Is Pakistan Imploding? Can US and China Afford to Let It Fail?

“Rich Army, Poor Nation, Poorer People — Manufacturing Relevance on Borrowed Time and Borrowed Money“

Pakistan is not collapsing overnight—it is imploding in slow motion.

Despite economic bankruptcy, insurgencies, political repression and institutional decay, Islamabad continues to attract extraordinary support from Washington, Beijing and Gulf capitals.

Why?

Because Pakistan has mastered the art of remaining strategically indispensable even while becoming economically unsustainable.

Pakistan presents one of the greatest strategic paradoxes of modern geopolitics. A state battling insurgencies, mounting debt, shrinking democratic space and deep economic distress continues to command disproportionate global attention. This article analyses why the United States, China and Gulf states continue investing in Pakistan’s survival, why these interventions cannot reform its structural weaknesses, and what India’s long-term strategic response should be.

This analysis explains why the world’s major powers keep rescuing Pakistan, why those rescues cannot solve its structural problems, and what lessons India must draw from Pakistan’s paradox. The text of the Analytical paper is given below:-

IS PAKISTAN IMPLODING?

CAN THE USA AND CHINA SAVE IT?

“Rich Army, Poor Nation, Poorer People — Manufacturing Relevance on Borrowed Time and Borrowed Money“

Major General (Dr) S B Asthana, SM, VSM (Veteran)

International Strategic & Defence Analyst | Former DG Infantry, Indian Army | Former Director, USI | PhD International Affairs | 600+ Publications | Global Media Commentator | 5000+ TV Appearances

I.  A State on Permanent Life Support

Every news cycle on Pakistan now reads like a split screen. On one panel: protests in Pakistan-occupied Jammu & Kashmir (PoJK) met with live fire and rigged election, the Baloch Liberation Army striking convoys and gas installations, the Tehreek-e-Taliban Pakistan fighting a cross-border war that Islamabad itself has called “open war,” and a currency and treasury kept solvent only by serial International Monetary Fund transfusions. On the other panel: Field Marshal Asim Munir shuttling between Washington, Tehran and Rawalpindi as a trusted mediator in the Iran crisis, Pakistan courted by Gulf capitals, and a nuclear-armed state that continues to command disproportionate great-power attention relative to its economic weight.

The paradox is the story. Pakistan is not collapsing in the classic sense of a state losing control of territory overnight; it is imploding in slow motion — hollowing out fiscally, socially and institutionally — even as it remains diplomatically indispensable to Washington and structurally indispensable to Beijing. This piece examines whether that indispensability can be sustained indefinitely, what it costs ordinary Pakistanis, and what it means for India’s own strategic calculus.

II.  A Failing State with Unending Tale of Debt, Default and the IMF Favouritism

As of early 2026, Pakistan’s total external debt and liabilities, including bank and private external liabilities, government guaranteed borrowing, and sovereign debt, totalled about USD 138 billion, with China accounting for almost half of it. Government external debt alone had climbed to USD 92.2 billion by end-March 2026, of which IMF exposure accounted for nearly USD 9.9 billion — about 11 percent of the total. Islamabad is currently running its twenty-fourth-odd programme with the Fund since 1958, the present USD 7 billion Extended Fund Facility (approved September 2024) now layered with a Resilience and Sustainability Facility, together disbursing about USD 4.8 billion across three completed reviews by May 2026 and accumulating some seventy-five conditionalities along the way.

The pattern is familiar: reserves rebuilt to roughly USD 16 billion by end-2025. A periodic bilateral rescue valves prevents sinking— Beijing rolling over a USD 2 billion deposit, Gulf states parking reserves with the State Bank — each timed to prevent a default rather than to correct the underlying structure. What is never restructured is the composition of spending itself: defence and military-linked enterprise remain insulated even as tariffs, subsidies and taxes on ordinary citizens are repeatedly “rationalised” to satisfy the Fund. It is not an economy being reformed; it is a security state being underwritten, one tranche at a time.

III.  Rich Army, Poor Country, Poorer People

Pakistan’s political economy is best summarised in one line: rich army, poor country, poorer people. The Pakistan Army’s institutional footprint extends well beyond defence into real estate, agriculture, cement, banking and manufacturing through foundations such as Fauji, Army Welfare Trust and Shaheen, insulating the officer corps from the austerity imposed on the rest of the population. Defence and security spending — overt and covert — continues to claim a disproportionate share of a shrinking fiscal pie, crowding out health, education and social protection, even as the “India threat” narrative is continuously manufactured to legitimise the imbalance.

“The India threat theory is not merely a security assessment; it is the load-bearing pillar of the military’s claim on the national budget, its dominance of foreign and nuclear policy, and its extensive commercial empire. Remove the external threat, and the rationale for that privileged position collapses with it.“

This is a self-reinforcing architecture: external adventurism manages internal contradictions, and internal repression manages the blowback from external adventurism. No civilian government has ever been permitted to break the cycle, because doing so would require the one institution empowered to authorise reform to first surrender its own privileges.

IV.  When People Don’t Matter, the Military Decides

Civilian governments in Pakistan are tolerated, not truly elected in the full sense — permitted to function so long as they remain within the “permissible band” of policy defined by Rawalpindi. The events of 2026 illustrate the point starkly. In Pakistan-occupied Jammu & Kashmir, a Supreme Court of Azad Kashmir ruling in June upholding twelve refugee-reserved legislative seats reignited protests led by the Jammu Kashmir Joint Awami Action Committee over electricity tariffs and constitutional under-representation. Islamabad’s response was to ban the organisation under anti-terrorism law and meet demonstrators in Rawalakot and Muzaffarabad with live fire, killing at least eleven — on top of tolls from the 2024 and 2025 rounds of the same protest cycle — followed by the now-familiar reflex of internet and mobile shutdowns.

Balochistan tells a parallel story at greater intensity. BLA-led attacks under “Operation Herof 2.0” killed 31 civilians in January 2026 alone, part of a broader pattern that saw Pakistan top the Global Terrorism Index rankings this year. When citizens in either periphery protest tariffs, disappearances or marginalisation, the state’s instinct is securitised repression rather than negotiation — because negotiation would concede that the citizenry, not the garrison, is the ultimate stakeholder in the Pakistani state.

V.  Fractured Democracy, Declining Minorities, and the West’s Selective Conscience

Pakistan’s democratic façade conceals a shrinking space for dissent and an even smaller one for religious minorities. Human Rights Focus Pakistan recorded over 600 documented violations against religious minorities — murders, forced conversions, blasphemy-law abuse, abductions — in just the first six months of 2026. The 2026 World Watch List again places Pakistan among the eight most dangerous countries in the world to be a Christian, citing mob violence, bonded labour and near-total impunity for perpetrators, while the US Commission on International Religious Freedom’s 2026 report has urged Washington to redesignate Pakistan a “Country of Particular Concern.” Ahmadis, Hindus and Sikhs report similar patterns of forced conversion, targeted killing and legal disenfranchisement, even as sectarian clerics retain outsized political influence.

Yet Pakistan remains, in large measure, a strategic “darling” of the West. The Cold War pattern — frontline-state status in CENTO and SEATO in exchange for Western indulgence of its internal conduct — has simply been updated for a new era: a nuclear-armed counter-terrorism partner judged too dangerous to be allowed to fail is granted latitude that a state of comparable human-rights record would rarely receive elsewhere. Pakistan has repeatedly secured seats on UN human-rights bodies even while hosting more UN-designated terrorist entities than any other country — a paradox that says less about Pakistan’s exceptionalism than about the limits of Western normative rhetoric whenever hard security and nuclear risk management enter the room.

VI.  Washington’s Calculus: From Mediator to “My Favourite Field Marshal”

American interest in Pakistan has narrowed sharply since the 2021 withdrawal from Afghanistan, but it has not disappeared — and in 2026 it has taken on a distinctly personalised character. Field Marshal Asim Munir’s relationship with President Trump, forged during the India-Pakistan crisis of May 2025 and cemented by a rare White House lunch meeting, has evolved into a working partnership in which Munir shuttled repeatedly to Tehran through April and May 2026 to help mediate the US-Iran confrontation, with Secretary of State Marco Rubio publicly crediting “slight progress” to the effort. US Congressmen have since met Munir directly in Rawalpindi, and CENTCOM’s commander has called Pakistan a “phenomenal partner” in counter-terrorism, citing intelligence-led captures of high-value ISIS-Khorasan operatives.

Strip away the personal chemistry, and the American calculus is unchanged in substance: counter-terrorism access against networks operating from Afghan soil, oversight of proliferation risk around a substantial nuclear arsenal, and a hedge against China monopolising influence over a state astride the western approaches to the Indian Ocean and Afghanistan. What has changed is the channel — Washington is once again dealing with the Pakistani military chief directly and preferentially over the civilian government, reinforcing rather than correcting the military’s primacy over Pakistan’s institutions. U.S. is also convinced that for any military option of a ground action against Iran or elements in Afghanistan, the strategic logistics route through Pakistan is inescapable.

VII.  Beijing’s Stakes: CPEC 2.0 and an “Iron Brotherhood” Under Fire

For China, Pakistan remains structurally, not merely transactionally, important. The China-Pakistan Economic Corridor — the flagship of the Belt and Road Initiative — offers Beijing a land bridge from Xinjiang to Gwadar that bypasses the Malacca Strait chokepoint and ties down Indian strategic attention on its western flank. “CPEC 2.0” has moved beyond concrete and coal, adding roughly 9,500 megawatts to the national grid and preparing to bring Chinese electric-vehicle assembly to Pakistan by mid-2026, even as flagship hydropower projects such as Diamer-Bhasha, Dasu and Bunji remain inexplicably sidelined and new special economic zones are sited in documented flood-risk districts.

The corridor’s greatest vulnerability, however, is security. At least twenty Chinese nationals have been killed and dozens injured in Baloch Liberation Army attacks since 2021, with January 2026’s coordinated strikes in Quetta and Gwadar killing 31 civilians and exposing what Chinese commentators themselves describe as reactive, fragmented and under-resourced protection. Foreign Minister Wang Yi and his Pakistani counterpart met in Shanghai in July 2026 to “consolidate counterterrorism security guarantees,” and Beijing is reportedly weighing deployment of its own security personnel — an extraordinary step for a state that has long insisted on non-interference. China continues to roll over deposits and finance new tranches regardless, because CPEC’s strategic value to Beijing outweighs, for now, its mounting security and solvency risk. However, the relevance of Pakistan as an irritant in India’s growth remains as a potential competitor.

VIII.  The Gulf’s Silent Stake: Manpower, Deposits and Remittances

Arab Gulf states — principally Saudi Arabia and the UAE — hold a quieter but no less consequential stake in Pakistan’s survival. Gulf deposits have repeatedly plugged State Bank reserve gaps during balance-of-payments crises, while Pakistani military manpower, training relationships and historical troop contributions continue to underpin security cooperation with Gulf capitals. Pakistani expatriate labour across the Gulf remains a critical remittance lifeline for millions of households, tying Pakistan’s domestic stability directly to Gulf economic cycles and to Islamabad’s standing within the Organisation of Islamic Cooperation, where it has long styled itself as the Muslim world’s only nuclear power. Islamabad’s growing profile as a mediator in West Asia — from the Iran-US channel to efforts at reconciling factions in Libya — further consolidates this relevance within the Islamic world, even as its own peripheries remain in revolt.

IX.  The Art of Manufactured Relevance: A Small State’s Grand Strategy

Pakistan’s strategic art, honed since 1947, lies in perpetually finding relevance for great powers even from a position of underlying weakness. During the Cold War it offered geography and anti-Soviet utility as a CENTO and SEATO frontline state; during the US “War on Terror” it offered logistical corridors and calibrated cooperation with, and against, the Taliban; under CPEC it offers China a corridor and a low-cost counterweight to India; today it offers Washington a back-channel to Tehran. Each era has demanded a different service, but the underlying method is constant — subtracting rival influence while adding itself as the indispensable node.

This balancing act between Washington and Beijing is increasingly precarious rather than skilful. Pakistan seeks American bailouts, IMF goodwill and security reassurance while deepening Chinese defence and economic entanglement and hosting Chinese assets under CPEC. Washington scrutinises the JF-17 programme, naval cooperation and technology transfers to Beijing through a sanctions-risk lens; Beijing, in turn, expects Islamabad to prioritise CPEC security over any renewed American defence relationship. Pakistan’s declared “strategic neutrality” is, in practice, simultaneous dependence on both — and both patrons know it, tolerating the ambiguity only because each still extracts more value from a merely-functional Pakistan than from a truly failed or a genuinely reformed one.

X.  The Technique: Intelligence and Terror as a Leverage-Generation Machine

Pakistan’s intelligence and military establishment has refined manufactured relevance into a repeatable technique: nurture controlled instability, then offer selective access, pressure relief or mediation that external partners come to depend upon. The Inter-Services Intelligence directorate’s decades-long patronage of the Afghan Taliban as an instrument of “strategic depth” against India is the clearest historical example — a calculated subtraction-and-addition strategy that has now catastrophically inverted, with the Tehreek-e-Taliban Pakistan turning that same doctrine against its architect in the cross-border war that began in late 2025 and escalated into direct air strikes on Kabul, Kandahar and Nangarhar in early 2026.

When a state nurtures terror as an instrument of policy, it cannot indefinitely quarantine itself from its consequences — Pakistan’s own frontier is now paying the price of its “good Taliban, bad Taliban” doctrine.

Yet even as this doctrine boomerangs domestically, the same apparatus is repackaged internationally as indispensable crisis-management capacity — the very state accused of incubating designated terrorist entities is simultaneously courted as the mediator best placed to talk to Iran, the Taliban and assorted Libyan factions. This is not opportunism; it is a doctrine of manufactured indispensability, in which the capacity to destabilise and the capacity to selectively de-escalate are two ends of the same lever, generating bargaining chips with Washington, Beijing, Riyadh and multilateral bodies alike.

XI.  Can America and China Really Save Pakistan?

The uncomfortable answer is that Washington and Beijing can prolong Pakistan’s survival; they cannot save it in any structural sense. IMF-endorsed bailouts and CPEC rollovers keep the state solvent and the nuclear arsenal under professional custodianship, but they neither democratise decision-making nor subordinate the military to civilian authority nor diversify an economy still organised around a defence-heavy budget and a narrow tax base. Both powers, in fact, have an incentive to keep Pakistan afloat but not fully reformed — Washington to preserve counter-terrorism access and nuclear oversight, Beijing to protect CPEC and anchor its western periphery — because a merely-functional Pakistan, led by a military establishment both capitals find easier to deal with than an uncertain civilian politics, serves their respective interests more predictably than either collapse or genuine transformation would.

A truly rebalanced Pakistan — one that invested in its people rather than its proxies, normalised relations with India, and freed its peripheries from coercion — would diminish the leverage of its current ruling structure and alter regional calculations that both external patrons currently find convenient. For now, the system that is imploding from within is also the system its patrons find most manageable.

XII.  What India Must Do: Leverage Is Capability, Not Subservience

For India, the task is to counter Pakistan’s negative impact — cross-border terrorism, information warfare, hostile diplomatic narratives and nuclear brinkmanship — without inflating Pakistan’s strategic importance beyond its actual weight. This calls for a calibrated approach along several axes:

• Maintain robust conventional and nuclear deterrence while avoiding escalatory traps designed to validate Pakistan’s “India threat” narrative and its military’s claim on primacy.
• Use diplomatic, informational and legal channels to expose Pakistan’s internal contradictions — PoJK’s unrest, Baloch grievances, TTP blowback — through calibrated activism rather than direct interference that could unify a fragmented polity against India.
• Press international financial institutions to ensure future bailouts do not indirectly subsidise cross-border terrorism, while recognising that India should not and cannot engineer Pakistan’s economic collapse.
• Strengthen India’s own resilience — border management, counter-terror capability, economic growth and strategic autonomy toward both Washington and Beijing — so that Pakistan’s attempts to tie India down on its western front have limited traction.

The central lesson, and the one most relevant to India’s own strategic posture, is this: relevance built solely on alignment, geography or votes at multilateral forums is transactional and ultimately fragile — Pakistan’s own history demonstrates as much. Durable leverage in today’s competitive order is not secured only by being subservient or accommodating to powerful partners; it is secured by demonstrating credible, lawful capability to impose costs on adversaries, and on those who abet activity against one’s interests. Pakistan has pursued this logic through proxies and manufactured instability, and it remains relevant — but at the price of perpetual fragility and dependence on external dictates. India’s task is to pursue the same underlying principle through the opposite method: transparent, capability-driven signalling — economic, technological, diplomatic and military — that leaves no ambiguity about India’s capacity to protect its interests and respond proportionately when they are violated, without recourse to the proxy-driven instability that has hollowed out Pakistan itself.

XIII.  Conclusion: Leverage, Legitimacy and the Road Pakistan Chose

Pakistan’s trajectory is a cautionary tale for any state seeking relevance in a crowded multipolar arena. Relevance can be built by offering geography, troops, votes or mediation services to great powers; but durable leverage — the kind that commands respect rather than merely attention — comes only from independent capacity: the demonstrated ability to defend one’s interests, contribute to regional public goods, and engage with multiple poles of power without becoming any one power’s extension. Pakistan chose the path of proxies, manufactured crises and external patronage over internal reform, and it remains relevant precisely because of that choice — at the continuing cost of its own people’s welfare and its own state’s coherence.

Whether Washington and Beijing can keep that structure from collapsing outright is, in the final analysis, less important for India than ensuring that India’s own strategic trajectory — economic, military and diplomatic — remains autonomous, resilient and unambiguously capable, whatever unfolds next in Rawalpindi.

Further Reading and Viewing by the Author

This analysis draws on and extends the author’s longer study, “Pakistan Paradox: An Imperfect Partition — A Nuclear State at War with its Neighbours, its Periphery and Itself,” published on asthanawrites.org.

Related video commentary by the author:

• TV interview / discussion on Pakistan’s internal fault lines and regional strategy — https://www.youtube.com/watch?v=7ecUL_bUXqc
• TV debate on Pakistan’s proxy doctrine and regional security implications — https://www.youtube.com/watch?v=RM_xSvtXQQY
• Short-form analysis on Pakistan’s strategic balancing act — https://youtube.com/shorts/GpH1nMFJp4o

Full archive of the author’s writing, TV debates and the video channel is available at asthanawrites.org and YouTube: @GenAsthanaAnalyses.

About the Author

Major General (Dr) S B Asthana, SM, VSM, PhD (Veteran)

The views expressed are the personal views of the author, who retains copyright. The author is a globally acknowledged strategic and security analyst, and former Director General of Infantry, Indian Army, and former Director at the United Service Institution of India. A prolific strategic-affairs commentator with over 600 published works and more than 5,000 global TV appearances, he writes on geopolitics, military doctrine and Indian defence policy.

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