Hosting direct rounds of US-Iran engagement in Islamabad was not a small diplomatic achievement. But there is no point pretending that access is the same as resolution.

The talks may have created room for de-escalation, yet they did not produce a breakthrough.

That was always the more realistic outcome. A conflict shaped by four decades of mistrust, strategic rivalry, sanctions, nuclear anxieties, and regional proxy politics was never going to be settled in a few intense meetings.

Even so, Pakistan’s foreign policy handling has been better than expected.

It has stayed relevant without becoming reckless, visible without becoming partisan, and engaged without fully surrendering its room for manoeuvre.

In a polarised region, that is not nothing. Pakistan is getting global attention for the right reasons, and it is managing, as far as possible, to preserve a degree of neutrality.

But diplomacy should not be romanticised. It can create openings. It cannot, by itself, dissolve contradictions that have been hardening for decades.

The ceasefire, therefore remains fragile. That is the real point. The world economy cannot indefinitely function with the Strait of Hormuz hanging over it as a live geopolitical choke point.

Even if shipping is not fully halted, the threat alone is enough to keep energy markets nervous, freight costs elevated, and inflation expectations unsettled.

Pakistan may have helped lower the immediate temperature, but it cannot impose a settlement on powers whose core red lines still clash.

This limited diplomatic success has nevertheless given the government some badly needed public oxygen after years of political fatigue.

That is precisely why this is the moment for sobriety, not exuberance. Foreign policy gains can improve optics. They do not fix macroeconomic fragility.

As the regional conflict lingers, Pakistan’s economic exposure is becoming more pronounced.

Oil prices are likely to remain elevated, second-round inflationary effects are bound to build, and the external account remains vulnerable at a time when large repayments and rollover dependencies are still part of the story.

This is not the moment for premature populist relief on petroleum prices, especially without fixing the refinery pricing formula.

Artificially suppressing prices may buy temporary applause, but it worsens fiscal strain, delays adjustment, and deepens distortions.

When the state is already under pressure, cosmetic relief becomes an expensive indulgence. Belts need to be tightened, not loosened for the sake of a few easy headlines.

Foreign policy also takes time to pay economic dividends. Domestic vulnerabilities, by contrast, demand immediate attention.

Pakistan’s relations with the UAE may be diplomatically sound, but that does not reduce economic dependence.

The country is repaying around $3.5 billion to the UAE while also managing other large external obligations, including the Eurobond repayment.

That creates a real financing gap. Reports that Saudi support may help fill part of that space are certainly reassuring at face value, but replacement financing is not the same thing as stronger fundamentals.

If one deposit is merely replaced by another, or if support comes in the familiar form of safe deposits and deferred oil facilities, then the structure of vulnerability remains intact.

The hole may be plugged, but the balance sheet does not become healthier.

The real gain would come only if fresh support arrives in a form that improves the quality of external financing, whether through longer-duration flows, actual investment, or inflows that reduce dependence on short-term political goodwill.

Even then, another problem emerges: concentration risk. Pakistan is already too dependent on a narrow set of friendly capitals for external comfort.

More reliance may feel stabilising in the short run, but it also makes the economy more hostage to external relationships over which it has limited control.

The remittance channel is another source of concern. The UAE accounts for a large share of Pakistan’s remittance inflows, and any disruption in labour market access there would quickly become a balance-of-payments issue here.

There are already anecdotal concerns around visa restrictions and labour market tightening.

Even if the picture is still unclear, the risk should not be dismissed.

More than a million Pakistanis work in the UAE. If a meaningful number return home, or if new worker outflows slow sharply, Pakistan would have to absorb that pressure in an economy already struggling with weak job creation, low private-sector dynamism, and limited room for self-employment.

The economic impact would be significant. The social impact would be worse.

That is the broader lesson. Better foreign policy can bring Pakistan into the limelight for the right reasons, but visibility is not strength.

Diplomatic traction does not substitute for fiscal consolidation, structural reform, or internal economic coherence.

Without those, the problems of 240 million people will not ease in any durable way. The government appears to have regained some public support.

It would be foolish to waste it on self-congratulation. This is the time to use that space to restore internal cohesion, impose fiscal discipline, and push a reform agenda while the opening still exists.

Copyright Business Recorder, 2026

This article first appeared in the daily Business Recorder on April 13, 2026