Pakistan’s Deepening Crisis: Economic Hardship, Rising Poverty and Growing Insecurity

Pakistan is facing one of the most serious crises in its modern history. The country’s problems are no longer limited to inflation or political instability. Economic weakness, rising poverty, heavy international debt, terrorism, separatist violence in Balochistan and growing tensions with Afghanistan are combining to create a dangerous “polycrisis”—a situation in which several crises reinforce one another.

Pakistan has not completely collapsed, but its institutions, economy and security system are under severe pressure. Without major structural reforms and political stability, the country could face even greater economic and social instability.

An Economy Under Severe Pressure

Pakistan’s economic crisis has developed over several years. A balance-of-payments crisis, declining foreign-exchange reserves, currency depreciation, political uncertainty, high inflation and weak economic growth have placed enormous pressure on the government and ordinary citizens.

The country has repeatedly struggled to pay for essential imports and meet its external financial obligations. In recent years, Pakistan has required assistance from the International Monetary Fund and other international lenders to avoid default. Although financial-support programmes have provided temporary relief, they have not solved the deeper problems affecting the economy.

The World Bank has described Pakistan’s economic growth as insufficient to reduce poverty. A rapidly growing population requires strong economic expansion, investment and job creation, but the country’s growth rate has remained too weak to meet these demands. Pakistan needs sustained annual growth of around 6–7% to create enough employment and support its growing population, according to recent economic assessments.documents1.worldbank+1

The economy is also affected by low tax collection, a narrow tax base, energy-sector losses, state-owned enterprises, political instability and a persistent trade imbalance. These weaknesses reduce the government’s ability to spend on healthcare, education, infrastructure and social protection.

Poverty and the Cost of Living

The economic crisis has had its greatest impact on ordinary Pakistanis. Food, fuel, electricity, gas, transport and medical expenses have become increasingly difficult for millions of families to afford.

According to recent assessments, Pakistan’s national poverty rate increased from 21.9% in 2018–19 to approximately 28.8–28.9% in 2024–25. Other estimates using a lower-middle-income poverty line place the figure even higher, at around 40% of the population. Different poverty estimates use different income thresholds, but they point to the same conclusion: poverty and economic insecurity are increasing.wikipedia+2

Rising prices have forced many households to reduce the amount and quality of food they consume. Families are also taking on more debt, withdrawing children from schools, delaying medical treatment and selling assets to survive.

Food insecurity remains particularly serious in conflict-affected and economically backward regions. In early 2025, approximately 17 million people in Pakistan were projected to face crisis or emergency levels of food insecurity. This situation has been worsened by inflation, floods, droughts, agricultural losses, unemployment and disruptions to transport and markets.acaps

Poverty is not only an economic issue. It also creates social frustration, increases inequality and can deepen public anger against political institutions. When people cannot find work or afford basic necessities, confidence in the government and the state begins to decline.

The Burden of International Debt

Pakistan’s debt problem is at the heart of its economic crisis. The country must regularly repay foreign loans while also importing fuel, machinery, food and other essential goods. A large portion of government revenue is consumed by debt servicing, leaving fewer resources for development.

Pakistan’s public debt has been estimated at roughly three-quarters of its gross domestic product, while a significant share of this debt is denominated in foreign currencies. This exposes the country to exchange-rate risk: when the Pakistani rupee loses value, the cost of repaying foreign debt rises.dfat.gov+1

Pakistan has received numerous IMF programmes since 1958. The IMF’s financial assistance can help stabilise foreign-exchange reserves and prevent immediate default, but it often requires difficult measures such as reducing subsidies, increasing energy prices, raising taxes and controlling government spending. These steps may improve fiscal stability in the long term, but they can create additional hardship for low-income families in the short term.

The repeated cycle is clear:

1. Pakistan faces a shortage of foreign currency.

2. The government seeks help from the IMF and other lenders.

3. Austerity and tax measures are introduced.

4. Ordinary citizens face higher prices and reduced purchasing power.

5. Structural reforms remain incomplete.

6. The country returns to another financial crisis.

This cycle cannot continue indefinitely. Pakistan needs stronger tax collection, reduced corruption, export growth, energy-sector reform, better public institutions and long-term investment in human development.

Rising Terrorism and Internal Violence

Pakistan is also facing a serious security crisis. Terrorist attacks and militant violence have increased, particularly in Balochistan and Khyber Pakhtunkhwa.

Recent reports indicate a major rise in terrorism-related deaths. One assessment reported that terrorism-related fatalities increased from 971 in 2022 to 4,001 in 2025, with thousands more recorded during the first months of 2026.newsonair.gov+1

Several militant and insurgent groups operate in or around Pakistan, including the Tehrik-i-Taliban Pakistan, the Balochistan Liberation Army and Islamic State Khorasan Province. These groups have carried out attacks against security forces, civilians, government facilities, transport routes and foreign nationals.

Terrorism imposes a major economic cost. It discourages domestic and foreign investment, damages infrastructure, disrupts trade, increases security spending and creates fear among citizens. Large development projects, including projects linked to the China–Pakistan Economic Corridor, have also faced security risks in Balochistan.acaps+2

Military operations may eliminate individual militants, but they cannot resolve the political and economic conditions that help violent groups gain support. Long-term stability requires education, employment, justice, local development and meaningful political participation.

The Balochistan Insurgency

Balochistan is Pakistan’s largest province by area but remains one of its poorest and least developed regions. The province is rich in natural resources, including minerals, gas and copper, yet many local communities complain that they have not benefited fairly from those resources.

The Balochistan conflict involves separatist groups that accuse the central government of political marginalisation, resource exploitation, enforced disappearances and excessive use of force. The state, on the other hand, views these groups as a major national-security threat.

This conflict has continued for years and has become more complicated due to attacks on security forces, civilians, infrastructure and Chinese nationals working on development projects. Balochistan’s insecurity has also slowed economic development and weakened public trust.thediplomat

The province cannot be stabilised through military action alone. A lasting solution would require political dialogue, economic fairness, provincial autonomy, accountability for human-rights violations and greater participation of local communities in development decisions.

Tensions with Afghanistan

Pakistan’s relationship with Afghanistan has also deteriorated. Islamabad has accused militant groups based in Afghanistan of launching attacks inside Pakistan, particularly through the border region. Afghan authorities have rejected or disputed many of Pakistan’s accusations.

This is not an “internal war” in the same sense as the Balochistan insurgency. Rather, it is a combination of border tensions, disputes over militant activity, refugee issues, trade restrictions and disagreements over the Durand Line.

The Pakistan–Afghanistan relationship is economically important. Border closures, restrictions and insecurity have affected trade and damaged the livelihoods of communities on both sides. Pakistan has also faced challenges related to Afghan refugees and cross-border movement.

Pakistan’s accusations against Afghanistan may reflect genuine security concerns, but military pressure and public blame alone are unlikely to solve the problem. Both sides need direct communication, border-management mechanisms and cooperation against militant groups.

Political Instability and Governance Problems

Economic and security crises are made worse by political instability. Frequent changes in government, confrontation between political parties, disputes involving the military, restrictions on media freedom and a lack of institutional trust have weakened policymaking.

Investors are reluctant to commit capital when economic rules can change quickly and political conflict remains intense. Citizens are also losing faith when governments announce reforms but fail to implement them consistently.

Pakistan’s crisis is therefore not caused by one government or one political party alone. It is the result of decades of weak governance, unstable economic policies, corruption, poor tax collection, institutional conflict and insufficient investment in human development.

A country cannot achieve economic recovery without political predictability. Businesses need confidence, citizens need accountable institutions and provinces need to feel that they have a meaningful role in national decision-making.

Is Pakistan Heading Towards Collapse?

The phrase “Pakistan is totally collapsing” is powerful, but it requires some qualification. Pakistan still has functioning state institutions, a large economy, a professional bureaucracy, a substantial military, international partnerships and a significant population of educated and talented citizens.

However, the country is clearly facing a dangerous period of national stress. Its economy remains dependent on external financing, poverty is rising, terrorism has intensified, regional conflicts are worsening and public trust is declining.

The real danger is not necessarily a sudden collapse overnight. The greater risk is a slow deterioration in which:

• Poverty continues to rise.

• Debt repayments consume government resources.

• Terrorism discourages investment and development.

• Provincial grievances become more radical.

• Political conflict prevents long-term reforms.

• Young people face unemployment and hopelessness.

• Public institutions lose credibility.

This type of gradual decline can be more difficult to reverse than a single dramatic collapse.

The Way Forward

Pakistan still has an opportunity to change direction, but the solution requires more than emergency loans or temporary political agreements.

The country needs a national reform strategy focused on:

• Expanding the tax base and ending preferential treatment for powerful groups.

• Reducing losses in the energy sector.

• Promoting exports, manufacturing and agricultural productivity.

• Protecting poor families from the effects of austerity.

• Investing in education, healthcare and employment.

• Addressing grievances in Balochistan through dialogue and political reform.

• Improving relations and security cooperation with Afghanistan.

• Combating terrorism through intelligence, policing and community development.

• Strengthening civilian institutions and the rule of law.

• Ensuring transparent and accountable governance.

Pakistan’s crisis is serious, but collapse is not inevitable. The country’s future will depend on whether its political and military leadership chooses short-term survival or genuine long-term reform.

Conclusion

Pakistan is facing a multi-dimensional crisis involving the economy, poverty, debt, terrorism, political instability and regional conflict. The country’s financial problems are increasing pressure on its citizens, while violence in Balochistan and Khyber Pakhtunkhwa is threatening internal security. Tensions with Afghanistan have added another layer of instability.

Pakistan has not completely collapsed, but it is moving through one of the most dangerous periods in its history. Without political dialogue, economic reform, better governance and a serious effort to address poverty and regional grievances, the country could face deeper