The recent military escalation between India and Pakistan is estimated to have cost nearly USD 1 billion per hour of combat, according to preliminary assessments. While India’s larger economy may absorb such shocks more easily, analysts say Pakistan has borne a disproportionate burden due to its ongoing fiscal challenges, depleted foreign reserves, and reliance on international financial support.

Emerging evidence suggests that Pakistan’s defense infrastructure faced considerable vulnerabilities during the conflict, which saw India maintain a strategic advantage across the operational timeline. In response, Islamabad has announced a significant increase in defense spending, a move that has sparked debate among economists and policy experts.

Pakistan’s military reportedly incurred substantial expenses related to troop movements, fuel, radar operations, and missile deployments, as well as the mobilization of intelligence assets. “Pakistan’s military expenditure over the four-day conflict, including jets, artillery, and missile deployments, amounted to approximately USD 1.5 billion from the national budget, by my estimate,” said Shakeel Ramay, a political economist based in Islamabad. “This level of expenditure is highly consequential, especially as the country continues to engage with the International Monetary Fund (IMF) to stabilize its economy,” he added.

Other experts have pointed to broader, indirect consequences. Dr. Farrukh Saleem, a well-known economist, warned of far-reaching effects on the national economy. “The indirect economic impact of the conflict on Pakistan could be substantial. GDP disruption from halted economic activity and uncertainty is estimated at USD 25 billion, with financial market instability and currency depreciation contributing another USD 15 billion. Trade and supply chain disruptions may add USD 12 billion, and reduced foreign direct investment (FDI) inflows along with possible IMF-related losses are estimated at USD 5 billion,” Dr. Saleem said.

Christopher Clary, a non-resident fellow at the Washington-based Stimson Center, noted in an early assessment that Pakistan’s military infrastructure suffered significant damage while India’s air and missile defenses reportedly performed well. “India demonstrated the ability to carry out precise standoff attacks over vast areas. Pakistan continues to show vulnerability to Indian air assaults,” Clary wrote, also noting the effective performance of India’s missile defense systems against limited Pakistani ballistic missile strikes.

A major fallout from the conflict has been the suspension of the Indus Waters Treaty (IWT) by India—a move seen by analysts as a blend of strategic, tactical, and diplomatic maneuvering. Development policy expert Ali Tauqeer Sheikh warned that this decision could have serious implications for Pakistan’s agrarian economy. “The suspension of the IWT threatens Pakistan’s agricultural sector, which constitutes 22.7 percent of GDP and consumes over 95 percent of the country’s available water. This could lead to severe water shortages, particularly during dry seasons,” he said.

Financial markets responded sharply to the escalation. Pakistan’s stock market reportedly dropped by over 6,500 points in a single session following Indian airstrikes. “This conflict is escalating dangerously, and the consequences are deeply damaging to Pakistan’s fragile economic recovery,” said Sakib Sherani, head of Macro Economic Insights.

Despite securing a USD 7 billion IMF bailout package to address a balance of payments crisis, high fiscal deficit, and rising debt, Pakistan’s decision to expand its defense budget is drawing scrutiny. Some economists and civil society leaders argue that the increased spending could come at the cost of essential services and human development initiatives.

Planning Minister Ahsan Iqbal defended the decision, stating that the proposed defense budget hike is necessary to uphold national sovereignty. “It is our duty to provide the armed forces with the necessary resources to strengthen their capacity and defend our country,” he said.

Pakistan’s defense expenditure is projected to rise to 3.8 percent of GDP, a figure considered high relative to the country’s economic output. Meanwhile, Indian Prime Minister Narendra Modi has suggested that the military operation is not yet concluded, adding to regional tensions.

In response to the suspension of the IWT, Pakistan is also prioritizing investment in water infrastructure, including major projects like the Diamer-Bhasha Dam. However, some analysts caution that this reallocation of funds could hinder progress in social and economic reforms. “Shifting resources to defense and megaprojects may significantly reduce spending on public services, leaving ordinary citizens to bear the brunt,” said economist Kaiser Bengali.

With a proposed 32 percent hike in the defense budget, concerns are mounting about the long-term implications for Pakistan’s economic stability and social development. As the country navigates a complex post-conflict landscape, balancing national security priorities with economic resilience remains a pressing challenge.