ISLAMABAD: A four-day military standoff between arch foes Pakistan and India last week cost both nations an estimated $1 billion an hour combined, a leading economist said this week, as a finance adviser to the government argued the conflict would have “minimal fiscal impact” for Islamabad.

Tensions between nuclear-armed neighbors India and Pakistan escalated after a deadly April 22 attack on tourists in Indian-administered Kashmir that India blamed on Pakistan, which denied involvement. On the night of May 6/7, India struck multiple sites in Pakistan that it said was “terrorist infrastructure” and Pakistan retaliated, downing five Indian fighter jets. 

Over the next four days, the two nuclear-armed rivals engaged in the worst fighting between them since 1999, pounding each other with fighter aircraft, missiles, drones and artillery fire, until a ceasefire was brokered by the US and other nations on Saturday. 

The military confrontation had in the meantime disrupted stock markets, led to airspace closures, escalated defense spending and caused economic losses amounting to billions of dollars.

Asked about the economic cost of the conflict, Farrukh Saleem, a prominent Pakistani political scientist and economist, said he estimated the 87-hour confrontation cost “about a billion dollars an hour for both countries put together,” breaking it down into estimated costs borne by either of the neighbors.

“India has a much larger army, much larger air force. Once it starts moving, once it starts mobilizing its troops, it costs about, let’s say, 12 to 20 times more for the Indian army to mobilize itself as compared to the Pakistani army,” Saleem said.

“So, when I say a billion dollars an hour, you’re probably looking at 20 percent of that being incurred by Pakistan and a good 80-85 percent by India.”

The investment in war was also different, Saleem said, comparing India’s French Rafale fighter jets to Pakistan’s Chinese J-17 Thunders and J-10cs. 

“You look at Rafale, for instance, which is the French aircraft, with its paraphernalia, it’s about $240 million apiece. India has a $16 billion investment into Rafales,” Saleem explained. 

“On the other hand, Pakistan Air Force has gone for cheaper platforms. They are either JF-17 Thunders or J-10Cs and they’re like $20-25 million.”

In terms of missiles, the Indian ballistic missile BrahMos is $3 million apiece. 

“If you’re firing, let’s say, 8 to 10 [missiles] a day, that’s 10 times $3 million, that’s $30 million in one day,” the economist said. 

Arab News reached out to the defense ministry and Pakistan’s military media wing for official estimates of the latest conflict’s cost but did not receive a response. 

But Khurram Schehzad, an adviser to the Pakistani finance minister, said the fiscal impact on Pakistan would not be large.

“The current standoff with India won’t have a large fiscal impact on Pakistan,” he told Arab News. “It can be managed within the current fiscal space, with no need for a new economic assessment.”

Schehzad said Pakistan’s economic resilience was evident from a new record at the Pakistan Stock Exchange, which on Monday posted the highest single-day gain in over 26 years, surging by 10,123 points or 9.45 percent, significantly surpassing the losses recorded last week following the Indian strikes.

“Pakistan’s measured and responsible response, in both its narrative and actions on the ground, has caught investors’ eye, alongside the potential positive spillover effect of a possible settlement in the US-China tariff issue,” he added.

But economists say the recent military standoff has already inflicted heavy financial losses on both countries.

Saleem said daily economic losses from the conflict, including stock market declines and other impacts, amounted to around $20 billion per day, with Pakistan losing up to $4 billion and India as much as $16 billion a day.

“I have tried to put things together. If this conflict had continued for 30 days, my estimate is that both countries would have lost a good $500 billion, with over a $400 billion loss for the Indian economy,” he said.

Dr. Ali Salman, Executive Director of the Policy Research Institute of Market Economy (PRIME), an Islamabad-based independent economic policy think tank, said the conflict had disrupted economic sentiment and affected investor confidence.

“Certainly, investors would not like to come into countries, whether India or Pakistan, if they are in a constant war-like situation,” he told Arab News.

He also warned that a prolonged conflict would push people in both countries deeper into poverty, noting that one in four poor people in the world lived in India or Pakistan.

“We have 27 percent of the world’s poor in just these two countries, and I believe that we need to come out of the military contest and go into an economic contest,” he added.

Another economist, Shakeel Ramay, said every war had an economic dimension and this conflict too had imposed a heavy financial burden on both economies.

“Pakistan’s military expenditure over the four-day conflict, including jets, artillery and missiles, amounted to around $1.5 billion from the national budget, by my estimate,” he said, a significant cost as the country walked a tricky path to economic recovery bolstered by an $7 billion IMF bailout.

“The good thing is our economic activities continued without interruption, retail markets operated smoothly with no shortages and trade routes remained open, all indicating that the direct economic cost was minimal,” Ramay added. 

ISLAMABAD: Pakistan’s increasing gold exports are likely to take a hit due to a ban on the import and export of precious metals introduced amid last week’s military standoff with India, analysts said on Wednesday.

On May 6, the government enforced a 60-day ban on the import and export of precious metals, jewelry and gemstones to stabilize its foreign exchange reserves, just one day before India attacked Pakistan.

The deadly escalation followed an attack in Indian-administered Kashmir on April 22 that killed 26 tourists, which New Delhi blamed on Pakistan despite Islamabad’s denial of any involvement.

Nearly two weeks after the incident, the nuclear-armed neighbors exchanged ballistic missiles and artillery fire after India targeted what it called “terrorist infrastructure” inside Pakistan.

Gold remains a traditional store of value in the country, which primarily sources its imports of the metal from the United Arab Emirates, Switzerland, Turkiye and other major gold-trading global centers.

“This ban is expected to be lifted,” Ahsan Mehanti, the Chief Executive Officer at Arif Habib Commodities Ltd, told Arab News. “However, it is negatively impacting the country’s gold exports that were increasing to a record level.”

According to the Pakistan Bureau of Statistics, the country’s jewelry exports rose by 58 percent to Rs3 billion ($11 million) in March this year, matching the total for the entire previous year.

“This 58 percent surge is a record,” Mehanti said, adding the ban will have a short-term impact on gold exports this year, which are bound to increase later when the ban is lifted in July.

“The ban was imposed when the [Pakistan-India] border tensions started intensifying,” he continued. “This military escalation could have led to an increase in the circulation and prices of gold in Pakistan, but no such thing happened because of the government’s ban.”

He maintained the ban helped the gold market avoid speculative trading that kept the prices in check.

Mehanti said since international gold prices have declined on the back of the US-China trade war’s settlement, “we expect the surge [in Pakistan’s gold exports] to be higher than the previous record surge of 58 percent.”

Pakistan’s Dawn newspaper reported on May 8 the export curb aimed to limit the flow of gold and other precious metals to India via Dubai, citing unnamed government officials.

It added the ban was also intended to restrict the outflow of dollars from the cash-strapped country, which has spent over $28 million on importing 368 kilograms of gold so far this year.

However, the commerce ministry spokesperson, Muhammad Ashraf, denied the ban had any “relevance to the Pak-India conflict.”

A member of the managing board of Karachi Sarafa & Jewellers Group, M. Iqbal, said Pakistan’s gold market was linked to the international gold market, which is mainly driven by the dollar.

“Gold would take a hit when the United States faces an issue like what we saw during the US-China tariffs war,” he explained.

The cash-strapped country also exported $4.1 million worth of gems in the first nine months of FY25 ending in June.

Prime Minister Shehbaz Sharif’s administration is relying mainly on the International Monetary Fund’s (IMF) $7 billion loan program to keep debt-ridden Pakistan’s balance of payments in check, as exports have grown only six percent this year while foreign direct investment has remained stagnant for decades.

The government has incentivized jewelry exporters through duty drawbacks and zero-rating for specific inputs, which helped the country’s jewelry exports rise 43 percent last year.

Gold prices in Pakistan hit a record high late last month but have been declining since the US and China resolved their trade tariff dispute. 

On Tuesday, 12 grams of the yellow metal were priced at $1,222 (Rs344,200).

In 2023, Pakistan relaxed several gold import regulations to promote transparency, minimize smuggling and establish computerized customs valuation and tracking systems.