By IndraStra Global Editorial Team
The air is thick with tension along the Line of Control (LoC), the de facto border slicing through the rugged terrain of Kashmir. For nine consecutive days, Pakistani and Indian forces have traded fire, shattering a fragile 2021 ceasefire agreement. The spark? A horrific terrorist attack on April 22, 2025, in Pahalgam, a picturesque meadow in Indian-administered Kashmir, where 26 civilians, mostly tourists, were gunned down. India points the finger at Pakistan, alleging state-backed militants orchestrated the massacre. Pakistan vehemently denies the charge, but the diplomatic fallout has been swift and severe. Visas canceled, diplomats expelled, airspace closed, and the Wagah-Attari border—the sole trade route between the two nations—sealed shut. As the drumbeats of war grow louder, the world watches two nuclear-armed neighbors teeter on the brink. But for Pakistan, already grappling with a battered economy, the cost of a full-scale conflict could be nothing short of catastrophic, threatening to plunge its people into an abyss of poverty while its entrenched elites shield themselves from the fallout.
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| Cover Image Attribute: Akhtar Soomro/Reuters |
The Pahalgam attack has unleashed a torrent of consequences, both immediate and foreboding. India’s response has been uncompromising: Prime Minister Narendra Modi has granted the armed forces “full operational freedom” to retaliate, while diplomatic measures, including the suspension of the Indus Waters Treaty, signal a willingness to escalate. Pakistan, sensing the heat, has scrambled to fortify its defenses, deploying radar systems and air defense weapons along the border. Schools near the LoC conduct drills, and residents stockpile supplies, haunted by the memory of past conflicts. The Pakistani military, long a dominant force in the nation’s politics and economy, is on high alert, with intelligence reports warning of an imminent Indian strike. Yet, amid rising hostilities, it is Pakistan’s fragile economic fabric—already frayed by inflation, debt, and unemployment—that stands to unravel most disastrously.
Pakistan’s economy was teetering long before the Pahalgam attack. Inflation, hovering around 10% in early 2025, has eroded purchasing power, with food and fuel prices squeezing households. The nation’s external debt, exceeding $130 billion, looms like a guillotine, with repayments to international creditors, including the International Monetary Fund (IMF), draining scarce resources. Unemployment, particularly among the youth, festers at over 8%, fueling discontent in a country where nearly 65% of the population is under 30. The IMF’s latest bailout, secured in 2024, came with stringent conditions—subsidy cuts, tax hikes—that have deepened public hardship. Now, the prospect of war threatens to tip this precarious balance into chaos. Posts on X capture the anxiety: trade with India frozen, airspace closures disrupting commerce, and fears that the IMF may reconsider its support as geopolitical risks mount. One user starkly warned, “Terror has consequences,” predicting economic losses akin to the $50 million hit Pakistan suffered during similar tensions in 2019.
War is a ravenous beast, and its appetite for resources is insatiable. Should Pakistan become entangled in a full-scale conflict with India, the diversion of funds to military engagement would gut public services already on life support. Hospitals, chronically underfunded, would struggle to cope with war casualties while basic healthcare for civilians deteriorates. Schools, where millions of children already lack access to quality education, would face further closures, particularly in border regions like Neelum Valley, where tourism—a lifeline for local economies—has collapsed in the wake of the attack. The idyllic valley, once bustling with 300,000 summer visitors, now lies deserted, its bazaars silent as residents brace for conflict. Energy shortages, a persistent plague, would worsen as fuel is prioritized for military use, leaving households in the dark. The Pakistani rupee, already weakened, could plummet, driving inflation to new heights and making basic goods unaffordable for millions.
Trade, a critical artery for Pakistan’s economy, would suffer a near-fatal blow. The closure of the Wagah-Attari border has already halted bilateral commerce, modest though it was, valued at around $2 billion annually. India’s ban on direct and indirect imports from Pakistan, coupled with reciprocal measures, stifles industries reliant on cross-border exchange, from textiles to agriculture. Airspace closures disrupt not only passenger travel but also cargo routes, delaying exports and inflating costs. The Pakistan Stock Exchange, a barometer of investor confidence, crashed by 3,500 points on April 30, 2025, as fears of Indian retaliation gripped markets. Experts attribute the plunge to uncertainty over potential military action, with one analyst noting, “Investors are worried about a strike that could destabilize the region.” Foreign investment, already skittish due to political instability and security concerns, would dry up entirely, as multinational corporations flee the specter of a war zone. The ripple effects would be felt across sectors, from manufacturing to services, with small businesses—Pakistan’s economic backbone—bearing the brunt.
Yet, amid this economic carnage, one institution stands poised to weather the storm: Pakistan’s military establishment. Often described as a state within a state, the military’s economic empire spans real estate, manufacturing, banking, and even consumer goods. Through entities like the Fauji Foundation and Army Welfare Trust, it controls vast assets, from cement factories to sprawling housing developments. These enterprises, deeply embedded in the economy, generate billions in revenue, much of it insulated from public oversight. In times of crisis, the military has historically prioritized its interests, securing resources and contracts while civilian sectors starve. A war with India would likely amplify this pattern, with defense budgets soaring and military-run businesses profiting from contracts for supplies, logistics, and reconstruction. The elite—generals, bureaucrats, and their corporate allies—would find ways to shield their wealth, perhaps even capitalizing on the chaos to expand their influence.
For ordinary Pakistanis, however, the story is one of unrelenting hardship. Historically, the masses have been treated as expendable, caught in the crossfire of internal crackdowns and external conflicts. The 1971 war, which birthed Bangladesh, left scars still felt today, with millions displaced and the economy in tatters. More recent skirmishes, like the 2019 Balakot crisis, saw civilians endure the fallout—disrupted trade, grounded flights, and skyrocketing prices—while the military’s narrative of resilience dominated. Today, the Pakistani people risk becoming cannon fodder once more, their livelihoods sacrificed in a geopolitical chess game that enriches the powerful. Social media reflects this despair, with users lamenting the “impoverishment of the masses” as elites bunker down. One poignant post read, “The generals will feast while we starve,” capturing the growing chasm between the haves and have-nots.
The international community, alarmed by the prospect of a nuclear escalation, has urged restraint. U.S. Vice President JD Vance, in a measured statement, expressed hope that Pakistan would cooperate with India to hunt down the perpetrators of the Pahalgam attack, urging both nations to avoid a “broader regional conflict.” Secretary of State Marco Rubio echoed this, calling for de-escalation and cooperation in investigating the “unconscionable” attack. The European Union, Qatar, Saudi Arabia, and others have joined the chorus, condemning terrorism while pleading for diplomacy. Yet, these appeals ring hollow against the backdrop of historical enmity. The Kashmir conflict, rooted in the 1947 partition, has fueled decades of bloodshed, with Pahalgam merely the latest chapter. Pakistan’s military, under pressure to respond to India’s accusations, may find it politically impossible to back down, even as the economic costs mount.
Could there be a path to de-escalation? Some voices, like former Pakistani Foreign Minister Bilawal Bhutto, have acknowledged the country’s “past” links to terror, hinting at a need for introspection. India, meanwhile, is pushing for Pakistan’s return to the Financial Action Task Force’s “grey list” to curb terror financing, a move that could further isolate Islamabad economically. But these measures, while significant, do little to address the immediate threat of war. A neutral probe into the Pahalgam attack, as proposed by Pakistani Prime Minister Shehbaz Sharif, could theoretically pave the way for dialogue, but mutual distrust runs too deep. India’s External Affairs Minister S. Jaishankar, in conversations with global leaders, has reiterated a “zero tolerance” policy toward terrorism, signaling that New Delhi is in no mood for concessions.
As the standoff continues, the Pakistani people stand at a precipice. A full-scale war would not only devastate the economy but also deepen the social fractures that have long plagued the nation. Inflation would spiral, debt would choke, and unemployment would surge, leaving millions to fend for themselves in a landscape of crumbling public services and vanishing opportunities. The military establishment, with its vast resources and entrenched power, may emerge unscathed, its coffers swelled by war’s grim dividends. But for the ordinary citizen—whether a shopkeeper in Lahore, a farmer in Punjab, or a laborer in Karachi—the cost would be incalculable. Once again, they would bear the weight of a conflict not of their making, their dreams of a better future buried beneath the rubble of geopolitical ambition. The world can only hope that reason prevails, for the alternative is a tragedy too dire to contemplate.
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