War fears, sanctions hurt Pakistani economy

As fears of a war with India escalated, Pakistani stocks dropped again in early trading today, deepening a week-long slump, dealers said.

Pakistan’s prime Karachi Stock Exchange 100 share Index has shed more than 9% in the past three days amid a massive troop buildup by the two nuclear-armed rivals.

‘‘The market is in a grip of uncertainty,’’ said Shoaib Memon, a dealer in Pakistan’s commercial hub of Karachi.

‘‘People are worried because of the massive deployment of troops by the two sides. We don’t know where all this tension will lead to,’’ he said.

Tensions mounted after India accused Pakistan-based Islamic militant groups as well as neighbouring Pakistan’s intelligence agency of sponsoring a December 13 suicide attack on Parliament in New Delhi that killed 14 people, including the five attackers. Islamabad and the two groups denied involvement.

Yesterday, the two countries barred each other’s airliners from using each other’s airspace from January 1, and ordered half of each other’s diplomatic corps to go home.

The decision will result in the cancellation of Pakistan International Airlines’s 12 flights a week to India and re-routing of 13 others to Asian destinations because they fly over Indian airspace, the Pakistani airline said.

Flight times for Pakistani airliners heading to Manila, Tokyo, Bangkok, Singapore, Hong Kong and other destinations in the region are expected to increase by between 45 minutes and one hour. No details on the economic cost of the diversions were released.

Pakistan’s rhetoric has not been as belligerent as in past confrontations with India, though General Rashid Quereshi, a military spokesman, vowed yesterday that Pakistan would ‘‘retaliate in all conceivable ways’’ if attacked by India.

Pakistan and India have fought three wars since gaining independence from Britain in 1947. Two wars were fought over the divided region of Kashmir, which both countries claim.

Hindu-dominated India accuses Pakistan, a Muslim nation, of fomenting violence in its part of the Muslim-majority state of Kashmir, where Islamic guerrillas have waged a bloody secessionist war since 1989. Pakistan denies the charge and calls it an indigenous struggle.