- The economic costs have already started kicking in
Perhaps the most dangerous result of the USA’s killing of Iranian military commander Gen Qassem Soleimani has been the tanking of stock markets the world over. As Iran’s neighbour, Pakistan could not remain unaffected, and on Monday, the Karachi Stock Exchange lost 1116 points on the KSE 1000 index, or 2.71 per cent. Obviously, the fear of conflict breaking out in the sensitive Persian Gulf was behind this highly negative sentiment. There was a rush worldwide towards so-called safe havens, as the fund managers who had cash available from stock sales desperately places to invest that would yield maximum returns. There was a rise in the price of gold, which reached a seven-year high, as well as in the rates of the yen, the euro and the Swiss franc. Oil prices also went up, a development Pakistani policymakers must regret, both because it is a safe haven, and because a conflict would lead to shortages. Incidentally, this would show how ‘hot money’ seeks high returns as well as safety, and how quickly it flees a country.
Markets worldwide could not find much assurance from the moves of world leaders. US President Donald Trump’s threat to respond strongly to any Iranian response to General Suleimani’s death would not help calm the markets. He also rejected the Iraqi parliament’s call for US troops to withdraw, another red rag to the markets. However, closer home, Foreign Minister Shah Mehmood Qureshi was not reassuring when he addressed the National Assembly on this issue, and though he said that Pakistan would not take part in any conflict, this crisis also reflected the failure of its attempts to mediate between Iran and Saudi Arabia.
The impression that comes across is of a government in disarray, unable to formulate a response in the face of the challenge that is posed. The government seems at sea, and let alone formulate a response, it seems not to understand what is happening. Most important, what seems to have escaped its attention is what is happening on the economic front. Unfortunately for Pakistan, it is already going through a rough patch economically, and there does not seem there is much breathing-space. At this point, all it can do is hunker down and prepare for the real world– or the worst.
