Pakistan's Foreign Policy Challenges Due to Global Economic Crisis (2025–2026)

Abstract

Foreign policy effectiveness in economically vulnerable states is fundamentally shaped by macroeconomic conditions, financial constraints, and global market dynamics. This study examines how the global economic crisis of 2025–2026 has influenced Pakistan's foreign policy challenges, focusing on the effects of global economic instability, debt burden, trade disruptions, and energy security constraints on Pakistan's diplomatic effectiveness. The study further investigates the mediating role of diplomatic negotiation capacity and the moderating role of geopolitical alliance strength. Grounded in Dependency Theory and the Political Economy of Foreign Policy framework, the research provides a comprehensive analytical lens for understanding how economic crises translate into foreign policy constraints. A quantitative cross-sectional research design was employed, and primary data were collected from 850 respondents, including policymakers, diplomats, academics, civil society representatives, and trade professionals through a structured questionnaire using a five-point Likert scale. Data were analyzed using Structural Equation Modeling (SEM), while bootstrapping procedures were utilized to test mediation and moderation effects. The findings indicate that global economic instability, debt burden and financial vulnerability, trade disruptions, and energy security constraints all significantly and negatively affect Pakistan's foreign policy effectiveness. Debt burden emerged as the strongest constraint on diplomatic capacity. The results further reveal that diplomatic negotiation capacity partially mediates the relationship between economic variables and foreign policy effectiveness. Additionally, geopolitical alliance strength significantly moderates the impact of economic pressures on foreign policy outcomes. The study contributes to the literature by integrating economic and diplomatic determinants of foreign policy within a unified framework and offers policy implications for strengthening Pakistan's international standing during global economic shocks.