The year of Pakistan’s geoeconomic power litmus test

After years of dwindling global significance, the year 2025 dramatically elevated Pakistan’s global profile. This was largely through a security lens thanks to a brief but game-changing military skirmish in May with India in which Islamabad held its own and thwarted a numerically superior Delhi. In over 50 public instances since then, American President Trump has repeatedly indicated that Pakistan won the first formal air combat between the two nuclear neighbors in five decades.

By year’s end, Islamabad had reinforced military partnerships, expanded its defense export footprint and consolidated strategic ties with key global powers, projecting an image of a state that could still matter on geopolitics despite enduring internal turbulence. This roster included a strategic mutual defense pact with Saudi Arabia, and defense deals centered around with selling its signature JF Thunder combat planes with Bangladesh, Libya, Iraq, Indonesia, Nigeria and Azerbaijan.

Islamabad has also been figuring centrally in the unfolding post-ceasefire security and political arrangement in Gaza, as well as working with diplomatically significant Eurasian blocs like Economic Cooperation Organization and Shanghai Cooperation Organization, as well as Organization of Islamic Cooperation on preventing current global military risks from flaring up. 

Now at the onset of 2026, Pakistan is signalling a rewiring of its foreign policy priorities – seeking to balance its now muscular and certified security legacy with a more assertive diplomatic and economic agenda that could shape its role in Asia, the Middle East, and beyond.

The ultimate litmus test for whether Pakistan pulls off as good a 2026 as 2025, lies in whether it can tackle its thorniest diplomatic and economic challenge yet: ties with India.

Adnan Rehmat

 For once this shift is not simply rhetorical. Amid global multipolar realignments in the backdrop of Ukraine, Gaza, Venezuela and Iran, Pakistan is attempting to translate its security capital into broader engagement internationally. For this transition to prove sustainable, however, Islamabad must simultaneously overcome deep economic stresses, domestic political volatility and regional diplomatic uncertainties.
 
Indicating that it is alive to these considerations at home, the Pakistan government has reworked legal and administrative arrangements and is aggressively pushing forward governance and economic reforms centered on digital transformation, energy, climate, taxation, industrialization and exports. Ties between the ruling political classes and security establishments have never been better although the jury is still out on the sustainability of what is termed a ‘hybrid’ political governance model that is anything but democratic.

Based on the priorities becoming public recently, it is apparent that Pakistan is proactively seeking to translate a global recognition of its security prowess into economic dividends and the sovereign guarantees that the hybrid governance model brings. Hence Pakistan’s military chief is seen just as involved in economic diplomacy as the prime minister is seen stitching up security deals.

But Pakistan’s ongoing recalibration from “geopolitics only” to “geoeconomics also,” while discernible, is still a work in progress. For instance, the foreign ministry is pursuing balanced relations with both US and China. While this seemingly paradoxical diplomatic challenge can strengthen Pakistan’s global image and expand its strategic space, the contours of this balance remain delicate. This is still to play out fully and Trump is sure to test it in 2026.

For now, Islamabad and Beijing have formally embarked on revitalizing the structured mechanism of the Pakistan-China Strategic Dialogue, a platform that signs off on concrete agreements across security, economic and regional issues. Simultaneously, Islamabad has been working with Trump on institutionalizing and expanding two new initiatives with US investments: crypto and rare minerals.

Such balanced outreach amid great power competition and conflict between Washington and Beijing creates both risks and opportunities for middle powers like Pakistan but Islamabad appears to be hedging well by maintaining deep ties with both through a geoeconomic lens. This is institutionalized, not ad hoc diplomacy.

But perhaps the ultimate litmus test for whether Pakistan pulls off as good a 2026 as 2025 was, lies in whether it can tackle its thorniest diplomatic and economic challenge yet: ties with India. If anything, the brief air war last year has made it even more difficult to undertake this. But tackled it must be. Perhaps the political reset in Bangladesh, which has revived all but dead bilateral Islamabad-Dhaka ties and worsened Delhi-Dhaka relations, offers a diplomatic opportunity.

Islamabad will need to engage Dhaka from a perspective of South Asian amity. A rare handshake between Indian and Pakistani high officials at the funeral ceremony of Khaleda Zia in Dhaka this month already offers a chance for a benign regional gamble. This will require Pakistan’s hitherto hard power projection to switch to soft-power approach. This is a strategic necessity and one final test of Pakistan’s multilateralism. Pulling this off diplomatically will establish Pakistan as a geoeconomic power as well. 

– Adnan Rehmat is a Pakistan-based journalist, researcher and analyst with interests in politics, media, development and science.

X: @adnanrehmat1