Pakistan’s successful role in helping negotiate a peace agreement in the Iran war has earned Islamabad widespread diplomatic praise — and with it, the possibility of economic rewards. But analysts are skeptical that such gains can address the country’s long-standing economic troubles.
Prime Minister Shehbaz Sharif and army chief Field Marshal Asim Munir were present at talks between Iran and the United States held in the Swiss town of Buergenstock last weekend. The meeting marked the conclusion of months of behind-the-scenes diplomatic work by Pakistan in one of the world’s most significant international negotiations.
The warm reception Pakistan received was on full display when U.S. Vice President JD Vance spotted Munir at the resort location. “This guy. What’s up, man?” Vance said before embracing the army chief. Leaders from multiple countries have expressed gratitude to Islamabad for helping bring an end to a conflict that threatened to block the Strait of Hormuz, disrupt global oil supplies, and destabilize the world economy.
The diplomatic achievement has elevated Pakistan’s standing on the world stage. Analysts say the nation of 250 million now has a window to turn that international goodwill into concrete economic gains. However, they caution that no amount of diplomatic prestige is likely to fix the country’s deeper problems — including economic inequality, a narrow tax base, and a pattern of repeated bailouts from the International Monetary Fund.
Pakistan is aiming for economic growth of 4.0% and inflation of 8.2% in the coming fiscal year, compared to projected growth of 3.7% in fiscal 2026, which ends in June, and an average inflation rate of 6.7% during the July through May period of the current year.
An adviser to Pakistan’s finance minister offered an optimistic take: “A nation that delivers stability at home and helps advance stability abroad becomes a more credible destination for investment,” said Khurran Schehzad. He added that “a growth-oriented economic agenda, coupled with a reputation as a force for peace and stability, places Pakistan in a uniquely favourable position to attract investment into its people, infrastructure, technology and future growth sectors.”
Many observers are anticipating some form of financial reward from the United States, though no concrete benefits have materialized yet.
Alex Vatanka, a senior fellow and director of the Iran program at the Middle East Institute in Washington, said one significant opportunity for Pakistan is the “huge potential to be a more integrated part of the broader Middle East,” which could eventually lead to wider economic and defense partnerships in the region.
A former finance minister, Miftah Ismail, pointed to another possibility: if sanctions on Iran are lifted, it could open the door to “huge trade between Iran and Pakistan,” especially through the land border in Balochistan.
Analysts drew comparisons to what happened after the September 11, 2001 attacks, when Pakistan’s alignment with Washington led to debt relief from more than a dozen countries, renewed IMF support, and U.S. assistance. Despite those opportunities, Pakistan failed to capitalize on them due to structural weaknesses in its economy.
Economic commentator and journalist Khurram Husain said the current moment resembles the post-9/11 period, but with a key distinction: that earlier episode came “at the start of a long ruinous war in which Pakistan had to play a frontline role,” whereas today “Pakistan is playing the role of a peacemaker.” That difference means Pakistan’s leverage now comes from being valuable to multiple parties at once — including Washington, Tehran, Gulf states, Turkey, and China.
Former finance minister Ismail, however, struck a more cautious tone. While acknowledging that the diplomatic role has boosted Pakistan’s global image, he said it does nothing to address the high costs, weak exports, and debt repayments that keep the country reliant on the IMF. “Our house is in such disorder that foreigners can’t really help us unless we help ourselves,” he said. “Nothing here in this war changes that and we will be continually dependent on the IMF.”
Asim Ijaz Khawaja, a professor at Harvard University and director of the Harvard Center for International Development, urged Pakistan to resist accepting short-term financial concessions that don’t actually improve productivity. Instead, he recommended pursuing academic exchanges and scholarships, better market access for textiles and technology services, technology transfers, and green investment frameworks.
Britain’s minister for the Middle East, Hamish Falconer, visited last week and thanked Islamabad for its peacekeeping efforts. He told Reuters the UK sees “huge scope for deepening trade links” with Pakistan and that a British trade minister is expected to visit in the coming months. Diplomats from two other Western nations also indicated their governments are exploring ways to strengthen economic ties with Pakistan following its peace efforts, though they asked not to be named.
Atif Mian, a professor of economics, public policy, and finance at Princeton University, said Pakistan should avoid using diplomacy simply as another way to secure deposits, debt rollovers, or IMF-style relief. The real opportunity, he argued, is what he called a “peace pivot” — both internationally and domestically — built on regional trade, energy connections with Iran, and stronger ties with the Gulf and Turkey through exports, technology transfer, and shared industries.
Despite the optimism in some quarters, analysts were united in warning that new economic opportunities won’t solve Pakistan’s deeper challenges. “If structural reforms are not implemented, the country is poised for an implosion in coming decades,” said Adeel Malik, associate professor of development economics at Oxford University. “There are deep-seated grievances among the young and the shrinking middle classes against Pakistan’s ruling elite. The prevailing system has given ruling elites an extended lease of life but has made the country socially and economically insecure.”
