The welcome economic stability of recent months remains fragile, as the country still depends on loans and foreign assistance rather than a significant domestic economic turnaround. Foreign exchange reserves are currently about $14.5 billion, but this has been fueled mainly by foreign aid rather than by outstanding export performance. However, growth is projected at 3.2% for the current financial year, and there has been optimism about the industrial sector’s performance. But deep-seated structural issues identified by IMF and local economic experts still threaten to erode the already weak ground on which the economy is built, and the government’s limited ability to stimulate economic activity is still hampered by the billions that are flushed down the drain every day on account of state-owned basket cases. Expansion of the tax base remains an expert example of eyewash, as ambitious claims continue to peter out as the year progresses. The coming years require consistent implementation of transparent reforms to build fiscal credibility and diversify investment.
It is also widely agreed that economic success requires political stability, but despite leading a relatively strong coalition government, Prime Minister Shehbaz Sharif’s tenure has been anything but stable. Although agitation on the streets by the PTI has been relatively limited — never rising to the level of protests that were led by imprisoned party founder and former prime minister Imran Khan — the sustained pressure has been enough to worry many investors and create hurdles for people in several cities, especially because the government appears to regularly miss the balance between allowing peaceful protest and promptly shutting down violent ones.
On the security front, the threat of terrorism persists, as religious extremists such as the Tehreek-e-Taliban Pakistan and Daesh elements continue to be active in the country, while Baloch separatist terrorists have shown no sign of slowing down, in an asymmetrical conflict that has gone on for longer than most Pakistanis have been alive. Analysts are also concerned that despite improving ties with the US and a defence pact with Saudi Arabia, there is still a “moderate likelihood” of armed conflict with India, which increasingly finds itself surrounded by countries that its bigoted far-right government sees as adversaries — most recently Bangladesh.
While foreign security experts have often presented solutions such as cross-border working groups against terrorism and increased diplomatic exchanges, the Indian government — at least publicly — has literally positioned itself as not wanting to even let its citizens shake hands with Pakistanis. This belligerent and combative attitude to international relations is why, despite all the other conflicts in the world, New Delhi is the reason most people worried about nuclear war have sleepless nights.
As for public health, Pakistan is again on the brink of being declared polio-free, but the Global Polio Eradication Initiative has noted that there is a funding gap of almost $2 billion, making it almost certain that Pakistan and Afghanistan will have to self-finance vaccination and awareness initiatives or risk falling short again with the finish line in sight.
The choices made in 2026 will thus define Pakistan’s trajectory for years to come.