Pakistan sees minimal fiscal impact from India standoff as economists estimate billions in losses

Arab News

13-05-2025

ISLAMABAD: Pakistan's finance ministry said on Tuesday the recent four-day standoff with India will not have a significant fiscal impact, as analysts estimated that the conflict cost both countries losses of around $1 billion per hour.
Tensions between India and Pakistan escalated after a deadly April 22 attack on Hindu tourists in Indian-administered Kashmir, which killed 26 people. India blamed Pakistan for the assault, an allegation denied by officials in Islamabad, though it still led to one the worst military confronts between the two nuclear-armed neighbors in decades.
A ceasefire was announced on Saturday by US President Donald Trump, following four days of fighting and intense diplomatic efforts led by Washington. However, the military confrontation, by then, had disrupted stock markets, led to airspace closures, escalated defense spending and caused economic losses amounting to billions of dollars.
'The current standoff with India won't have a large fiscal impact on Pakistan,' Khurram Schehzad, adviser to the finance minister, told Arab News.
'It can be managed within the current fiscal space, with no need for a new economic assessment,' he added.
Schehzad said Pakistan's economic resilience was evident from a new record at the Pakistan Stock Exchange, which on Monday posted the highest single-day gain in over 26 years, surging by 10,123 points or 9.45 percent, significantly surpassing the losses recorded last week following the Indian strike.
'Pakistan's measured and responsible response, in both its narrative and actions on the ground, has caught investors' eye, alongside the potential positive spillover effect of a possible settlement in the US-China tariff issue,' he added.
Arab News reached out to the defense ministry and Pakistan's military media wing for official estimates of the conflict's cost, but did not receive a response by the time of filing this story.
Meanwhile, economists said the recent military standoff inflicted heavy financial losses on both countries, with combined costs approaching $1 billion per hour.
'The recent conflict, over an 87-hour period, I think cost about a billion dollars an hour for both countries,' economist Farrukh Saleem told Arab News.
He estimated total combined losses of between $80 and $90 billion over the four-day period.
'About 20 percent of that was incurred by Pakistan and a good 80 to 85 percent by India,' he added.
Saleem said daily economic losses from the conflict, including stock market declines and other impacts, amounted to around $20 billion per day, with Pakistan losing up to $4 billion and India as much as $16 billion per day.
'I have tried to put things together. If this conflict had continued for 30 days, my estimate is that both countries would have lost a good $500 billion, with over a $400 billion loss for the Indian economy,' he added.
Explaining India's higher losses, he noted that each Rafale fighter jet costs around $240 million, while Pakistan's JF-17 Thunder or J-10C jets are priced between $20 and $25 million per unit.
'BrahMos, for instance, the Indian ballistic missile, costs $3 million apiece. If, for example, 10 units are used in a day, that amounts to $30 million in a single day,' he said.
Dr. Ali Salman, Executive Director of the Policy Research Institute of Market Economy (PRIME), an Islamabad-based independent economic policy think tank, said the conflict had disrupted economic sentiment and affected investor confidence.
'Certainly, investors would not like to come into countries, whether India or Pakistan, if they are in a constant war-like situation,' he told Arab News.
He emphasized that prolonged conflict would push people in both countries deeper into poverty, noting that one in four poor people in the world lives in India or Pakistan.
'We have 27 percent of the world's poor in just these two countries, and I believe that we need to come out of the military context and go into an economic context,' he added.
Another economist, Shakeel Ramay, said every war has an economic dimension and that the conflict had imposed a heavy financial burden on both economies.
'Pakistan's military expenditure over the four-day conflict, including jets, artillery and missiles, amounted to around $1.5 billion from the national budget, by my estimate,' he said, adding that this was significant, especially as the country continues to face economic challenges.
'The good thing is our economic activities continued without interruption, retail markets operated smoothly with no shortages and trade routes remained open, all indicating that the direct economic cost was minimal,' he added.