finds strong evidence in support of the adverse impacts of terrorist violence on Pakistan’s economy. The most devastating impact of terrorism was recorded for reduced remittances and loss in domestic investments.