PakAlumni Worldwide: The Global Social Network

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Happy New Year 2026: Pakistan's Year 2025 in Review

As we enter the year 2026, it is time to review the year 2025 and wish you all Happy New Year 2026! May it bring peace, prosperity and happiness to all!!

The year 2025 saw Pakistan defeat a brazen Indian attack on its soil, while reviving its economy and fighting increasing terror. Pakistan's successful response to multiple serious challenges in 2025 helped significantly raise its geopolitical profile with improved ties with the United States and stronger relations with its friends in China, Russia and the Middle East. Pakistan’s GDP crossed the $400 billion mark in 2025. The year ended with Pakistani currency stable and the KSE-100, the key Pakistani stock market index, achieving new record highs with over 50% annual return in US dollar terms for investors. Privatization efforts gained steam with the sale of the PIA, the debt-ridden money-losing state-owned national airline, to private Pakistani investors. The political issues between the rulers and the opposition remained unresolved while PTI chief Imran Khan and his wife were sentenced to long jail terms. Taliban and Baloch terrorist groups stepped up their attacks on both civilian and military targets in the country. Pakistan has accused the Afghan Taliban of harboring these terrorist groups with India's backing.

Indian Aggression in May 2025:

On May 7, 2025, the Indian military launched an unprovoked attack on civilian targets in Pakistan after alleging without evidence that the terrorist attack in Pahalgam in the Indian Occupied Kashmir was carried out by groups based in Pakistan. The Indian attack was met with a robust Pakistani response in which multiple Indian fighter jets, including recently acquired Rafales, were shot down, leading to the grounding of the entire Indian Air Force for 48 hours. The fighting was halted within 4 days after mediation by the US President Donald J. Trump.

India's diplomatic efforts to isolate Pakistan by attempting to persuade the international community that Pakistan bore responsibility for Pahalgam failed miserably as the world demanded evidence which New Delhi could not produce. Azerbaijan, China and Turkey stood firmly with Pakistan, while India stood alone. Neither the US nor Russia came to India’s support.

High Optimism in Pakistan for 2026. Source: Gallup International

Pakistan's Geopolitical Gains:

Pakistan's success in what India dubbed Operation Sindoor was widely recognized by independent analysts and international media. President Trump talked about India's losses and a US government report referred to Pakistan's military successes against India.

Pakistan’s arm sales soared as the world learnt how the Pakistani military successfully used its indigenous defense gear, including drones and rockets, in the May conflict with India.

The Chinese celebrated the combat performance of their J-10C fighter jets and PL-15 air-to-air missiles used by the Pakistan Air Force against Indian military jets. Saudi Arabia signed a mutual defense pact with Pakistan after the Israeli Air Force struck in Doha, Qatar and the US government did nothing to help the country that hosts the largest US military base in the region.

Pakistan GDP FY 2008 to FY 2025. Source: PBS and AKD

Pakistan's Economic Revival:

Pakistan's economy stabilized with its currency stability and investor confidence. Pakistan’s gross domestic product (GDP ) reached $411 billion in June, 2025, rising 6.2% in April-June quarter. It slowed to 3.7% as floods hit parts of the country in the July-September quarter. The key stock index KSE-100 closed at record highs with 52% annual gain in US dollar terms. Large scale manufacturing grew with 8.3% in Oct 2025, driven by automobiles, construction, textiles, and petroleum. About 36,000 new retail trading accounts were opened in the September quarter, compared to 23,600 new registrations just three months ago, according to Topline Securities, a brokerage house in Pakistan. Broad and deep participation in capital markets is essential for economic growth and wealth distribution in any country.

Pakistan Shares Index Performance in 2025. Source: PSX

Pakistani Rupee Performed Better Than Indian/Sri Lankan Currencies in 2025

Pakistan's arms exports soared with multi-billion dollar orders for its fighter jets, trainer aircraft and drones. Azerbaijan, Sudan, Libya and Turkey purchased Pakistan-made defense equipment.

The discovery of rare earth metals, particularly large deposits of antimony, a critical mineral, boosted Pakistan's potential in world trade of critical metals. Antimony's main uses are in flame retardants (as antimony trioxide in plastics, textiles), strengthening alloys (especially with lead for batteries, ammunition, bearings, cable sheathing, pewter), and in semiconductors (diodes, infrared detectors). It's crucial for military tech (night vision, explosives), improves battery performance, and is used in glass (clarifying agent) and ceramics, highlighting its role in critical defense and energy technologies. . The price of antimony trioxide has shot up to around $40,000 per ton — off its peak of more than $60,000 as some users seek alternatives but still substantially higher than $26,000 in September 2024 — as fears about China’s control of the supply chains for metals including antimony have sparked a global race to secure supplies.

Pakistan received commitments of billions of dollars in investments in its large copper and gold deposits. Copper's importance has dramatically increased with growth in electric vehicles, data centers and global power demand.

Pakistan Space Program:

In October 2025, China launched HS-1 satellite for Pakistan, its first hyper-spectral satellite which is equipped with advanced hyper-spectral imaging sensors capable of capturing data across hundreds of narrow spectral bands. The satellite lifted off from China’s Jiuquan Satellite Launch Center on a Kinetica-1 rocket. It is expected to boost Pakistan's national capacities in areas such as precision agriculture, environmental monitoring, urban planning, and disaster management. Its high-resolution data will support improved resource management and strengthen Pakistan’s resilience to climate-related challenges.

In addition to the HS-1 satellite, Pakistan has signed a $406 million deal with China’s PIESAT for a constellation of over 20 imaging and communication satellites, a move that signals a profound shift in its strategic posture, according to defense site Quwa. The deal includes a full transfer-of-technology (ToT) for in-country satellite manufacturing. It is poised to provide the Pakistani military with a sovereign, persistent imaging intelligence (IMINT) capability.

Pakistan's First AI Data Center:

Data Vault and Telenor Pakistan launched the nation's first dedicated AI data center in Karachi. It is designed to support startups, researchers, and government agencies with high-performance computing and GPU-as-a-service offerings. It is equipped with more than 3,000 Nvidia's highest performance H100 and H200 GPUs for which the Trump Administration issued export licenses. These GPUs cost from $40,000 to $60,000 each, making the Nvidia chips the biggest chunk of the investment made in this AI data center. Other data centers in Pakistan also support AI workloads but this new data center in Karachi is specially designed for AI. It puts the country on a short list of only a handful of nations with locally hosted AI data centers. Pakistanis rank among the world's top five users of Artificial Intelligence (AI) tools, securing the fourth spot among 21 nations surveyed by the Schwartz Reisman Institute.

Pakistan's Challenges in 2026:

Sustained economic recovery is the key challenge for Pakistan in 2026 and beyond. It is a difficult challenge amid unsettled issues with India and unresolved domestic political problems at home. Opposition leader Imran Khan and his wife have been sentenced to long jail terms by Pakistani courts. This situation, if left unresolved, is likely to continue to be a source of instability and poor economic performance. The other challenge is rising incidents of terror in the country with a 70% increase in terror attacks in 2025. Brute force alone will not resolve these issues. There's a need for talks to reach a political settlement with the Afghan Taliban who are harboring groups like the TTP and BLA that launch cross-border attacks in Pakistan.

Comment by Riaz Haq 3 hours ago: A new Indian foreign policy consensus is emerging. That India isn’t a great power yet
After exuberance, India must now not only take difficult and costly steps toward industrialisation, but also convert growth into geo-economic leverage and military modernisation.
Sidharth Raimedhi

https://youtu.be/SgRKrybkJZs?si=SBh0i2Ir_3xHKolh

https://theprint.in/opinion/indian-foreign-policy-consensus-great-p...

After exuberance, India must now not only take difficult and costly steps toward industrialisation, but also convert growth into geo-economic leverage and military modernisation.

A new consensus in Indian foreign and strategic policy thinking has emerged over the past year. It holds that, despite various proclamations, India is not yet a great power, and that its status as a rising power should not be taken for granted either.

Accordingly, India should focus on costly reforms to establish the long-term foundations of power, rather than limiting its policy options to short-term diplomatic or strategic moves. If anything, these priorities require greater restraint and caution in foreign policy, rather than expansion or overt great-power assertion.

Whereas the evolving foreign policy consensus in the US has, understandably, hogged much of the attention in recent months, what is more easily missed is a parallel shift in India’s own broad policy framework, toward what can be termed ‘post-exuberance realism’. As a country’s foreign policy environment becomes more contested and multi-dimensional, it is only logical that its strategic culture adapts accordingly. The shift, therefore, is unsurprising.

The external drivers of post-exuberance realism

As argued earlier, shifts in key equations among the great powers, and in their respective equations with Delhi, have left India occupying a much diminished geopolitical sweet spot from which to bargain. As External Affairs Minister S Jaishankar has argued, changes in the global order have made India’s relationships with the system’s major powers — China, Russia, and the US — far more challenging and complex than they were in 2019. Indeed, 2025 proved to be a sobering year for Indian foreign policy. It saw China’s ‘DeepSeek’ moment and a growing appreciation in India of Beijing’s breakneck ascent toward superpower status. In particular, China demonstrated its ability to threaten industrial supply chains in the US, as well as key sectors of the Indian economy, through its still-evolving and coercive rare-earth export control licensing regime.

The year also saw Washington brusquely abandon India-US strategic convergence and pivot toward a softer reconciliation with China, driven by economic rationale but carrying strong strategic implications for Asia’s future. Trump’s trade war against India further exposed New Delhi’s limited stock of deployable geo-economic leverage vis-à-vis both China and the US. As external bottlenecks have hardened, India has been forced to finally confront internal constraints, evident in recent efforts to boost domestic demand and push labour law reforms.

Meanwhile, India was also confronted with the extent of the maturation of the China-Pakistan strategic and defence relationship in May last year, during Operation Sindoor — something that had faded from public consciousness since 2019-20. China’s continued infrastructure development along the LAC, combined with its growing economic leverage over India, has enabled Beijing to underwrite trilateral cooperation with Afghanistan and Bangladesh, with Pakistan on its side in both cases. The emergence of Turkey as a military ally and defence supplier to several states in the Indian Ocean region has not escaped attention either. Together, these developments necessitate a sober reckoning with the structural weaknesses in India’s armaments policy, as well as a measure of military restraint in the short term. India’s Chief of Defence Staff, General Anil Chauhan, appeared to allude to this last week when he emphasised the need to avoid “attritional warfare” amid increasing geopolitical uncertainty.

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