Pakistan's financial issues during a war with India would be significant, considering the country's already strained economy. The estimated cost of war for Pakistan is substantial, with daily expenditures reaching approximately $3.7 billion during the 2002-2003 conflict. A full-scale war would likely exacerbate Pakistan's existing economic challenges, including a narrow tax base, low tax-to-GDP ratio, and reliance on foreign aid.

*Key Financial Challenges:*

- *Defense Budget:* Pakistan's defense allocation for 2024-25 is approximately $7.64 billion, marking a 17.6% increase from the previous year.

- *Foreign Exchange Reserves:* As of March 14, 2025, Pakistan's total liquid foreign reserves were approximately $16.02 billion, with $11.15 billion held by the State Bank and the remainder by commercial banks.

- *Fiscal Deficits:* Pakistan's economy is characterized by high fiscal deficits, which could worsen during a war, leading to increased borrowing and potential economic instability.

- *Taxation:* The government may be compelled to raise tax rates, which could further strain the already burdened populace and reduce economic activity.

*Historical Financial Costs of Conflict:*

- The 2001-2002 Operation Parakram cost India an estimated $1.8 billion, while Pakistan's expenses were around $1.2 billion.

- The 1999 Kargil War cost India approximately Rs 15 crore per day, highlighting the immense financial strain even short-term conflicts can impose.

- In 2019, Pakistan faced a balance of payment crisis with a deficit close to $18 billion and foreign currency reserves at an all-time low of $8 billion ¹ ².

These financial challenges would likely worsen during a war with India, making it essential for Pakistan to prioritize diplomatic engagement and conflict de-escalation to prevent substantial economic costs.