by Tania Hansraj
On 27th December, 2007, Pakistani opposition leader Benazir Bhutto was assassinated. The twice former prime minister and the first women to be the head of state of an Islamic nation was the victim of a targeted shooting and suicide bombing attack whilst delivering a speech to thousands of ardent supporters at a rally in Rawalpindi. Having suffered 2 gun shot wounds and a severe head injury, she was declared dead at 6:16 pm, at the local hospital in Rawalpindi throwing the country into another political crisis.
A state of emergency was declared as riots broke out all through the length and breadth of the country, especially in her hometown of Karachi. Cars were stoned, roads were closed down and shops were burnt, bringing the entire economy to a halt. The economy suffered severe losses following the assassination of the former prime minister as strikes and riots lead to the destruction of property and infrastructure. Severe water and food shortages hit the people of Pakistan, as businesses remained closed for several days following the assassination leading to a significant loss in revenue from both, domestic consumption as well as, exports.
Moreover, the incident led to a lot of fear and nervousness, from both Pakistan as well as the western world as people questioned the level of security and risk in Pakistan. Several experts on the topic suggested that the assassination instantly lead to an increase in the geopolitical risk associated with Pakistan. This was furthered by the S&P’s announcement of a possible down grade in the country’s credit ratings in the event of prolonged political turmoil within the country.
Over the last few years, Pakistan had become the hub of foreign direct investment as the economy continued to grow at an annual rate of around 7% with the benchmark Karachi Stock Exchange 100 Index having jumped 47.1% in 2007. However, following the assassination, investors started to fear the security of their investments considering the state of the economy and soon began to draw out their funds. This was reflected in the 5% drop in the benchmark index of Karachi Stock Exchange when it opened on the Monday following the attack. It is important, however, to note that the aftermath of this incident did not stay limited to Pakistan as its effects rippled throughout Asian markets. The Indian Sensex fell 0.05% while Hong Kong’s Hang Seng Index fell 1.7% on the day immediately following the attack. Although the other markets soon recovered from the drop, anxiety over the assassination prevented investors from buying stocks and instead moving investments into safer assets like bonds.
While the state of the country has some what stabilized, the possibility of further turmoil in the days leading up to the parliamentary elections, now scheduled for February 15th remains in the back of people’s minds. Further riots and rallies on the part of political parties and Bhutto supporters will further increase the level of risk in the country and will continue to bring down the economy in terms of foreign direct investments, consumption and exports.