The recent Pahalgam attack has once again raised tensions between India and Pakistan. But while emotions run high, hard economic facts reveal a brutal truth: any escalation into full-blown war would be catastrophic for Pakistan.
Here’s a close look at why military conflict with India would amount to economic suicide for Pakistan.
Immediate Economic Collapse
Foreign Reserves Crisis
Pakistan’s financial health is already on life support. With just $8 billion in reserves and a massive $22 billion in external debt repayments due in 2025, the country is walking a tightrope. Any military escalation would trigger immediate capital flight, evaporate the remaining reserves, and likely lead to a sovereign default.
IMF Bailouts At Risk
Pakistan’s ongoing $3 billion IMF program and a $1.3 billion climate loan require fiscal discipline and regional peace. A war would violate both conditions, cutting off Pakistan’s last financial lifeline.
Currency Devaluation
The Pakistani rupee, already reeling at 308 per USD, would likely collapse to 400 per USD in the event of war. This would drastically spike the cost of essentials like fuel, medicine, and food, triggering hyperinflation in an economy already suffering 38.5% inflation in 2023.
Sectoral Breakdown: Agriculture and Industry Under Siege
Agriculture Devastation
India’s potential suspension of the Indus Waters Treaty would hit Pakistan where it hurts most. About 24% of Pakistan’s GDP depends on agriculture, which in turn depends on the water from eastern rivers. Farmers in Punjab and Sindh could face famine-like conditions as water dries up.
Industrial Breakdown
Cross-border trade between India and Pakistan, valued at around $2 billion annually, has already suffered. War would completely halt the trade of critical imports like pharmaceuticals, chemicals, and textiles, crippling Pakistan’s industrial supply chains.
Debt Spiral Deepens
Today, 40–50% of Pakistan’s government revenue is eaten up by interest payments. A war costing ₹12,250 crore ($1.5 billion) would drive the country into an even deeper debt spiral, hastening an economic collapse.
Military and Geopolitical Risks
Nuclear Deterrence and Reality
While Pakistan has nuclear weapons, military analysts argue it’s unlikely to risk “national suicide” by escalating into nuclear conflict. India’s superior conventional forces and missile-defense systems make it clear who would withstand a prolonged war better.
Retired Indian General GD Bakshi noted that Pakistan’s leadership, especially under current military rule, prioritizes self-preservation over national pride.
Global Isolation
Pakistan is increasingly alone on the global stage. After the Pahalgam attack, even the Taliban condemned the violence, highlighting Pakistan’s diplomatic isolation. Meanwhile, India is rallying global support, reaching out to over 25 countries including Gulf powers and China.
CPEC in Danger
The $62 billion China-Pakistan Economic Corridor (CPEC) investments are already slowing. China is unlikely to pour more money into a potential war zone, leaving Pakistan’s long-term infrastructure dreams in tatters.
Domestic Pressures
Public Unrest and Political Instability
The Pakistani army’s crackdown on Imran Khan’s supporters, media censorship, and ongoing insurgencies in Balochistan and Khyber Pakhtunkhwa have already weakened public trust. A war could trigger mass protests, riots, and even civil strife.
Water Security Threat
Pakistan’s own leaders have called India’s suspension of the Indus Waters Treaty an “act of war.” But with its agricultural backbone under threat, the real danger is widespread famine, economic paralysis, and societal collapse.
Structural Weaknesses Exposed
Unemployment and Economic Growth
With growth forecasts at a dismal 2.7% (World Bank, 2025), Pakistan is in no shape to absorb the shock of war. Unemployment would skyrocket as industries shutter and foreign investment flees.
Investment Flight
Already grey-listed for terror financing, Pakistan’s reputation would further sink, driving investors away permanently and crippling any chance of post-conflict recovery.
Human Capital Erosion
Chronic underfunding has left Pakistan with a 58% literacy rate and a 67-year life expectancy. Post-war, rebuilding would be almost impossible without educated citizens and functioning healthcare systems.
Long-Term Consequences
Stock Market Crash
The KSE-100 index plunged over 2,000 points after India’s retaliatory measures, and a full-scale war could crash it by 30–50%, wiping out $15–20 billion in market value.
Trade and Remittance Losses
Pakistan’s exports like textiles, rice, and more depend heavily on maritime routes that India’s navy could easily blockade. Moreover, 8 million overseas Pakistanis sending back $31 billion annually could face deportation or asset freezes, delivering another crushing blow.
Mass Displacement
A prolonged conflict could displace 10–20 million people inside Pakistan, overwhelming its already bankrupt social services and leading to an internal humanitarian disaster.
Pakistan Cannot Afford a War
The reality is harsh but simple: Pakistan’s economy, military, and society cannot endure a war with India.
Its debt burden, weak currency, dwindling public support, fragile industries, and diplomatic isolation leave it woefully unprepared for any sustained conflict.
The aftermath of the Pahalgam attack should be a wake-up call for Pakistan to stop terrorism.
