New World Order and World War III

In a world driven by technology, only change is permanent. Change we must, but how? Transition from one system to another is perhaps the biggest challenge that we have not been able to cope with. Half-baked solutions with underage players cannot deliver. Reminds me of Einstein’s famous quote: “We cannot solve our problems with the same thinking we used when we created them.” Steve Jobs, one of the greatest technologists of the 21st century, went even further by saying: “Either lead or get out of the way.” A few years back I was doing some research on universities and their impact on setting the course of nations. Syed Ahmed Khan’s Aligarh Muslim University stood out. It produced the Change Managers who not only led the freedom movement but also had the capacity to sustain it. The Islamic Republic of Pakistan (IRP) desperately needs such individuals who can understand and then manage the needful. In the year 1875 he founded the MAO College (Mohammadian Anglo Oriental College) which later grew into a university in the year 1920. He passed away in 1898 but the institution grew. Later on, Allama Iqbal led the movement, and finally it was Muhammad Ali Jinnah who succeeded in carving a new homeland in August 1947 for the Muslims of the Indian Subcontinent. Unfortunately, he did not live long enough to lay the foundations of the new state, but he did leave clear guidelines for the inherited establishment to follow (Armed Forces, Bureaucracy). After taking over in October 1999, Pervez Musharraf created a think tank called the National Reconstruction Bureau (NRB). Headed by Lt. Gen. Tanvir Naqvi, it was located in the Chief Executive (CE) secretariat. The task was to design and execute political and administrative reforms in the country. I was invited to give my input. Naqvi Sb was very confident about delivering meaningful change. His main focus was on devolution of power. As a student of management, I asked him a simple question: “Who will implement his plan?” Bureaucracy, of course, was his quick reply. He did not have an answer to my second concern: “Why will they implement a plan which reduces their power?” He then decided to get rid of me by saying if I wanted to discuss implementation details, I should go to the third floor to the CE’s office. Finally, he stepped down and was replaced by a young novice who lacked the experience and clout to deliver meaningful change. Then there was another initiative called the National Commission for Human Development (NCHD), led by a pediatrician from a small town in Oregon. The worthy Dr assured the CE that he would manage funds from abroad while the local expenses were to be provided by the Government of Pakistan (GOP). Various centers were established across the country and staff recruited. While GOP provided the internal resources, the external help never came despite fundraising efforts abroad. The CE was convinced that the two sectors were well covered, but they were not. Finally, NCHD became a liability and was shut down and the staff laid off. During my term as Chairman, Pakistan Science Foundation (PSF), I lobbied for technocrats to head technical ministries, which was not well received by the powers that be. Commercialization and application of research is the biggest challenge faced by the R&D sector of the country. When I was denied an extension after the completion of my term, I paid a farewell visit to the Secretary MOST (Ministry of Science and Technology). It was a friendly meeting; the Secretary appreciated my work but complained that I did not follow his guidelines. While leaving, he pointed at the board where the names of his predecessors were written. I still remember his words: “Only our names make it here.” He did not like my spontaneous response: “Time will tell,” and it did. My lobbying prevailed; a retired Chairman of PAEC (Pakistan Atomic Energy Commission) replaced him. Though he had no commercial background, I decided to guide and support him. He recommended major investments in creating public sector entities like HMC III, run by PAEC, for meeting their equipment needs. At best, only pilot plants were viable for transfer of technology from laboratory to industry. He was unable to get the funds. As such, his term ended with no major breakthrough, and business as usual continued. Pakistan has a federal structure of governance. Federating units are diverse with differing needs. I am in favor of devolution, but the task on hand is not simple. The forces of status quo are too entrenched. Change Managers are needed at all levels. Complexities have to be understood and managed. There has to be consensus on the road map. Islamabad has an archive of failed plans. The same mistakes should not be repeated again. The first challenge is to find qualified individuals with solid re-engineering experience to lead the crusade. Einstein and Jobs were two brilliant brains of their times; we must value their outlook to move forward and avoid chaos and confusion. Oversimplification of the task at hand must be avoided.

Distrust in Azad Jammu and Kashmir is linked to a small but organized group that allegedly used social media manipulation, propaganda, and genuine public grievances to create an impression of widespread support disconnected from reality, deepening divisions within society and straining relations between the state and its citizens. The Rawalakot protests are said to have involved only a small fraction of AJK’s population of about four million, with fewer than 40,000 participants at peak attendance and likely around 10,000–15,000 overall, while more than five times that number reportedly traveled from Rawalakot to Rawalpindi on June 6 and 7. Many families moved weddings to Rawalpindi and Islamabad, sick people and schoolchildren left the town, and hundreds of families delayed school and college admissions until August because of the disruption. Most residents remained away from the protests to protect their families, forming a “silent majority,” while around 90 percent of people in other districts are said not to support the protesters’ agenda. Large political rallies in Muzaffarabad, Kotli, Dhirkot, and Bhimbar are taken as evidence of stronger support for the constitutional political process than for the Rawalakot sit-in. Around 10,000–15,000 protesters are held responsible for disrupting daily life, damaging the economy, creating fear and uncertainty, and causing disorder over an issue that could have been resolved through legislation, dialogue, and democratic institutions rather than confrontation and violence. Aided by a few journalists acting as propagandists, the movement is accused of using manipulated images, fake news, and emotional appeals to create the impression that the whole of Azad Kashmir supports it, even though the participants are said to constitute less than 10 percent of Rawalakot’s own population.   The government has addressed many demands by reducing electricity and flour prices, abolishing refugee ministries, reducing the number of ministers, halving the property transfer tax, completing the Rathwa Hariyam Bridge, withdrawing FIRs and legal cases, compensating the families of those killed and 56 injured people, providing a government job to Azhar’s brother, approving a Rs. 5.5 billion PC-1 for MRI facilities, and approving a Rs. 9 billion PC-1 to improve the power transmission system.   The application to make Azad Kashmir Bank a scheduled bank has been submitted to the State Bank of Pakistan, a move that will strengthen the financial sector and provide greater access to banking services for the people. The health card has been restored, a vital social safety net program that provides access to medical care for those who cannot afford it, and its restoration was a major victory for the people. Two new boards of education have been established, decentralizing the education system and allowing for more focused and effective administration of schools. The Mansehra, Muzaffarabad and Mangla expressways are included in the CPEC project, a game-changing development that will bring massive investment, improve connectivity, and create economic opportunities for the region. The establishment of Mirpur Airport was announced by the Prime Minister of Pakistan on live television, a major milestone that will open up the region to the world and facilitate trade and tourism, and work on the feasibility has started, with the project now moving from the planning stage to reality. The quota system has ended, a long-standing demand that was seen as discriminatory and unjust, and its abolition was a major step towards equality and fairness. Additional departments were abolished and merged with existing departments, a move that reduced bureaucracy and made the government more efficient. The e-tendering of electricity meters was approved, a reform that will ensure transparency and fairness in the procurement process. The demand for 30 KVA for schools and colleges was approved, and the notification has been issued, ensuring that educational institutions will have access to a reliable power supply. Now, among the remaining demands, there is a demand for 4 tunnels and bridges, infrastructure projects that are undeniably needed and would greatly benefit the people, but in reality one single tunnel is estimated to be completed in 10 billion rupees, and the total development budget of Azad Kashmir is less than 40 billion rupees, meaning that these projects cannot be built overnight. The government or no one has any magical capabilities, and no airport, bridges, and tunnels can be built overnight, as they require years of planning, feasibility studies, environmental assessments, and massive financial outlays that must be spread over many years.   In fact, after approving so many demands, after demonstrating such a clear willingness to address the grievances of the people, to insist on only one remaining demand and to lay siege to the entire region and paralyze the lives of millions, one must ask a crucial question: is it the stubborn government or the action committee that is being unreasonable?   The so-called peaceful revolutionary sit-in of the banned Joint Action Committee has been completely exposed for what it really is, and the mask of peaceful protest has slipped to reveal the ugly face of violent insurgency. Their so-called rational teams, which were presented as peaceful negotiators and organizers, are in fact positioned on rooftops with state-of-the-art SMG guns and ultra-expensive military binoculars, and their purpose is not to maintain order but to monitor the security forces on the ground, tracking their movements and planning for a confrontation. This is not a political sit-in, which is a legitimate form of protest in a democracy, but a planned military confrontation against the security forces of the state, a deliberate strategy to provoke a reaction and to create martyrs. Recently a banned Action Committee’s leader made a revealing statement, admitting to the supply of modern US-made M4 rifles to troublemakers, a serious accusation that confirms the armed nature of the group and its intent to use violence against the state. The banned JAAC is using fake and AI generated videos and posts to get the support of the people, manufacturing evidence and creating a false reality to manipulate public opinion, and these fabricated materials are spread widely on social media to create a sense of crisis and to incite hatred.

The assault on the Khazina Banda police post in Hangu was not another entry in Pakistan’s grim terrorism ledger. Attackers first struck with explosive-laden quadcopters and then ambushed the post and its reinforcements. Al Jazeera’s initial report put the police death toll at 11, including Deputy Superintendent Diyar Khan, with 28 personnel injured; subsequent local reporting revised the fatalities to nine. Fifteen attackers were reportedly killed. No organisation immediately claimed responsibility. The disputed count does not alter the horror. Men defending the State confronted a privately financed force equipped with drones, explosives and heavy weapons. Hangu should destroy the fiction that terrorism, narcotics and illicit arms are separate problems assigned to separate departments. They form one war economy. Narcotics generate cash; illicit finance launders it; weapons protect routes; militants supply coercion; political and official patronage obstructs investigation. The system survives governments and military operations because Pakistan attacks gunmen without dismantling the business that replenishes them. This was the warning in Pakistan: From Hash to Heroin and, more systematically, in its sequel Pakistan: From Drug-trap to Debt-trap. The Afghan war did not merely push refugees across the border. It created an enduring logistics chain in which weapons travelled one way and opium, heroin and dirty money travelled the other. The jihad (holy war) against the erstwhile Soviet Union was presented as strategic necessity. Its unrecorded balance sheet included extremism, heroin, the Kalashnikov culture, protected smugglers, corrupted institutions and a drug elite wealthy enough to enter respectable business and influence politics. The term “narcoterrorism” is often used carelessly, as if every attack can be attributed to a particular consignment. That is not the proposition. The connection is systemic, not necessarily transactional in every case. Armed groups and criminal syndicates occupy the same spaces, use overlapping routes, brokers, hawala channels and protection arrangements, and profit from weak border governance. Money is fungible. Revenue from smuggling, extortion, narcotics or lawful-looking businesses can buy the same rifle, drone component or safe house. Pakistan helped manufacture this economy through choices made during the General Zia-ul-Haq era and then preserved it through denial. The State celebrated the fighters, tolerated the gun markets and allowed traffickers to convert illicit fortunes into property, commerce and political access. Periodic seizures created the appearance of enforcement, while financiers, facilitators, beneficial owners and patrons largely remained beyond reach. The poor courier was arrested; the network endured. A poppy field was destroyed; no viable crop or market was supplied to the farmer. An addict was criminalised; treatment remained scarce. The spectacle of control substituted for control. Afghanistan’s changed opium economy does not justify complacency. The UN Office on Drugs and Crime (UNODC) estimated that cultivation fell by 20 percent in 2025 to 10,200 hectares and production dropped by 32 percent to 296 tonnes, far below pre-ban levels. This is important, but it is not the burial of the drug economy. Stocks, established trafficking routes and accumulated capital, survive a harvest decline. UNODC also warned that synthetic drugs, particularly methamphetamine, were becoming organised crime’s new business model because production is easier to conceal and less dependent on climate. The market adapts faster than bureaucracies. The same adaptation is visible in the air above Hangu. Reuters reported in July 2025 that militants had used commercially acquired quadcopters in at least eight attacks in Bannu and adjoining areas within two and a half months. The provincial police chief acknowledged that the police had no equipment to meet the threat and that militants were better equipped. One year later, weaponised quadcopters helped open a lethal assault on a police post. This was not an unforeseeable innovation. It was an institutional warning ignored until officers paid with their lives. The immediate response followed the familiar script: condemnation, funerals, retaliatory operations and claims that the mastermind had been killed. Removing operational commanders is necessary, but body counts do not measure the destruction of a war economy. If the financier remains solvent, the trafficker keeps his route, the arms supplier retains access, the hawala operator moves the proceeds and the protector remains influential, another commander will emerge. Tactical success without financial and institutional disruption merely changes the names of the dead. Islamabad is entitled to demand that Kabul prevent Afghan territory from being used for attacks. The Taliban government’s denials cannot answer evidence of militant mobility and sanctuary. Pakistan, however, cannot outsource security or erase its history by pointing across the Durand Line. Routes, facilitators, arms stocks, laundering channels and political shields also exist inside Pakistan. A foreign-policy accusation is not a domestic counterterrorism strategy. The starting point must be a permanent national narcoterrorism and illicit-arms fusion centre, not another ornamental committee. It should bring the provincial counterterrorism departments, police, Anti-Narcotics Force (ANF), Federal Investigation Agency (FIA), Customs, Federal Board of Revenue (FBR), Financial Monitoring Unit (FMU) and intelligence agencies onto a common operational platform. Every major terrorist investigation should generate a parallel financial, narcotics, communications and weapons inquiry. Investigators must follow beneficial ownership through real estate, trade misinvoicing, shell companies, cash couriers, hawala networks and virtual assets, freezing and confiscating criminal proceeds through courts and due process. Weapons require the same discipline. Pakistan needs a national register of recovered arms and ammunition, forensic and ballistic databases accessible to provincial police, mandatory tracing of serial numbers and ammunition lots, and public reporting of leakages from official stocks. Border terminals and maritime routes need risk-based scanning rather than theatrical checking. Most urgently, exposed police posts require layered counter-drone protection: detection, electronic countermeasures, hardened positions, trained response teams and protected communications. Sending under-equipped policemen against weaponised drones is not bravery by policy; it is abandonment by the State. Supply-side enforcement must be joined to rural development and public health. Farmers require credible alternative livelihoods, irrigation, credit, storage and assured markets; addicts require treatment, rehabilitation and reintegration. Pakistan, Afghanistan, Iran, China and Central Asian states need verifiable cooperation on routes, precursor chemicals, laboratories, wanted financiers and arms flows under UN facilitation. Diplomatic declarations should be tested against shared data, inspections, arrests, convictions,

Pakistan does not need an external adversary to explain its economic decline. It has one at home, operating out of two regulatory buildings in Islamabad: the National Electric Power Regulatory Authority and the Oil and Gas Regulatory Authority, backstopped by a Ministry of Power and a Ministry of Petroleum that have spent two decades signing contracts, indexing tariffs, and deferring hard decisions in ways that now function less like national stewardship and more like a slow, self-administered dismantling of the country’s own industrial base. There is an old Urdu instinct for this kind of failure — “apne pairon par khud kulhari maarna,” to swing the axe onto your own foot — and it captures the pattern better than any conspiracy theory could. Nobody needs to have plotted Pakistan’s energy collapse. Two regulators simply kept striking the same foot, quarter after quarter, determination after determination, until there was nothing left to stand on. Start with NEPRA, and start with the number that should embarrass every member of its board. On August 10, 2026, the Authority approved a 30-year, 9.4-US-cent tariff for the 102 MW Gulpur hydropower project — a project whose tariff history is itself a case study in regulatory drift, having been revised in 2015, modified again in 2021 for exchange-rate relief, and delayed by force majeure claims for the better part of a decade before finally being settled this month, over the recorded dissent of one of NEPRA’s own members. Three weeks earlier, the same regulator had approved a tariff of just 3.0899 US cents for a 269 MW hybrid wind-and-solar project at Dhabeji.  A regulator capable of holding both of those numbers in its hands in the same month and treating them as equally acceptable outcomes is not pricing risk. It has simply stopped asking what things should cost. Then, in February 2026, NEPRA turned the same instinct on ordinary citizens. Its Prosumer Regulations 2026 dismantled the one-to-one net metering framework that had made rooftop solar a rational household investment, replacing it with net billing: excess power sold back to the grid at the National Average Energy Purchase Price of roughly Rs 10–13 per unit, while the same household buys grid electricity back minutes later at full retail rates. A citizen who financed their own panels, took on their own installation risk, and asked nothing from the state now effectively subsidizes the grid every time the sun shines. Compare that to Gulpur’s sponsors, who face none of that asymmetry and are guaranteed indexed returns for three decades. The Ministry of Power approved this framework and let it stand, even after the Prime Minister was reported to have ordered a NEPRA appeal to protect existing solar users — an appeal that, months later, has changed remarkably little for new applicants. OGRA, the sister regulator for oil and gas, has been just as busy inflicting damage of its own kind, and its failures deserve equal billing, because it is the gas sector, not electricity, that has produced Pakistan’s most persistent circular debt crisis. By July 2026, Pakistan’s gas circular debt had reached roughly Rs 3.44 trillion, and the country had missed an IMF deadline for a gas tariff notification that the Fund treats as a structural benchmark for the entire bailout program. OGRA’s own determinations tell the story: SNGPL and SSGC continue to report system losses well above the “unaccounted-for-gas” allowances built into their tariffs — 8.8 % actual against a roughly 7 % allowance for SNGPL, and a startling 13.6 % actual against an 8.2 % allowance for SSGC — with the gap simply passed through to consumers as cost rather than treated as the operational failure it is. In July 2026, when OGRA’s own recalculated prescribed prices should have lowered consumer gas bills, the federal government instead chose to keep tariffs unchanged and let SNGPL bank a projected Rs 44 billion surplus and SSGC a smaller one, rather than pass relief to the households and factories paying the bill. This is not regulation. It is bookkeeping in service of institutional convenience, dressed up as prudence. The consequence of all this — NEPRA’s mispriced generation contracts, its punitive treatment of rooftop solar, OGRA’s tolerance of chronic system losses, and both ministries’ shared unwillingness to force a reckoning — is a business environment where foreign direct investors cannot model their own electricity or gas costs five years out, let alone thirty. Industrial production stalls not because Pakistani manufacturers lack skill or ambition, but because no factory can plan around a power bill and a gas bill set by regulators who reward legacy contracts over least-cost technology and who treat circular debt as something to defer rather than solve. Pakistan’s Interior Minister recently said publicly that “the system has collapsed” — a remark aimed at governance and security, but one that describes the energy sector with uncomfortable precision, and one the security establishment has been strangely slow to connect to its own economic consequences. A country cannot out-negotiate a debt crisis it keeps manufacturing at the regulator’s desk every single quarter. None of this requires believing anyone set out to sabotage the country. It requires recognizing that an institution can do a slow version of the same damage through nothing more than inertia, misaligned incentives, and a persistent unwillingness to price energy the way the rest of the world now prices it — cheaply, competitively, and honestly. NEPRA and OGRA do not need another IMF-mandated hearing or another quarterly adjustment. They need leadership willing to admit that thirty years of axe-swings at the country’s own foot is enough, and that the next tariff determination should finally start asking what things should cost, not merely what precedent allows. So who actually chooses the people who run NEPRA and OGRA? This is the part of the story that gets almost no scrutiny, and it should. Both chairmen are selected by the federal cabinet from shortlists assembled by selection committees chaired by a serving federal minister — for NEPRA, historically the Minister for

Regions with structural problems need structural fixes, not more funding formulas. Pakistan’s administrative map was drawn for a country that no longer exists. We have four provinces today, the same number we had 55 years ago, while East Pakistan, which used to be one province, now has eight administrative units and 64 subdivisions or districts. Since then Pakistan’s population has multiplied several times over, but the map has not moved an inch. That mismatch is the primary reason why resources never reach the people who need them. Pakistan’s approach when it comes to managing resources is wrong for a country this size. The population crossed 241 million in 2023, with density around 260 people per square kilometre. On its own, this is a sign of a healthy, growing country, just until we look at how that population is actually distributed. In the last six years alone, the country has added roughly 35 million people, which is a 16 percent increase. Sixty-one percent of that population lives in rural areas, 39 percent in cities like Islamabad, Lahore and Karachi. The alarmingly undeniable fact is that the trend keeps moving one direction, in which young people keep leaving villages for urban areas because those are the only places where jobs, universities and hospitals reliably exist. This migration is certainly not a lifestyle choice. This is bound to happen when four provincial governments are asked to administer a population that is five times larger than the one they were built for. Punjab alone holds 59 percent of the country’s population. It is administered as a single unit, but its population is more than most countries on earth. No provincial government, no matter however competent it is, can deliver electricity, healthcare and education evenly across a population that size from a single provincial capital. The same problem exists in reverse in Balochistan, which covers 48 percent of Pakistan’s landmass but accommodates only 11 to 12 percent of the population, and has absorbed six of the last six years’ 16 points of national population growth despite having the country’s thinnest infrastructure. These two provinces tell the story of two completely different failures. The cause, however, is common: the administrative unit is the wrong size for the job. The numbers underneath this are national rather than regional. Eighty-two percent of Pakistanis have electricity, but that average hides the gap between urban grids and rural darkness; hence urbanisation. The list of problems does not stop here. Take Balochistan, where one doctor serves 10,000 to 10,500 people. Sixty percent of the province lacks clean water, and filtration plants are scarcer still. Moreover, 70 percent of rural communities nationwide lack adequate education, and 44 to 45 percent of people in those communities never reach middle school. The human cost of that distance is specific and repeats itself in province after province. Young doctors trained in these regions leave for Punjab, Sindh and Islamabad. The biggest reason is safety, since their lives can be at risk in remote postings. The second is that a health facility 30 kilometres from the nearest paved road, unable to stock full equipment, offers nothing to build a career on. Vocational training institutes exist in these areas but sit locked, not for lack of funding but because there is no administrative capacity to operate them. These are not Balochistan’s problems alone. They can happen anywhere a provincial government is too large, too centralised, or too distant to reach its own population. Balochistan simply shows the extreme case. If it were split into three or four provinces, governments could actually reach people there. Then there is this issue of financial distribution, and this is where the case for new provinces stops being administrative and becomes constitutional. Pakistan’s own constitution ties resource revenue to the province that produces it. Sindh generates around 70 percent of national revenue and receives back only 24 to 25 percent. Similarly, Balochistan sits on gas fields and mineral wealth that fund the federation, while its own communities remain unconnected to piped gas or reliable power. Calling this a technical funding gap would be wrong because the problem is structural. Provinces too large to manage internally are also too large to track what they are owed, let alone claim it. Regions with structural problems need structural fixes, which again brings us to the dire need for carving out more provinces instead of introducing more funding formulas layered onto the same four units. How many provinces should there be is debatable. There are four now, and making that six or eight is better than staying at four. That would certainly put administration close enough to reach a village 30 kilometres off the highway, and close enough that Punjab’s 59 percent isn’t governed as a single bloc or Balochistan’s 48 percent of the map isn’t governed as an afterthought. Balochistan’s neglect, Punjab’s congestion, Sindh’s revenue grievance, the pressure on Karachi and Lahore are not four different crises but one. And this crisis will not be solved by anyone currently governing under the old map.

Pakistan’s debt problem has entered a new phase. The headline figure is alarming: total debt and liabilities reached Rs. 99.59 trillion by the end of fiscal year (FY) 2025-26. The deeper concern, however, lies in the composition of this debt, the burden of servicing it and the channels through which public borrowing now affects every productive sector of the economy. According to the latest State Bank of Pakistan data, total debt stood at Rs. 97.88 trillion. Gross government domestic debt reached Rs. 59.44 trillion, while external debt amounted to Rs. 36.20 trillion. Central government debt increased by 7.39% over the preceding year to Rs. 83.64 trillion. External debt and liabilities stood at US$138.85 billion. These numbers confirm the central argument developed in the a ten-part series published in these columns [‘Bankruptcy of ideas—X: Debt, Taxes & Democracy’, Minute Mirror, June 21, 2026]. Pakistan has not merely borrowed against its future. It has increasingly borrowed to service earlier borrowing, while failing to create sufficient productive capacity from the accumulated debt.   ‏The external debt-servicing profile for FY2026 makes this particularly clear. Pakistan serviced US$21.59 billion of external debt during the year. An extraordinary US$10.14 billion—nearly half of the annual amount—fell in the final quarter alone. Quarterly servicing was 2.63 times the amount paid in the preceding quarter, mainly because principal repayments jumped from US$2.70 billion in the third quarter to US$8.81 billion in the fourth. This concentration of repayments is as important as the overall debt stock. A country may carry a large debt if its economy generates sufficient revenue, exports and foreign exchange to service it. Pakistan’s difficulty is that debt obligations have expanded much faster than the productive and export capacities needed to meet them. The debt accumulated over decades cannot be attributed to one government or one fiscal year. Persistent fiscal deficits, a narrow and inequitable tax base, losses of state-owned enterprises, the energy-sector circular debt, excessive recurrent expenditure, exchange-rate depreciation and repeated balance-of-payments crises have all contributed to it. Borrowing became the preferred substitute for reform.  Governments borrowed because they could not tax influential sectors, restructure loss-making enterprises, reduce wasteful expenditure or build a competitive export economy. External lenders financed temporary stability, while domestic banks financed the fiscal deficit. Each arrangement postponed difficult decisions without removing the causes of the crisis. The Ministry of Finance reported public debt at 70.7% of GDP by June 2025. The ratio may improve when nominal GDP grows faster than debt, especially during periods of inflation, fiscal consolidation and lower interest rates. A declining debt-to-GDP ratio, however, does not necessarily mean that the debt burden has become harmless. Pakistan’s debt stock is still increasing. What has improved is the immediate cost of servicing parts of it. Total debt and liabilities servicing declined from Rs. 13.16 trillion in FY2025 to Rs. 11.97 trillion in FY2026. Interest payments on debt fell by more than 23%, from Rs. 9.47 trillion to Rs. 7.27 trillion, largely because lower policy rates reduced the cost of servicing domestic government debt. Interest payments on gross government domestic debt consequently fell from Rs. 8.08 trillion to Rs5.99 trillion. This is welcome relief. It should not be presented as the end of the debt crisis. Lower interest rates reduce the flow cost of debt; they do not extinguish the stock. Principal repayments on external debt and liabilities increased from Rs. 3.47 trillion to Rs. 4.47 trillion during FY2026. Pakistan therefore obtained relief on domestic interest payments while facing a substantially heavier external repayment burden. The distinction is between debt management and economic transformation. Pakistan may be moving from an acute debt-accumulation crisis towards a more manageable financing position. It has not escaped debtocracy—the system in which fiscal policy, taxation, banking, foreign relations and development priorities become subordinate to the requirements of borrowing and repayment. Debtocracy does not remain confined to the accounts of the Ministry of Finance. It is transmitted throughout the economy. The first channel is the banking system. Government securities offer banks sovereign backing, liquidity and attractive risk-adjusted returns. Lending to the government is easier than evaluating businesses, financing innovation or supporting small and medium enterprises. A large domestic borrowing requirement therefore creates continuous competition for available liquidity. The result is crowding out. The State obtains the funds it requires, banks earn relatively secure returns and the private sector bears the adjustment. Productive businesses face limited access to credit, higher risk premiums and shorter financing horizons. Smaller enterprises suffer the most because they cannot compete with the sovereign for bank liquidity. This creates a financial system that can remain profitable while the productive economy remains weak. Deposits are mobilised from citizens and businesses, channelled into government securities, and then used substantially to meet recurrent expenditure and service earlier debt. Banking expands without an equivalent expansion in productive capacity. The second channel operates through foreign exchange. External debt repayment creates demand for dollars. That demand places pressure on reserves and the current account. Any resulting exchange-rate depreciation increases the rupee value of external liabilities and raises the domestic price of imported fuel, machinery, raw materials and intermediate goods.  The chain is direct: External repayment creates foreign-exchange demand; reserve pressure increases exchange-rate sensitivity; depreciation generates imported inflation; and inflation raises working-capital requirements and production costs. Debt consequently becomes a corporate balance-sheet issue. An industrial enterprise may have no external loan, yet still bear the effects of sovereign external debt through a weaker rupee, costlier imports, higher energy prices and restricted access to domestic credit. Consumers ultimately pay through inflation, reduced employment and lower real incomes. The third channel is fiscal. Every rupee allocated to debt servicing is a rupee unavailable for education, health, water, climate resilience and productive infrastructure—unless the State raises additional revenue or borrows again. Pakistan then enters a circular arrangement: borrowing creates servicing obligations, servicing compresses development expenditure, weak development limits growth and revenue, and insufficient revenue necessitates further borrowing. This is why a primary surplus, though necessary, is not sufficient. It can stabilise debt dynamics, but