Costs and Consequences of the War on Terror
The War on Terror imposed costs on Pakistan that compounded across two decades and that continue to shape the country today. Understanding these consequences — beyond the immediate body counts — is essential for any analysis of contemporary Pakistani politics, foreign policy and security posture.
Economic consequences
The direct economic cost — over $150 billion in cumulative losses, according to Pakistani government estimates — captures only part of the picture. The deeper economic consequences include:
- Lost foreign direct investment: Pakistan's FDI inflows fell from $5.4 billion in FY 2007–08 to under $1 billion annually through much of the 2012–18 period, recovering only partially since.
- Tourism collapse: visitor numbers to Swat, Gilgit-Baltistan and the northern areas declined from approximately 800,000 in 2007 to below 100,000 in 2010, with recovery beginning only in the post-Zarb-e-Azb period.
- Insurance and security premiums: shipping and aviation insurance premiums for Pakistani routes carried a permanent "war risk" surcharge throughout the period.
- Diversion of fiscal resources: defence spending as a share of GDP remained elevated; security operations, refugee management and reconstruction absorbed development budgets that would otherwise have funded education and health.
- Damage to physical infrastructure: roads, bridges, schools (over 1,200 schools destroyed in the Swat valley alone during 2007–09), hospitals and government buildings required reconstruction running into billions.
The compounding effect across the two decades was substantial. Studies by the Pakistan Institute of Development Economics estimate that Pakistan's GDP in 2021 was roughly 8–12% smaller than it would have been absent the War on Terror disruption.
Political consequences
The political consequences were equally far-reaching:
Civil-military relations
The War on Terror reinforced the military's centrality in Pakistani state and society. The army's role as the principal interlocutor with the United States, as the operational arm of counter-terrorism, and as the institutional bearer of internal security responsibility deepened during the Musharraf period (2001–08) and persisted under successive civilian governments.
The 18th Amendment and FATA
Two major constitutional reforms during the war period had long-term consequences:
- The 18th Constitutional Amendment (April 2010) devolved substantial powers to the provinces, partly in response to the political consensus that grew during the war years.
- The 25th Constitutional Amendment (May 2018) merged FATA into Khyber Pakhtunkhwa, ending the Frontier Crimes Regulation that had governed the tribal areas since 1901.
Political polarisation
The drone programme, the Abbottabad raid, the NATO supply-route closures, and recurrent US criticism of Pakistan produced sustained political polarisation on foreign policy. The PTI under Imran Khan, in particular, built much of its early political identity on opposition to the drone programme and to Pakistani alignment with US war policy — a position that complicated bilateral relations from 2018 onwards.
Social consequences
The social fabric of the affected areas was reshaped:
| Dimension | Consequence |
|---|---|
| Displacement | At peak, 3.5 million Pakistanis were internally displaced from FATA and Swat operations |
| Education | Over 1,500 schools destroyed in FATA and Swat between 2007 and 2010 |
| Health | Maternal-mortality and immunisation rates declined in affected districts |
| Sectarian violence | Recurrent attacks on Shia, Hazara, Ahmadi and Christian communities |
| Madaris ecosystem | Growth of unregistered seminaries; uneven regulatory response |
| Mental health | Substantial increase in PTSD, particularly among displaced populations and security personnel |
The 2009 IDP crisis from Swat alone — over 2 million people displaced in three months — was one of the largest internal displacement events in modern South Asia.
Strategic consequences
Strategically, the War on Terror reshaped Pakistan's external relationships:
US-Pakistan relations
The bilateral relationship moved through three phases during the war:
- 2001–2007 (Musharraf alignment phase): high-tempo cooperation; major non-NATO ally status; aid packages
- 2008–2014 (turbulent partnership): Abbottabad raid, Salala, Raymond Davis (2011), drone-strike controversies; mutual mistrust
- 2014–2021 (transactional cooperation): reduced strategic content; counter-terrorism continued, but broader partnership thinned
The relationship has not recovered to the 2001–07 level since.
China-Pakistan relations
As US-Pakistan relations cooled, the China-Pakistan partnership deepened. The launch of CPEC in 2015 was the most visible expression of this realignment. By 2018–19, China had effectively replaced the US as Pakistan's principal external partner on infrastructure, energy and (increasingly) military hardware.
Afghan policy
Pakistan's Afghan policy moved from the pre-2001 Taliban-friendly posture, through the 2001–14 operational alignment with the US-led intervention, to the 2014–21 hedging period (cooperation with the US while maintaining channels to the Afghan Taliban), and now to the post-2021 effort to manage a Taliban-led Kabul that has not delivered on its commitments regarding the TTP.
Indian dimension
India was a continuous reference point in Pakistani threat perception throughout the war. The 2008 Mumbai attacks — by Lashkar-e-Taiba operatives — produced a severe bilateral crisis and accelerated Indian-US strategic alignment. The 2016 Uri and 2019 Pulwama-Balakot exchanges further deepened the Indo-Pakistan freeze.
For two decades, the United States and Pakistan have fought together against terrorism, paid each other in aid and rebukes, exchanged compliments and accusations in roughly equal measure, and ended each phase no closer to a shared strategic vision than they began.
The legacy question
A central debate in contemporary Pakistani policy circles is whether the costs of the War on Terror partnership were worth the benefits. Defenders of the alignment argue:
- Pakistan averted a worse outcome (Indian-US alignment against Pakistan, sanctions regime, loss of nuclear-asset legitimacy)
- The country received substantial economic and military assistance during the period
- The internal counter-terrorism capability built up has lasting value
- Pakistan's geopolitical centrality was reinforced
Critics argue:
- The economic costs vastly exceeded the assistance received
- The internal terrorism problem was, at minimum, exacerbated by alignment
- Pakistan's society and governance were destabilised
- The strategic returns to Pakistan were limited
A balanced assessment recognises that the alignment was, in significant respects, a forced choice — Pakistan's options in September 2001 were genuinely narrow — and that the outcomes that followed were shaped by external decisions (the Iraq war, the surge, the manner of the 2021 withdrawal) over which Pakistan had limited control.
The next topic — Pakistan's post-9/11 foreign policy more broadly — examines the diplomatic dimension of this twenty-year period in greater depth.
For CSS essay questions on the costs and consequences of the War on Terror, structure the answer through five categories: economic, political, social, strategic, and legacy. Avoid the temptation to write a single chronological narrative; thematic organisation produces a stronger script.