Crisis-hit Pakistan has found itself spiraling into a dual calamity—a full-scale economic meltdown compounded by intensifying hostilities with India. As the ongoing conflict severely impacts its internal financial system, the government in Islamabad has turned to the international community with an urgent plea for financial rescue, marking yet another chapter in Pakistan’s recurring dependence on foreign loans.

On May 9, 2025, the Economic Affairs Division (EAD) of Pakistan officially acknowledged the deteriorating situation via a post on social media platform X. It described the country’s plunging stock market, escalating inflation, and loss of investor confidence as indicators of an economic freefall driven by war. The EAD stated, “Amid escalating war and stocks crash, we urge international partners to help de-escalate. Nation urged to remain steadfast.”

This plea comes as military tensions with India soar following India’s precision military strikes under Operation Sindoor, which targeted terrorist infrastructure in Pakistan and Pakistan-Occupied Kashmir (PoK). The operation, conducted in response to the Pahalgam terror attack on April 22 that killed 26 Indian civilians, has intensified diplomatic isolation for Pakistan while amplifying domestic instability.

A Nation on the Brink

Prime Minister Shehbaz Sharif's administration now faces the herculean task of managing both a geopolitical crisis and a rapidly collapsing economy. The stock markets in Pakistan have registered historic lows, with capital flight from foreign investors triggering a sharp depreciation of the Pakistani Rupee. Energy shortages, inflation breaching double digits, and rising unemployment have further stoked civil unrest, particularly in urban centers such as Karachi, Lahore, and Islamabad.

Pakistan’s external debt, already nearing unsustainable levels, has worsened in the wake of military escalation. With foreign reserves dipping below the $2 billion mark, the nation is now struggling to import essential commodities such as fuel, wheat, and pharmaceuticals. Ongoing conflict has also disrupted cross-border trade routes and halted several domestic production facilities.

India’s Position on IMF Bailout

India, responding firmly to Pakistan’s global loan appeal, has signaled that it may oppose any further International Monetary Fund (IMF) bailout packages for its neighbor. At a press conference, Foreign Secretary Vikram Misri stated that India's executive director at the IMF would present the country’s position during the upcoming board meeting in Washington.

Misri emphasized that Pakistan has received 24 IMF bailouts to date, many of which, he pointed out, were misused or left incomplete. He questioned the wisdom of extending additional funds without strict oversight or assurances of reform. “The case with regard to Pakistan should be self-evident to those people who generously open their pockets to bail out this country,” Misri noted.

This assertive diplomatic stance adds to Pakistan’s challenges in securing international loans, especially from institutions that count India as a major stakeholder, such as the IMF and World Bank.

Operation Sindoor: The Flashpoint

The current crisis traces back to Operation Sindoor, India’s massive tri-service military operation launched between 1:05 am and 1:30 am on May 7, 2025. The operation was in direct retaliation for the deadly April 22 terror strike in Pahalgam, which Indian intelligence attributes to Jaish-e-Mohammed (JeM) operatives with bases in Pakistan.

According to Indian military sources, missile strikes under Operation Sindoor targeted key terror training facilities of JeM and Lashkar-e-Taiba (LeT) in Bahawalpur, Muzaffarabad, Kotli, and other locations within Pakistan and PoK. The mission was coordinated jointly by the Indian Army, Air Force, and Navy.

In a rare acknowledgment, JeM chief Maulana Masood Azhar confirmed that 10 members of his family and four close associates were killed during India’s strikes. The admission served to validate India’s precision targeting claims, while further exposing Pakistan’s patronage of terror groups—raising eyebrows in the international community.

Global Response and Diplomatic Pressure

Pakistan’s desperate request for international help comes amid growing pressure from several countries and financial institutions to cut ties with state-sponsored terrorism. Reports suggest that nations like France, the U.S., and the U.K., while sympathetic to Pakistan’s civilian plight, are reluctant to offer unconditional assistance without guarantees of political and military reforms.

Moreover, Gulf countries such as Saudi Arabia and the UAE, traditionally generous towards Pakistan, are said to be re-evaluating their financial support in light of recent escalations. With oil prices surging due to regional instability, even allies are prioritizing internal economic adjustments before extending external aid.

Public Unrest and Internal Political Crisis

Inside Pakistan, the worsening crisis has led to mass protests in cities like Rawalpindi and Lahore, with opposition parties demanding accountability from the Sharif government for what they call "reckless warmongering and mismanagement."

Several banks have imposed withdrawal limits, and fuel stations are reporting long queues and supply shortages. Inflation in key consumer goods like flour and medicine has crossed 20%, triggering anger on the streets.

Conclusion

Pakistan's current situation represents a complex intersection of military aggression, economic collapse, and political volatility. With India holding firm on its military and diplomatic stance, and the global community increasingly skeptical of Pakistan’s past loan track record, Islamabad finds itself in a deepening crisis of credibility.

Unless immediate steps are taken to de-escalate conflict, engage in genuine counter-terror reform, and stabilize the domestic economy, Pakistan may face not only financial insolvency but also political fragmentation. The next few days will be crucial as the IMF board meets to discuss the future of Pakistan’s bailout, a decision that could either salvage or sink an already fragile nation.

The Upcoming IPOs in this week and coming weeks are Integrity Belrise Industries, Integrity Infrabuild Developers, Accretion Pharmaceuticals, Wagons Learning.

The Current active IPO are Virtual Galaxy Infotech.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.