Pakistan’s Economic Crisis Amid Military Tensions – Can It Afford a War?
In response to the recent terrorist attack in Pahalgam, India launched a strong counter-operation named “Operation Sindoor”, targeting and destroying 21 terrorist camps in Pakistan and Pakistan-occupied Kashmir (PoK). This bold move has escalated tensions, with Pakistan vowing retaliation. However, the critical question arises—can Pakistan afford a full-scale war with its current economic situation?
The answer seems to lean heavily towards “No”, as Pakistan’s economy is in deep crisis. In 2023, the country teetered on the brink of default. In desperate need of international support, Pakistan turned to the International Monetary Fund (IMF) for bailout assistance. To qualify for the aid, the government agreed to a set of harsh austerity measures.
These measures included shutting down six federal ministries, cutting over 150,000 government jobs, merging key departments, and privatizing state-owned enterprises, including the Pakistan International Airlines (PIA) and four national banks. These steps, although aimed at stabilizing the economy, have triggered widespread public and administrative unrest.
To boost government revenues, Pakistan aggressively expanded its tax base. In 2023, about 300,000 new individuals were added to the income tax system. In 2024, this number jumped to over 800,000, doubling the total number of taxpayers from 1.6 million to 3.2 million. However, the burden of taxation is heavily skewed.
Salaried individuals pay 10 rupees in tax for every 100 rupees earned, while business owners and traders contribute as little as 60 paisa per 100 rupees. This highlights a severe tax inequality, where the lower and middle classes bear the brunt of revenue collection.
In terms of GDP, the contrast with India is stark. In 2023:
- India’s GDP: $4.2 trillion
- Pakistan’s GDP: $374 billion
- India’s per capita GDP: $2,711
- Pakistan’s per capita GDP: $1,581
Moreover, individual Indian states like Maharashtra and Tamil Nadu have economies that rival or surpass Pakistan’s entire GDP. Maharashtra’s GDP alone is projected to reach ₹42.67 lakh crore, while Tamil Nadu’s is estimated at ₹30 lakh crore—figures that show just how small Pakistan’s economy is by comparison.
Despite this fragile situation, Pakistan’s upcoming 2025-2026 federal budget, to be presented on July 1, is expected to increase military spending by 18%. While political parties like the ruling Pakistan Muslim League (Nawaz) and the opposition Pakistan Tehreek-e-Insaf appear united on defense issues, analysts warn that increased military expenditure without economic backing is unsustainable.
Most of Pakistan’s revenue is used for debt repayment, leaving little room for development or defense build-up. According to international political analysts, Pakistan simply does not have the economic strength to sustain a prolonged military conflict.
In conclusion, while Pakistan may issue strong words in response to India’s military actions, its economy tells a different story—one of debt, austerity, inequality, and vulnerability. Unless structural reforms and stability are achieved, the idea of engaging in a full-scale war is more rhetorical than realistic.
