For the first time in the past couple of months, the Karachi Stock Exchange (KSE) has reported a decrease of 785 points.
The reduction in the KSE comes after the rising tensions between India and Pakistan. The incident on Tuesday, in which 12 Indian fighter jets violated the Line of Control (LoC) and came into Pakistani airspace, sparked concern from the investors in the market. According to Tribune, the index began to fall as soon as it started trading.
The KSE closed at 38,822; falling below 39,000 for the first time over the past few months.
All major sectors in the economy reported poor performances yesterday. The reports for some of the multiplicity of losses is as follows:
- Nishat Mills – (-3.2%)
- OGDC – (2.8%)
- Habib Bank – (-0.8%)
- Engro – (-1.6%)
- FFC – (-1.4%)
- Lucky Cement – (3.2%)
In a statement by, JS Global analyst, Danish Ladhani, he said, “Going forward, we expect the market to remain volatile on geo-political concerns.”
Economic reasons to avoid war
The biggest issue that war or any conflict brings to the countries involved is the situation of increasing inflation. Inflation is defined as the general and sustained rise in price levels, over a period of time. Therefore, in a conflict-like situation price levels for goods will rise, which will encourage people to spend more and save less, which in turn will create a bigger loop of spending, increasing the circulation of money within the economy, which will eventually lead towards two possible outcomes:
1. The purchasing power of the people will fall and long-term standards of living will decrease under extreme circumstances.
2. The currency will eventually devalue, as excess spending on goods leads to increasing money supply in the economy.
Under the possibility of a full scale war between India and Pakistan, the destruction will be immense, ‘Hyperinflation’ is often the result at the end of a war.
Another reason, why tensions should never lead to war, is because of the opportunity cost. War, in itself, is extremely expensive and government spending on military expenditures is very high. Due to this, governments neglect sectors such as health care and education, so that they can use the finances for the benefits of war.
With regards to Pakistan, a developing economy, the circumstance of war would serve to be a major setback in terms of economic development.
The biggest reason
But let’s put some of these reasons aside, and talk about the biggest reason why war is awful. The human cost.
There is an extensive and an unprecedented loss of human life. This reason enough, should act as a deterrent for avoiding war. The casualties, associated with war, and its effects/repercussions span long after the war ends.
Let’s hope that rationale and peace prevail in such precarious circumstances and that the two countries understand the gravity of the situation and understand that plunging themselves into war is no way of countering any problem.