Pakistan ranked as the second most impacted country by terrorism in the GTI 2025, with terrorism-related deaths surging by 45 percent compared to the previous year. This placed Pakistan in a grim position alongside other developing nations such as Burkina Faso, Mali, Niger, and Nigeria, where weak governance and ongoing insurgencies have fueled prolonged instability.
This stark deterioration in Pakistan’s security was largely driven by the increased activities by banned organizations responsible for a sharp rise in attacks targeting military personnel, law enforcement agencies, and civilians, particularly in Khyber Pakhtunkhwa and Balochistan. The government’s counterterrorism response, though substantial, has struggled to curb these insurgencies effectively, with diplomatic tensions between Pakistan and Afghanistan further complicating security efforts. The latest report also highlights that urban radicalization and politically motivated violence also spiked, with major cities such as Karachi and Lahore witnessing increased militant activity.
The economic consequences of Pakistan’s high terrorism ranking have been severe. Foreign direct investment (FDI) declined sharply in 2024, with multinational corporations hesitating to invest due to security concerns. Chinese investments, particularly under the China-Pakistan Economic Corridor (CPEC), faced major disruptions, with several projects delayed or scaled back partly due to the worsening security situation. Attacks on Chinese workers and infrastructure forced Beijing to demand enhanced security measures, increasing the cost of doing business in Pakistan. Several international firms have reduced operations or exited the market entirely, further reducing investor confidence. The business environment deteriorated as operational costs soared, with companies increasing spending on security and insurance. Many industries, particularly in Balochistan and Khyber Pakhtunkhwa, faced major disruptions due to supply chain instability, forcing several enterprises to scale down operations.
Trade and cross-border commerce also suffered significantly in 2024, with terrorist attacks disrupting key trade routes. Pakistan’s exports to Afghanistan dropped by nearly 30 percent, while security concerns in Balochistan led to a decline in trade with Iran. International shipping and logistics companies imposed higher risk surcharges on Pakistan-bound cargo, making imports and exports more expensive. This economic strain, coupled with a depreciating Pakistani Rupee, contributed to inflationary pressures, making essential goods more expensive for the general population. Rising security costs forced the government to divert funds from development initiatives to counterterrorism measures, further exacerbating fiscal challenges. Defense and security spending increased by 12-15 percent during the year, reducing allocations for infrastructure, education, and healthcare.
The tourism sector, which had been showing signs of recovery, suffered a massive blow in 2024. Pakistan’s northern areas, a hub for domestic and international tourists, saw a steep decline in visitors significantly due to rising security concerns. International airlines raised travel insurance costs for flights to Pakistan, further deterring potential visitors. The perception of Pakistan as a high-risk destination continued to hinder its ability to attract foreign tourists and investors alike. Politically motivated violence also led to a brain drain, with skilled professionals, particularly in the IT, engineering, and medical fields, leaving the country in search of safer opportunities abroad.
The financial also sector felt the impact of Pakistan’s deteriorating security situation, with international lenders and credit rating agencies lowering the country’s economic outlook. Higher risk perception led to increased borrowing costs, making it more expensive for Pakistan to secure international loans. The government’s reliance on the International Monetary Fund (IMF) and other financial institutions for bailouts intensified, limiting its ability to implement independent economic reforms.
As the country navigates these economic and security challenges, urgent action is needed to restore stability. Strengthening counterterrorism operations, improving intelligence-sharing mechanisms, and engaging in diplomatic efforts with Afghanistan are critical steps toward mitigating the impact of terrorism. With terrorism continuing to evolve, both in its methods and impact, the question remains: Can Pakistan break free from the cycle of violence and economic instability, or will it continue to struggle under the weight of its security challenges?
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