During the five years that ended in financial year 2006-07, Pakistans economy has more than doubled in size with an annual GDP growth rate averaging seven percent. With relative price stability, the debt burden had reduced to one-half; foreign exchange reserves were sufficient to provide import cover for almost six months; stock market was one of the best performing in the emerging markets; and foreign direct investment touched close to six percent of the GDP. Pakistan successfully launched sovereign bonds of maturity ranging from five to 30 years in the international capital market with manifold oversubscription, and reflecting a strong vote of confidence of the global investors. But forced into a partnership by the US in its fight against terrorism and extremism, the Pakistani state and its helpless people are now paying a steep price for this participation This participation is not of their choosing. A military dictator looking for Western support to maintain his autocratic rule took the decision to plunge the country in a war that has not been won so far and is unlikely to be won in the future. The economic, social, psychological and other costs have not been fully documented so far. Pakistans former Foreign Minister Shah Mehmood Qureshi has claimed that, in the post-9/11 period, the country has incurred some 31,000 casualties and has arrested, apprehended, and eliminated 17,000 terrorists. The socio-economic costs paid by the people of Pakistan have been enormously high. These costs are still being paid at the expense of education, health and social development. The country has faced massive human displacement; resources had to be found for their succour and rehabilitation. The worsening law and order situation sharply reduced investment. There were reports of massive capital flight; there were less tangible infrastructural and cultural costs. The severe psychological toll on the Pakistani people has led to an upsurge in reports of depression, anxiety, paranoia, and post-traumatic stress disorders. While Pakistans own documentation of losses leaves much to be desired, according to the IMF, it has incurred a loss of Rs2.082 trillion in exports, foreign investment, industrial output and tax collection during the last five years due to the war on terror. The cost to the national economy, both direct and indirect, was estimated during financial years 2005-06 and 2008-09. According to the IMF, the cost gradually increased from Rs259.103 billion in FY05; Rs300.78 billion in FY06; Rs360.9 billion in FY07; Rs484.367 billion in FY08; and 678.8 in FY09. Pakistans role in the war has severely dented the development work in the country. It has sustained immense socio-economic costs of being a partner in the international counterterrorism campaign. According to other international financial institutions, the anti-terrorists campaign, which followed the 9/11 event in the US in 2001, overstrained Pakistans budget as the allocation for the law enforcement agencies had to be increased, significantly meaning the erosion of resources for development across the country, particularly in FATA and Khyber Pakhtunkhwa areas, in addition to human sufferings and resettlement costs. Several development projects, started earlier in the affected areas were afflicted with delays, which would ultimately result in large cost over-runs. The benefits that would have accrued from the completion of these projects have been postponed indefinitely. Since the start of the anti-terrorism campaign, an overall sense of uncertainty has slowed down domestic economic activity leading to a sharp decline in the GDP. The energy crisis has worsened over time. Industrial units have been forced to shutdown. There has been a massive increase in unemployment, which is triggering other social problems and putting pressures for the present government - that it appears incapable of handling. The public sector corporations are inflicting huge losses. Their operations had to be subsidised, widening the budget deficit and forcing the government to borrow unreasonable sums of money from the State Bank. The yawning external account deficit forced the government into the arms of the IMF. The conditionalities of the Standby Credit Arrangement are now being enforced causing further hardship to an already oppressed population. Pakistans sovereign bonds have also underperformed owing to the countrys participation in the anti-terrorism campaign. Frequent bombings, worsening law and order situation and displacement of the local population have taken a toll on the socio-economic fabric of the country. It is impossible to quantify losses on this account. However, faith of the people in the ability of the state to provide protection to their limb and property has been badly shaken, if not destroyed. To steer Pakistan back on the path of sustained and broad-based economic growth and to create jobs and reduce poverty, Pakistan requires a prolonged period of peace and harmony, macroeconomic stability, financial discipline and good governance. If this has to be achieved, opting out from the war is the only option that has to be at the centre of Pakistans political policy. The writer is a member of the former Civil Service of Pakistan.