When it comes to global nightmares, the thought of a nuclear-armed state falling apart is enough to make your skin crawl. Sadly, this nightmare situation is becoming more and more real in Pakistan. The country’s economy, which depends on imports, has reached a critical point where it needs foreign exchange badly. The results are a chain reaction of disasters, such as a lack of food and energy and economic instability that leads to political division, radicalization, and extremism.

The seriousness of these kinds of events goes beyond country borders. Because countries are linked to each other, Pakistan’s instability at home can lead to bigger border conflicts, especially with its neighbors India and Afghanistan. The worsening of these conflicts could make South Asia unstable, which could have effects all over the world. 

Pakistan is in a lot of trouble right now because it owes a lot of money to the International Monetary Fund (IMF), the World Bank, China, and other creditors. As the economic mess gets worse, the military is keeping a close eye on things, which makes people fear another coup. Pakistani society faces a huge problem that needs both calm judgment and quick action. Economics may be the gun, but politics is the skill of knowing when to pull the trigger. Today, the truth is very clear.   To understand what’s going on now, it helps to look back at the past. The British Empire set up a single currency for Colonial India in 1835 so that they could get the benefits of seigniorage and have more control over tax and debt payments. What a surprise: not much has changed since 1947, when Pakistan got its freedom. Foreign cash, which is needed to bring in things like food, energy, and fertilizers, is very important to the country’s 230 million people. 

Pakistan has had persistent budget and current account deficits for years because more foreign currency has left the country than came in. Things got worse in 2022 when Russia invaded Ukraine and caused prices of many goods around the world to rise sharply. This made a perfect storm that put pressure on Pakistan’s foreign exchange savings. Then there were the terrible rains along the Indus, which hit a third of the country and made economic problems even worse. 

Pakistan’s currency stockpiles were barely enough for a few weeks of imports by January 2023. In response, Islamabad did some very bad things, like cutting off power, raising energy prices, and limiting imports of things that were needed by people. These steps stopped funds from leaving the country, but they also cut back on production and caused industries to decline. Millions of people lost their jobs in Pakistan’s textile business, which was a big part of the economy.

The strict requirements of the IMF were tried to be met by Imran Khan’s leadership, which had some nationalist elements. But he was removed from office in a vote of no-confidence, putting the country in a lot of economic and political trouble. As a result, Pakistan might have to adopt a market-determined exchange rate, end energy handouts, and take severe measures that could radicalize a population that is already struggling with the rising cost of living.   The problems Pakistan is facing are more complicated than just its economy. Territorial conflicts are deeply connected to jihadism in the area, especially the Durand Line, a border created by Britain during its colonial rule that separates Pashtun lands. Pakistan’s possible internal collapse could give the Afghan and Pakistani Taliban more confidence as they try to get international recognition or more freedom for the Pashtun people. 

Things could get worse in Balochistan, which has had separatist groups for a long time. Pakistan could fall apart if both the Pashtun and Balochi regions rebel. 

In the middle of this complicated crisis, the situation with Pakistan’s nuclear weapons worries people all over the world. Pakistan had 165 nuclear warheads, as well as reactors for making plutonium and advanced facilities for enriching uranium, as of 2021. In a collapse situation, these assets could be taken over by non-state actors or rogue agencies, which increases the risk of nuclear proliferation. 

An ugly fight between India and Pakistan is on the horizon, especially over Kashmir, which is a flashpoint. The idea of mutually guaranteed destruction is put to the test in real-life wars, like the one that happened over the Kargil district in 1999. Communication problems between nuclear-armed neighbors make it more likely that mistakes will be made, which raises the risk of a nuclear conflict.    Pakistan’s problem goes beyond its borders. It’s not just a national issue; it’s a worldwide problem that needs a global response. Pakistan needs to fix its economic problems in order to become more stable. This means cutting back on military spending, trying to diversify the economy, and relying less on imports.

But the foreign debt, which is now a huge $130 billion, is still the main problem. Paying off the dollar-denominated debts uses up foreign currency that is needed to buy basic goods. If the demands for austerity are too strict, they could make the political situation worse.

Creditors like the IMF, the World Bank, and the Asian Development Bank have a lot of power. Still, the changing nature of geopolitics adds a layer of sneakiness to talks about restructuring debt. China is very important because it is Pakistan’s biggest foreign creditor. China is a major player because its investments in building projects like the China-Pakistan Economic Corridor are real. A real answer, on the other hand, would probably need concessions from all creditors, with China serving as a symbol. 

The world is holding its breath as Pakistan’s economy and government are about to fall apart. With its nuclear weapons, the country is too important to fail, and its huge foreign debt makes it impossible for it to succeed on its own. Even though the creditors are in charge right now, they might soon see that forgiving isn’t a kind thing to do, but a realistic one. It is said that debts that can’t be paid back won’t be paid back. 

So now we know that Pakistan’s issue isn’t just a problem for the country itself. It’s a problem that affects everyone and needs a complex, global solution. Thanks for coming along with me as I look into a complicated political environment.