Pakistan's involvement as a peacemaker in the Iran war has significantly raised its diplomatic profile, earning commendations from U.S. officials, including Vice President JD Vance. The country, which shares a 900-kilometer border with Iran and has a large Shia population, is particularly vulnerable to the war's repercussions, which have already strained its economy.
Experts highlight that Pakistan's motivation to end the conflict is driven by the desire to prevent spillover effects and to strengthen ties with the U.S. Despite the praise, Pakistan's economy remains in dire straits, having relied on 24 bailouts from the International Monetary Fund due to persistent fiscal deficits and high public debt.
The IMF has urged Pakistan to implement structural reforms, yet the military's significant role in the economy complicates tax revenue generation. While the recent peace talks may lead to favorable loan terms from Gulf states or security aid from the U.S., the lack of substantial investment commitments reflects Pakistan's ongoing economic challenges.
Inflation has surged, reaching 11.7% in May, further squeezing household purchasing power. Analysts predict that without addressing fundamental economic issues, the positive diplomatic developments may not translate into meaningful economic support from the U.S. or other allies