National security in 21st century, is inclusive of both border security as well as economic security; deterioration in one will have ripple effect on the other. The destiny has placed Pakistan in this milieu due to its geography; connecting its western border with Afghanistan. The economic landscape of Pakistan has been significantly shaped by its security environment. The persistent threat of terrorism and the substantial resources allocated to counter-terrorism efforts have had widespread implications. Terrorism causes both direct and indirect impacts on a state’s economic outlook. Viewing historically, the impact of terrorism and the GWOT on Pakistan’s economy is extensive, affecting nearly every sector. Direct costs include significant human and infrastructural losses, increased defense spending, and heightened security expenditures. Indirect costs manifest as reduced investment, disrupted trade, and decreased tourism revenue.

Addressing these challenges necessitates a multi-faceted approach, including improving security, attracting investment, rebuilding infrastructure, and implementing comprehensive economic reforms to foster long-term stability and growth. By framing the issue through a comprehensive lens, policymakers can better understand the depth of the economic challenges and devise strategies to mitigate the adverse effects on Pakistan’s economy.

The menace of terrorism and instability along western border is posing a significant threat to the current most important flagship project of China and Pakistan; the CPEC. The ongoing attacks on the CPEC project are primarily carried out by the Balochistan Liberation Army (BLA), which serves as an umbrella organisation for the Baloch separatists. These separatist factions argue that Pakistan’s deepening ties with China have failed to yield benefits for Balochistan province; instead, they characterize the engagement as a form of exploitation. As a result, they target CPEC facilities, Chinese personnel and the security personnel safeguarding them, employing a variety of terrorist tactics.

Beyond the BLA’s activities, other terrorist outfits such as , Tehreek-i-Taliban Pakistan (TTP), Islamic State Khorasan (ISIS-K) and Tehreek-i-Jihad Pakistan (TJP) have also launched attacks, particularly in border provinces like Khyber Pakhtunkhwa. This cloud of insecurity casts a shadow over the future of this important economic corridor. Addressing these concerns through a multifaceted formula involving military, diplomatic and economic dimensions is crucial for the project’s viability which is considered a crucial pillar in securing Pakistan’s economic future.

The ongoing terrorism on Pakistan’s western frontiers continues to have a profound impact on its economy. Following the 2021 Taliban takeover in Afghanistan, there is a surge in terrorism and the military’s influence grew, a trend that is expected to continue beyond 2024. Terrorist attacks surged by 70%  between 2022 and 2023. The Afghanistan-based Pakistani Taliban (TTP) perpetrated most of the attacks. Islamabad failed to convince the Taliban, which is closely allied with the TTP, to curb the group. Disruptions in bilateral and transit trade, decreased foreign investment, infrastructure damage, killings of Pakistani civilians and security personnels and Chinese employees with increased security costs collectively contribute to economic stagnation.

The HDI of Pakistan has remained significantly low as a security state such as Pakistan has reaped more consequences than the US since the beginning of GWOT. US has lost its military personnels and 2 trillion dollars whereas Pakistan bore a huge collateral damage with more than 2 million lives, unamendable loss in terms of economy and resurfaced threat of terrorism. The need for enhanced defense and security measures has led to increased government spending on military and law enforcement, diverting funds from essential sectors like education, healthcare, and social services.

The way out could seem hard, but impossible. In any case, Islamabad would be unwise to burn bridges with Kabul. Pakistani officials must be pragmatic. While not officially recognizing the Taliban government, they must acknowledge the reality that the Taliban is the sole authority in Afghan territories. This could be done while simultaneously asking Kabul to help combat anti-Pakistan terrorist groups as the interior Minister of Pakistan demanded the arrest of TTP leadership, recently from the Taliban government. Improving border security is the foremost imperative. Moreover, TTA should conform to the Doha agreement at first place because it would be the first step for international recognition and pre-requisite for all other states to extend diplomatic relations with it. As for Pakistan, it should transform its porous border of conflict into border of peace and cooperation. The cooperation must be multi-faceted. Cooperation should be taken as counter-terrorism strategy. It should be based on multiple trade and transit route with security clearance process as security can never take a back seat in already tense environment. Also, equal number of ‘hubs of cooperation’ mandated to facilitate trade, health, education and other basic necessities should be established to overcome socio-economic grievances of the people of border regions who might attract to terrorist activities due to their unheard voices.