New Delhi: Pakistan is trying to sell two futures at once — and neither is guaranteed. Even as Islamabad markets the JF-17 as a “budget multirole” fighter to cash-strapped air forces, it is simultaneously advertising its coastline as the next energy frontier, awarding offshore oil and gas blocks after years of exploration disappointment. The spectacle is revealing: a state scrambling to monetise both defence and geology because it lacks the one commodity that matters most — a strong economy.

Both campaigns come with the same strategic risk: credibility.

In arms markets, the JF-17 is not competing merely against Western fighters; it is competing against a technology curve that is bending sharply toward high-end networked warfare, sensors, electronic warfare resilience, and long-range kill chains.

Offshore, Pakistan’s deepwater promise must overcome thin drilling history, hard geology, slow payback cycles, and the security premium of operating near the terror-driven, Makran–Balochistan arc.

Put simply: Pakistan is trying to sell hope to the world while the world is raising the price of risk. This is a corrosive, low-equilibrium trap where economic fragility, internal violence, and narrowing external options reinforce each other.

Pakistan’s crisis is structural — the slow erosion of state capability and thereby national power.

Pakistan's real GDP at the end of 2025 is estimated around $410 billion. The World Bank notes Pakistan’s economy expanded 3 per cent in the fiscal year ending June 2025 and projects growth to remain around 3 percent in FY26. At first glance, Pakistan’s macro picture looks calmer than the acute crisis of 2022–23. Inflation has moderated. The most immediate balance-of-payments panic has eased.

Yet this “stabilisation” is less recovery than pause. Its mechanism is clear: fiscal tightening and import suppression — stabilisation-by-compression. Pakistan tightens to stabilise, stabilises to access financing, and accesses financing to avoid crisis — without structurally changing its growth engine. It remains an economy that can survive but cannot accelerate, one that cannot become competitive.

The future remains hostage to shocks. Energy spikes, global tightening, remittance disruptions, or political instability can reopen balance-of-payments issues overnight. The deeper weakness is not short-term liquidity; it is Pakistan’s long-term inability to earn foreign exchange. The World Bank underscores that exports declined from an average of 16 per cent of GDP in the 1990s to around 10.4 per cent in 2024. That is de-industrialisation — a structural downgrade in the economic base.

For Pakistan — with heavy debt servicing needs, significant energy imports, and substantial security expenditure — it’s export share of 10 per cent is strategically suffocating. It guarantees the recurring boom–bust cycle: a brief phase of consumption-driven recovery, followed by a balance-of-payments squeeze, followed by emergency tightening, followed by the IMF.

Pakistan repeatedly ends up managing scarcity instead of building capacity. The World Bank’s reference to “untapped export potential” sounds optimistic, but in reality, it’s a quiet indictment.

Pakistan’s binding constraint is not demand; it is competitiveness: logistics, energy reliability, contract enforcement, policy predictability, and governance capacity. In other words, without state capability, exports stagnate. Pakistan’s external buffers have improved but remain thin relative to needs. The State Bank of Pakistan’s reserves rose to about US$15.902 billion in the week ending December 19, 2025. But reserves are not the same as resilience. A meaningful part of this improvement reflects borrowing and deposits from “friendly countries”. That is liquidity, not solvency. It does not build capacity and signals that Pakistan’s reserve position is increasingly a product of external support, not export strength.

Governance deficits — policy reversals, weak enforcement, bureaucratic friction, and corruption — ensure private capital remains cautious even when macro numbers temporarily improve. The result is predictable: long-horizon investment does not commit, export diversification does not occur, and the cycle repeats.

Multilateral financing remains Pakistan’s macro anchor. On December 8, 2025, the IMF board signed off on Pakistan’s programme review, keeping the US$7 billion programme on track and unlocking around US$1.2 billion — about US$1 billion under the EFF and US$200 million under the RSF.

This prevents a disorderly crisis. But it also tightens conditionality where Pakistan’s political economy is weakest: taxes, state-owned enterprises, energy sector governance, and fiscal discipline. The IMF’s role therefore has a dual nature: it prevents collapse, but it narrows sovereignty.

The bigger danger is strategic: Pakistan ends up running its economy on “programme time”, not “policy time”. It becomes a state permanently negotiating its survival. Even the current account improvement must be treated carefully. In Pakistan, surpluses have often reflected import compression rather than export dynamism — achieved not through competitiveness but through constraint. A surplus built by choking imports is not strength but a warning light.

Public debt around the 70-80 per cent of GDP band constraints policy in a country with weak tax mobilisation and high fixed expenditures. But the sharper issue is composition: short-to-medium term liabilities rolled over repeatedly through bilateral deposits, commercial borrowing, and IMF-led stabilisation cycles. This transforms policy into a refinancing treadmill.

China has emerged as Pakistan’s largest bilateral creditor, particularly through energy and infrastructure projects linked to CPEC. While these investments addressed infrastructure gaps, they also increased repayment burdens — especially where loans are commercial or near-commercial.

Gulf partners provide deposits and deferred oil payments: crucial liquidity relief, minimal structural transformation.

Pakistan can roll over debt. But unless exports rise structurally, each refinancing round merely purchases time at the cost of autonomy. This is why Pakistan’s posture increasingly appears reactive.

It is not just geopolitics; it is balance-of-payments management disguised as strategy. Technological stagnation is the silent national security risk. Weak integration into global value chains and low innovation intensity reduce Pakistan’s ability to develop advanced manufacturing, resilient supply chains, and the industrial depth that underpins modern defence capability. Without productivity growth, Pakistan’s military machine will face a creeping constraint: sustaining modernisation becomes harder year after year as internal security consumes resources and external dependence deepens.

Domestic terrorism is a major economic drag, particularly linked to TTP in Khyber Pakhtunkhwa and insurgent violence in Balochistan. According to the Pakistan Institute for Peace Studies, 699 terrorist attacks were recorded in 2025, a rise of 34 percent, while terrorism-related fatalities rose 21 per cent year-on-year. Another dataset from the Pakistan Institute for Conflict and Security Studies described 2025 as Pakistan’s deadliest year in over a decade, with 3,413 people killed in violent incidents, including 667 security personnel and 580 civilians.

Security is both a governance issue and a macroeconomic variable. Terrorism raises operating costs. It reduces geographic investability by hollowing out precisely the regions Pakistan needs for the next growth cycle: Balochistan and Khyber Pakhtunkhwa. It destroys the credibility premium necessary for foreign direct investment. And it interacts with Pakistan’s history of militant ecosystems, ensuring the risk of blowback remains structurally embedded.

Pakistan is being priced as a high-risk state. Even Chinese projects under CPEC have faced threats, including attacks on Chinese nationals, generating delays, redesign, and rising protection costs. Security becomes not just a state issue, but a project variable — and therefore an investment deterrent.

Pakistan has revived offshore exploration after a long hiatus, awarding 23 offshore oil and gas blocks out of 40 offered in Offshore Bid Round 2025 — the first such allocation in nearly two decades. The blocks span roughly 53,510 square kilometres across the Indus and Makran basins. Initial commitments total roughly US$80 million for the first three years. Projections suggest total investment could reach US$750 million to US$1 billion if drilling proceeds. However, the risks are stark.

Pakistan’s offshore geology remains uncertain. Since 1947, only 18 offshore wells have reportedly been drilled. Even ExxonMobil’s Kekra-1 well in 2019 failed. Deepwater exploration is slow and capital-intensive. Fiscal expectations can be inflated long before results arrive. Offshore petroleum is not a quick forex fix. It is a 10-year gamble.

The third risk is security. The Makran–Balochistan terror arc raises costs and increases the chance that projects become contested assets. Finally, even if gas is found, monetisation is not automatic. Domestic gas pricing distortions and a strained network reduce investor confidence in long-cycle projects. At this stage, Pakistan is selling probability, not product.

Pakistan’s minerals story, especially Reko Diq, is marketed as an exit ramp: export earnings, fiscal relief, strategic leverage. But minerals require governance, security, logistics, processing capacity, and credibility. If Pakistan cannot secure personnel, infrastructure, and connectivity, minerals will remain narratives rather than transformation.

Pakistan is trapped. It cannot become a confident strategic actor without breaking the export-debt security loop. Stabilisation without reform is postponement. Pakistan has repeatedly bought time — often at the cost of sovereignty. Now it is trying to monetise jets and geology to widen its policy space.

For India, this is strategic asymmetry in slow motion. Pakistan’s core constraint is not a missing aircraft or a delayed drilling rig; it is a missing economic engine — and without that engine, Islamabad’s national power cannot compound. A neighbour trapped in a refinancing treadmill cannot sustain long-cycle competition, cannot fund modernisation without squeezing its own society, and cannot shape regional outcomes except through episodic disruption.

China understands this perfectly.

Beijing does not need Pakistan to prosper; it needs Pakistan to remain dependent — a corridor, a client, and a permanently available pressure point on India’s western flank. Every rollover, every deposit, every “friendly” refinancing tightens the leash. Pakistan’s tragedy is that it keeps mistaking tactical cash for strategic capability; India’s advantage is that it does not have to win every confrontation — it only has to outlast an economy that is bleeding credibility, dollar by dollar.

(Vivek Y Kelkar is a researcher and analyst focused on the intersection of geo-economics, geopolitics, and business strategy. Views expressed are personal)