Pakistan: Going Global, Overlooking Local: Forecast October 2025

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Pakistan's internal challenges underline the limitations of a hybrid regime far removed from the reality of governance appeasing the masters abroad indicating expanding clientelism

Pakistan’s focus after the inauguration of United States President Donald Trump has been on appeasing the US leader and gaining concessions in terms of favourable tariffs, investments with the lure of rare earth. The hybrid regime led by Field Marshal Syed Asim Munir with the Prime Minister Shahbaz Sharif in tow has ignored internal realities of disasters, strife and expanding torrent of terrorist’s attacks while increasing level of hostility with India and Afghanistan key neighbours in the East and West respectively. Pakistan’s Prime Minister Shahbaz Sharif the weakest in recent history has completely surrendered the political initiative to the Army and is seen spending more time outside the country visiting China, United States, Saudi Arabia, and Malaysia amongst others even as his home turf is burning each day. This does not augur well for the coming weeks and months. Here is a forecast of developments ahead.

         International Relations. Pakistan demonstrated flexibility in foreign policy balancing between the United States, Russia, and China at a time when geopolitical tensions remain high and divide between the West and the Rest is ever expanding. In terms of the US unusual meeting of US President Donald Trump for lunch with Pakistan Army Chief Field Marshal Asim Munir in June was followed by Oval Office meeting was the first time PM  Sharif had been welcomed to the White House since taking office last year. However, blind acceptance of the Gaza Plan of US President Donald Trump and Israeli Prime Minister Benjamin Netanyahu is likely to have internal repercussions in the days ahead. Pakistan’s relations with China are likely to remain stable, it should be noted that even as the Prime Minister was in the U.S. President Asif Ali Zardari was on a 10-day visit to China.  

        The high-profile invitation to Shabaz Sharif reflects Washington’s recalibration in South Asia as it seeks renewed access to the Bagram air base in Afghanistan. In turn Islamabad manoeuvres to maximise its own strategic position. How Pakistan will meet the US expectations on Bagram if any with China’s concerns remains to be seen. Other vectors for the US appear to be endearments of President Trump from crypto to rare earths. At the same time, Pak PM visit to the US was not a formal one and thus the hype could be exaggerated reflecting only a transactional partnership. Overall, current euphoria in Pakistan’s diplomatic circles is expected to be short lived as apart from the Strategic Defence Agreement with Saudi Arabia, other developments have remained below par.

         Regional Developments. Two visits the first by the Prime Minister Shahbaz Sharif on the sidelines of the Shanghai Cooperation Organisation (SCO) Council of Heads of State (CHS) summit, held from August 31 to September 1 and that of President Asif Ali Zardari for a 10-day extensive tour including to Xinjiang reflect strength of the Pak China relations. India and Afghanistan relations will remain strained. While engagement with Kabul is expected to continue diplomatically despite air and drone strikes violating sovereignty of the country, there is no breakthrough anticipated with India where relations may go downhill. The nexus between India and Afghanistan will be seen as a red flag in Pakistan and may only add to the ongoing tensions with New Delhi and Kabul.

         Political Developments. Pakistan’s higher judiciary is confronting the Deep State with Supreme Court Justice Athar Minallah reference to hybrid system in Pakistan — where unelected powers are actively involved in civilian affairs seen as a euphemism for dictatorship. Similarly Supreme Court Justice Mansoor Ali Shah letter to Chief Justice of Pakistan (CJP) Yahya Afridi asking him to publicly answer six questions regarding “pressing institutional concerns,” also reflects the same trend. Will this bring about a change of approach by the Deep State -unlikely for now. Meanwhile there are disruptions within the higher judiciary as well Islamabad High Court (IHC) judges moving the Supreme Court (SC) against the IHC itself, and its top judge for judicial impropriety of a serious nature accusing Chief Justice Sarfraz Dogar of undermining judicial independence by manipulating case rosters, sidelining colleagues, and misusing administrative powers.

         Pakistan Tehreek Insaaf [PTI]’s strategy of resignation from the Parliamentary Committees and refusing to participate in the byelections needs to be watched. There is turmoil within the Party which may impact resistance that is being given to the Establishment. The ruling coalition of the Pakistan People’s Party and the Pakistan Muslim League Nawaz has also developed fissures due to distribution of the disaster relief funds. However, this may be resolved with the involvement of the President Asif Ali Zardari and the PML N Supremo Nawaz Sharif.

         Internal Security. Terrorism in Khyber Pakhtunkhwa (KP), Pakistan, poses a persistent and evolving challenge. KP’s porous border with Afghanistan enables cross-border militant movement, emboldened by the Taliban’s return to power. Now Pakistan military has launched air and drone attacks which is unlikely to lead to neutralization of terrorism though some terrorists and hideouts could be neutralized. On the other hand, civilian casualties will add to the resentment in the tribal belt. Internal political divisions, particularly over different approaches between the Federal and the Khyber Pakhtunkhwa (KP) government will also hamper Pakistan’s anti-terror drive. Narrative is seen as a new counter terror tool but this alone is insufficient to combat terrorism, though it plays a vital role in shaping perceptions and countering extremist ideologies. Naming terrorists as Fitna e Hindustan or supported by India is also unlikely to gel with the masses. Implementation of the National Action Plan [NAP] to counter terror in the medium to long term with expanded diplomacy with Afghanistan alone can bring a closure to this perennial challenge. Air and drone strike in Afghanistan may only add to the already tense relationship between the two sides and could result in Taliban providing additional support to the Tehreek Taliban Pakistan and may prove counterproductive.

        Defence. Strategic Mutual Defence Agreement [SMDA] signed between Pakistan and Saudi Arabia provides Pakistan a degree of deterrence vis a vis India apart from expanding role in the Middle East security developments. This is a complex dynamic impacting Pakistan’s relation with multiple Gulf countries some of whom are competitors if not rivals of Saudi Arabia such as Iran and Turkey. China’s sensitivities will also have to be considered apart from the capacity of the Pakistan armed forces to take on wider responsibilities. How this impacts Pakistan’s deterrence vis a vis India remains to be seen. A boost to the defence budget as cash compensation for people who acquired land for construction of the Defence Complex in Islamabad could well be diverted for arms procurement. Missile testing and inductions to activate the Rocket Force is likely. Increasing military technical cooperation is envisaged by Pakistan to build aerospace potential as well as missile and drone capabilities. Apart from China which other countries as Türkiye are willing to provide the same remains to be seen.

       Economy. Pakistan's economy is projected to see growth of around 2.7% to 4.25% for the fiscal year ending June 2025 (FY25), with a significant update by the State Bank of Pakistan in August 2025 projecting growth up to 4.25% for FY26. Asian Development Bank (ADB) expects Pakistan's real GDP to growth to stand at 3% in Fiscal Year 2025-26 (FY26) and has warned of increase in inflation up to 6%. While key indicators show a gradual recovery from stabilization, some sectors, like large-scale manufacturing and agriculture, have underperformed. The massive floods in the country in July and August have caused widespread losses which are expected to impact the economy. As per the ADB report of September 2025, Pakistan’s economic outlook faces several risks, including potential policy slippage, delayed reforms, and climate-related threats such as floods that could disrupt agriculture and infrastructure. These factors may undermine business confidence, increase borrowing costs, and threaten household incomes. Global geopolitical uncertainties further add to inflation and stability concerns. However, quicker reforms and improved global conditions could enhance investor confidence and drive stronger growth and will also fetch Pakistan benefits from the International Monetary Fund [IMF] relief package.