Without going into the debate of we are fighting your war or he war is now ours, one thing that continues to haunt Pakistan, both socially and financially, is its cost. The latest Economic Survey 2010-11 reveals that the cost of this war for FY11 has reached almost $18 billion - a level where Pakistans exports used to be a couple of years back.
Pakistans is a relatively smaller economy, to which $18 billion mean 8.3 percent of the total GDP - it is not less than a miracle that the country has not collapsed, financially and socially due to this exorbitant expenditure. Credit should be given where it is due, and the government and the people of Pakistan do deserve a pat on the back for showing the kind of resilience.
As a pleasant surprise, the Economic Survey 2010-11 gives the break-up of major costs incurred due to the war, something that was demanded by a lot of corners as some thought the cost estimates are inflated and not well-researched. Although, the fact remains that most of the heads remain estimated costs as only a few are measureable in absolute terms, it is nevertheless a job well done.
It also appears that the finance and foreign ministries have joined hands to worked towards costs estimation and there is probably a major change in the computation methodology, as the cost estimates for previous years have been altered a great deal when compared to the Economic Survey FY09-10. For instance, the estimated cost of war in the last year Economic Survey was $43 billion, which is now tallied at $50 billion, hinting that a revised methodology has been adopted.
Without an intention of alleging that the government has inflated or fudged these numbers, it seems a few heads under the cost of war are overlapping in nature and probably require more clarity for the readers. For instance, foreign investment and privatisation costs have been estimated at $2.1 billion and $1.1 billion, respectively.
Critics argue that this is a case of overlapping and that both of these costs are opportunity costs in nature, hence the computation methodology should also be provided - which is a fair demand as the number is now going to be quoted widely in the international media and also while dealing with the strategic allies of the war.
What these costs do not mention, however, is the social cost of the war - which has far graver consequences as it weakens the social fabric and creats disharmony and unrest in the public - and this damage is also not easily repairable. It is therefore a pity that Pakistan ends up getting peanuts on being a front line ally - which hardly even covers the compensation paid to the affectees.
A swift end to the war would definitely be in Pakistans interest. Arguably it may not solve all the problems at once, but will go a long way in comprehensively addressing some of these problems.
By looking at the numbers, the war cost Pakistan over $2 billion on account of tax collection - imagine how Pakistan could have managed a fiscal surplus instead had there been no war. One hopes that the graph that has shown an exponential increase over the decade, soon takes a major dip, for Pakistan can ill-afford such high costs at this juncture.
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COST OF WAR ESTIMATES
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($ bn) FY02 FY11
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Exports 1.40 2.90
Compensation to affectees - 0.80
Physical infrastructure - 1.72
Foreign investment 0.15 2.10
Privatization 0.50 1.10
Industrial output 0.11 1.70
Tax collection 0.25 2.10
Cost of uncertainty 0.10 2.90
Expenditure overrun 0.11 1.60
Others 0.10 0.90
Total 2.72 17.82
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Source: Economic Survey 2010-11
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