Pakistan is one of the largest countries in South Asia and an important participant in regional political and economic processes. The country possesses significant demographic potential, a favorable geographical location, and a large domestic market. At the same time, Pakistan's development over recent decades has been accompanied by persistent structural problems, including macroeconomic instability, high poverty levels, energy shortages, weak state institutions, and continuing security threats. According to estimates by international financial institutions, Pakistan's population exceeded 255 million in 2025, while its gross domestic product (GDP) reached approximately USD 408 billion. However, GDP per capita remains below USD 1,700, indicating a persistent gap between the country's economic potential and the actual living standards of its population. In 2022–2023, Pakistan faced one of its most severe economic crises in recent decades. The country's economy was effectively stagnating, accompanied by record-high inflation, a sharp decline in foreign exchange reserves, depreciation of the national currency, and the threat of default on external obligations. Additional pressure on the financial system resulted from the consequences of the COVID-19 pandemic, rising global energy and food prices, and the devastating floods of 2022, which caused significant damage to the country's economy and infrastructure. To prevent financial collapse, the government was forced to seek assistance from the International Monetary Fund (IMF) and implement a set of strict macroeconomic stabilization measures, including tighter monetary policy and reductions in government spending. The implementation of the financial stabilization program helped improve the situation. In 2024–2025, economic growth resumed, reaching approximately 2.7–3.1%, while the size of the economy exceeded USD 400 billion for the first time. At the same time, inflation declined compared with the crisis period of 2023, when consumer price inflation exceeded 29%. An important role in stabilizing the economy was played by the IMF's Extended Fund Facility (EFF) program, amounting to approximately USD 7 billion. In May 2025, the IMF Executive Board approved the disbursement of another tranche of approximately USD 1 billion to Pakistan, as well as additional financing of USD 1.4 billion to strengthen climate resilience. Despite these positive developments, the country's economy continues to demonstrate relatively low growth rates compared with its demographic dynamics. In practice, economic growth only slightly exceeds population growth, limiting opportunities to improve citizens' living standards. One of the most serious challenges remains demographic pressure. Pakistan is among the world's fastest-growing countries in terms of population. Every year, millions of young people enter the labor market, while the economy is unable to create a comparable number of jobs. The situation of young people is particularly concerning. In recent years, the unemployment rate among citizens aged 15–24 has remained at approximately 9–10%. Actual figures may be higher, given the large informal sector of the economy. Another significant source of risk is the country's high debt burden. Pakistan's economy remains dependent on external financing and loans from international organizations. The country's total external liabilities exceed USD 130 billion, while debt-servicing costs continue to rise. A substantial share of the government budget is allocated to interest payments and debt repayment, limiting opportunities to finance social programs and infrastructure projects. The energy sector remains one of the most vulnerable sectors of Pakistan's economy. Despite having an installed electricity generation capacity exceeding 45 GW, the country continues to face chronic problems in electricity generation and distribution. Distribution network losses in certain regions reach 15–20%, while the energy sector's so-called "circular debt" has exceeded PKR 2.6 trillion (approximately USD 9 billion). Another risk factor is the country's heavy dependence on imported energy resources. A significant share of Pakistan's oil and liquefied natural gas requirements is met through foreign supplies, making the economy sensitive to fluctuations in global prices and exchange rates. As a result, industrial enterprises regularly face disruptions in electricity supply, rising electricity tariffs, and increasing production costs. These factors negatively affect the competitiveness of the national economy and discourage foreign investment. The difficult socioeconomic situation has a direct impact on the country's domestic political stability. Social discontent is particularly pronounced in major urban centers, including Karachi, Lahore, Islamabad, Peshawar, and Quetta. These cities concentrate major industrial enterprises, financial institutions, and large urban populations that are particularly sensitive to deteriorating economic conditions. In recent years, these cities have regularly witnessed protests triggered by rising food and energy prices, electricity supply disruptions, increasing tax burdens, and declining real incomes. High youth unemployment, particularly among university and college graduates, represents an additional source of tension. Social discontent is further intensified by persistent wealth inequality. According to expert assessments, a significant share of national wealth is concentrated in the hands of a limited number of financial and industrial groups, while approximately 25% of the population lives below the poverty line. Taken together, these factors create favorable conditions for growing protest activity, increasing political polarization, and the mobilization of the population by opposition forces. Another destabilizing factor is the persistent regional disparity in socioeconomic development. The most difficult situation is observed in the provinces of Balochistan and Khyber Pakhtunkhwa, which lag significantly behind the country's more developed regions in terms of household income, access to social and transport infrastructure, education, and healthcare services. Although Balochistan accounts for approximately 44% of Pakistan's territory and possesses substantial reserves of natural gas, coal, copper, and gold, it is home to less than 5% of the country's population and has one of the highest poverty rates. In many districts of the province, access to basic utilities and social infrastructure remains significantly below national averages. Socioeconomic problems are further aggravated by the activities of separatist movements advocating greater autonomy or independence for the region. In Khyber Pakhtunkhwa, the presence of a significant number of Afghan refugees and migrants places additional pressure on local authorities. According to international organizations, approximately 1.5 million registered Afghan refugees continue to reside in Pakistan, of whom more than 478,000 live in Khyber Pakhtunkhwa, accounting for more than half of their total number in the country. Taking into account undocumented migrants and individuals who arrived after the Taliban returned to power in Afghanistan in 2021, the total number of Afghans in Pakistan is estimated at approximately 2 million. Such a concentration of refugees places additional pressure on the labor market, healthcare system, education sector, and local budgets, while further complicating the socioeconomic situation in border areas. The activities of radical and extremist groups continue to pose a serious threat to national security. Over the past five years, terrorist activity along the Pakistan–Afghanistan border has increased. Tehrik-i-Taliban Pakistan (TTP) remains the most dangerous militant group, having significantly intensified its operations in border regions. According to international monitoring organizations, Pakistan was among the countries most severely affected by terrorism in 2024–2025, with the number of terrorist attacks and casualties showing a sustained upward trend. Most attacks occur in the provinces of Khyber Pakhtunkhwa and Balochistan, where military personnel, law enforcement officers, transport infrastructure, and energy facilities are regularly targeted. Persistent instability in Afghanistan facilitates the movement of militants across poorly controlled mountainous sections of the border, which extends for more than 2,600 km. This significantly complicates efforts to ensure security in border areas and requires substantial resources for counterterrorism operations. The climate factor also deserves particular attention. The devastating floods of 2022 caused tens of billions of dollars in economic damage and demonstrated Pakistan's high vulnerability to the consequences of climate change. Floods, droughts, and water shortages may have long-term negative effects on agriculture, employment, and food security. The analysis suggests that, in the medium term, the most likely scenario is a limited economic recovery accompanied by the persistence of existing structural problems. According to estimates by the IMF and other international organizations, Pakistan's economy could grow by approximately 3–4% annually. However, such growth rates are insufficient to achieve a substantial reduction in poverty and address the employment challenges associated with rapid population growth. Continued dependence on international financial assistance makes the country vulnerable to external economic shocks, fluctuations in energy prices, and changes in global financial conditions. Political polarization, regional conflicts, and climate-related threats create additional risks. At the same time, IMF experts indicate that consistent reforms in public administration, tax policy, and anti-corruption efforts could generate additional economic growth of 5–6.5% over the coming years. The evolution of Pakistan's socioeconomic situation is becoming increasingly important for Central Asian countries, which regard Pakistan as a key transit corridor providing access to Indian Ocean seaports and an important component of the emerging system of interregional connectivity. In this context, Pakistan's stability is a critical prerequisite for the implementation of infrastructure and energy projects, including the CASA-1000 electricity transmission initiative and the development of transport corridors passing through Afghanistan. The resilience of Pakistan's political system and the security situation in its border regions directly determine the prospects for the functioning of transit corridors, the volume of mutual trade, and the depth of economic cooperation between Central and South Asia. More broadly, Pakistan is becoming one of the key determinants of regional security, as its internal socioeconomic imbalances, energy constraints, and persistent instability in border areas may have consequences extending beyond its national borders. Should the domestic situation deteriorate, the risks of slowing regional economic integration, declining investment attractiveness of transregional infrastructure projects, and intensifying transboundary threats—including irregular migration, drug trafficking, and the activities of radical groups—would increase. Conversely, Pakistan's sustainable development would create favorable conditions for expanding trade and economic cooperation and establishing a more interconnected Central and South Asian region, in which Pakistan would serve not as a source of instability but as a key transit and logistics hub. * The Institute for Advanced International Studies (IAIS) does not take institutional positions on any issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of the IAIS.

In their opinion article for The Times of Central Asia, co-authored with Farrukh Yunuskhojaev, Odilbek Manabov examines what will determine whether the railway delivers lasting economic gains for communities along its route. Moving beyond discussions of transit volumes and shorter international connections, they focus on opportunities for local producers, businesses and workers in Kyrgyzstan’s Naryn and Jalal-Abad regions and Uzbekistan’s Andijan region. The authors argue that improved connectivity alone will not guarantee local development. Affordable and transparent tariffs, access to terminals for small consignments, efficient border procedures and connections between production sites and stations will be essential. Warehouses, cold storage and processing facilities could help producers retain more value locally, while training programmes introduced before operations begin would better prepare residents for permanent employment in railway services, customs and logistics. The opinion also calls for a more accountable approach to assessing the project’s impact. Alongside transit figures, the authors recommend tracking local freight participation, delivery costs, permanent jobs, wages and procurement from local firms. They emphasise the importance of disclosing environmental assessments and resettlement plans, arguing that the railway’s success should be measured by tangible improvements in neighbouring communities as well as its role in international trade. Read in The Times of Central Asia * The Institute for Advanced International Studies (IAIS) does not take institutional positions on any issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of the IAIS.

The construction of the Qosh Tepa Canal in northern Afghanistan is gradually becoming one of the most sensitive issues in Central Asian water security. For Afghanistan, the project is linked to food security, employment, and the development of the northern provinces. For Uzbekistan, it creates a new situation in the Amu Darya basin, where the water balance, the environmental sustainability of the Aral Sea region, and the modernization of the irrigation system are becoming part of a single regional agenda. The central question today is not whether the project can be stopped, but how to bring its operation into a format of regular data exchange, monitoring, and predictable interaction. Qosh Tepa on Afghanistan’s Agenda after 2021 After 2021, Afghanistan’s domestic politics have developed under conditions of limited international legitimacy, economic uncertainty, and the population’s heavy dependence on humanitarian assistance. Against this background, projects that can be presented as evidence of governability, of the capacity to create jobs, and of rural development have become particularly important for the de facto authorities. In this situation, the Qosh Tepa Canal is for Kabul not only an irrigation project but also an element of domestic political legitimation. The project allows the de facto authorities to demonstrate their ability to govern territory, sustain employment, and build a food base in the northern provinces. It therefore appears more realistic to expect not the termination of the project but a search for a format of negotiations on the terms of its operation. What Is Known about the Project In open sources, the Qosh Tepa Canal is usually described as a project about 285 km in length, involving water withdrawal from the Amu Darya and the irrigation of substantial areas of northern Afghanistan. However, the exact parameters of the future water intake, actual water losses, and the canal’s operating regime remain insufficiently transparent. It is precisely the limited availability of verifiable technical information that makes the project particularly sensitive for downstream countries. There is currently insufficient publicly available data on a full feasibility study, an environmental assessment, and an independent engineering review of the canal. There are already political assessments, satellite observations, and individual engineering studies concerning the project; however, a transparent system of regular data exchange has not yet been established. For the basin countries, information on actual water withdrawal, losses, the seasonal operating regime, and the condition of the earthen channel is of fundamental importance. In this situation, the most reliable approach is a comparative one, based on the analysis of three groups of sources: official statements by Afghanistan and the Central Asian states, documents of international organizations, and independent scientific and engineering assessments. The Afghan Logic: Why Kabul Will Continue the Project From the Afghan perspective, the Qosh Tepa Canal is a project of not only agricultural but also political and administrative significance. The country’s northern provinces have long been perceived as an agrarian periphery and, at the same time, as a space where ethnic, trade, border, and political interests intersect. In this context, irrigation becomes an instrument of employment, food provision, and the consolidation of control over territory. At the same time, the project remains subject to serious constraints. Afghanistan faces a shortage of engineering resources, limited access to international financing, sanctions risks, and a lack of trust on the part of its neighbors. The question is therefore not whether Afghanistan needs to develop agriculture, but whether Kabul can implement this project without heightening tensions over the Amu Darya. For Tashkent, the most important task in this situation is to move the issue onto a technical plane. Discussing the water-withdrawal regime, water losses, the condition of the channel, and mechanisms of advance notification makes it possible to reduce uncertainty without directly linking water issues to the question of the official recognition of the de facto authorities. Uzbekistan’s Water Security and the Downstream Factor The significance of the Qosh Tepa Canal for Uzbekistan is determined by the country’s position in the lower reaches of the Amu Darya and by the agricultural sector’s heavy dependence on irrigated farming. Additional water withdrawal upstream may aggravate existing water-supply problems, particularly in the context of climate variability, growing demand from the agricultural sector, and persistent losses in the irrigation system. Therefore, for Tashkent the Qosh Tepa issue is related not only to transboundary water use. It directly affectsfood security, the resilience of rural areas, the environmental situation in the Aral Sea region, and the need for accelerated modernization of the water sector. In November 2024, measures for the rational use of water and the reduction of losses in agriculture were considered separately at the level of the country’s leadership. Among the priorities identified were the concrete lining of canals, digital metering, the introduction of water-saving technologies, and the creation of a unified information system for monitoring water consumption. This shows that Uzbekistan treats the problem not only as an external challenge associated with Afghanistan but also as an incentive for the internal modernization of the water sector. Reducing losses, improving the accuracy of metering, and adapting the agricultural sector to less predictable transboundary flow are becoming important elements of national resilience. At the Seventh Consultative Meeting of the Heads of State of Central Asia in November 2025, the President of Uzbekistan proposed declaring 2026–2036 the “Decade of Practical Actions for the Rational Use of Water in Central Asia” and stressed the need for Afghanistan’s active involvement in the regional dialogue on the joint use of the water resources of the Amu Darya basin. Under these conditions, reducing uncertainty about the actual operating regime of the canal becomes key for Uzbekistan. Without data on water withdrawal, losses, seasonal dynamics, and the condition of the channel, any assessments will be incomplete. The priority is therefore a transition from general forecasts to continuous monitoring and verifiable information. The Regional Dimension: Afghanistan’s New Role in the Amu Darya Basin The construction of the canal changes not only the balance of interests between Afghanistan and the downstream countries but also the conditions of regional water governance. Afghanistan is gradually becoming an active participant in Amu Darya-related issues, whereas the earlier coordination mechanisms were formed without its full participation. The impact of the Qosh Tepa Canal on the Central Asian states is uneven and depends on their position in the Amu Darya basin, the structure of their water use, and their foreign economic interests. Uzbekistan and Turkmenistan remain the most sensitive countries, since both states are located in the lower reaches of the Amu Darya and depend on irrigated farming. For Turkmenistan, the issue is complicated by the fact that water-management risks are combined with an interest in preserving economic ties with Afghanistan, primarily in energy, transport, and transit infrastructure. Ashgabat’s position will therefore likely be built on a cautious balance between protecting its water interests and maintaining working contacts with Kabul. For Kazakhstan, the significance of the Qosh Tepa Canal is predominantly indirect. Astana does not depend directly on water withdrawal from the Amu Darya; however, possible changes in the water balance are important for the Aral Sea region, the environmental sustainability of the region, and the overall effectiveness of water coordination in Central Asia. For Tajikistan and Kyrgyzstan, the canal’s impact is less direct. These countries are not located in the lower reaches of the Amu Darya; however, the emergence of Afghanistan as a more active water user heightens the importance of regional consultations on transboundary water resources. Their interest is related primarily to how the overall system of water-energy interaction in the region will change. The Afghan Dimension in Uzbekistan’s Water and Transport Policy The Qosh Tepa Canal should be considered in the broader context of Afghanistan’s transformation after 2021. Kabul seeks to integrate into regional transport, energy, and trade projects. For Uzbekistan, Afghanistan remains at once a source of water-management risks and a potential corridor to South Asia. Uzbekistan’s approach to Afghanistan therefore cannot be limited to water issues alone. Alongside the risks associated with the Amu Darya, transit, trade, security, and southern transport connectivity remain important for Uzbekistan. This requires Tashkent to address two tasks simultaneously: protecting its water interests and maintaining working channels of engagement with Kabul. For Pakistan, Iran, China, Russia, and the Persian Gulf states, Afghanistan remains an important area in terms of transit, energy, security, natural resources, and access to regional markets. Their interest in Afghanistan may facilitate the development of infrastructure and economic projects in which Uzbekistan is also interested. At the same time, this configuration carries a certain limitation: against the background of large transport and energy initiatives, water issues may recede into the background. It is therefore important for Tashkent to keep the Amu Darya issue on the general agenda of its engagement with Afghanistan. Risks and Opportunities for Uzbekistan First, the main risk is associated with a possible reduction in the available flow of the Amu Darya. This is particularly sensitive for Uzbekistan, since water scarcity is already becoming one of the region’s systemic problems. The lower-lying territories, agriculture, and the Aral Sea region are the most vulnerable. A possible reduction in water could affect not only production but also the social resilience of rural areas. In the most vulnerable districts, this could increase pressure on employment, household incomes, and state support measures. Second, the problem of a lack of transparent data persists. Without regular exchange of information on water withdrawal, losses, and the canal’s operating regime, every low-water season may deepen mistrust between the parties. At the same time, the actual impact of the canal may differ from preliminary expert forecasts. Third, there is an engineering risk. If the canal is operated with high water losses, seepage, or instability of the earthen channel, this will create problems not only for the downstream countries but also for Afghanistan itself, since the effectiveness of the project directly depends on the quality of its construction and operation. Alongside the risks, opportunities for practical cooperation also remain. Uzbekistan can strengthen its role in regional water coordination if it promotes a working format of cooperation with Afghanistan: regular monitoring, technical consultations, the exchange of hydrological data, the training of specialists, and discussion of water losses. Such an approach would allow Tashkent to combine the protection of national interests with a pragmatic dialogue with Kabul. Scenarios for the Development of the Situation In the controlled scenario, construction of the canal continues with data exchange and technical consultations in place. In this case, the risks to the downstream countries persist but become more manageable. Monitoring, diplomatic dialogue, and the acceleration of water-saving measures remain priorities for Uzbekistan. The baseline scenario assumes that the canal gradually reaches higher operating parameters while a data-exchange mechanism takes shape slowly. In that case, periodic tension may arise in low-water years. For Uzbekistan, this means the need to accelerate internal reforms, expand digital metering, and strengthen regional coordination. A critical scenario is possible if maximum water withdrawal, a dry period, and the absence of transparent dialogue coincide. In this case, the water-management problem may move into a more sensitive political and diplomatic plane. An anti-crisis interagency mechanism and urgent consultations with Afghanistan and the Central Asian countries become necessary measures. Practical Recommendations Establish a permanent technical communication channel with Afghanistan on Amu Darya issues: water withdrawal, seasonal regime, water losses, the condition of the channel, and advance notification. Accelerate the modernization of irrigation infrastructure within Uzbekistan, primarily by reducing water losses, introducing digital metering, and ensuring more precise control of water consumption. Expand the adoption of water-saving technologies in agriculture and take into account possible changes in the water balance when planning the crop structure. Create an interagency monitoring system for the Qosh Tepa Canal that will regularly assess the hydrological, environmental, and socio-economic consequences of its operation. Promote a regional dialogue on the Amu Darya involving the Central Asian countries and Afghanistan, with an emphasis on data, technical consultations, and practical coordination. Conclusion The Qosh Tepa Canal is becoming one of the key factors changing the water situation in the Amu Darya basin. For Afghanistan, it is a project of domestic development, employment, and food security. For Uzbekistan, it is a source of new water-management, environmental, and socio-economic risks, particularly given the agricultural sector’s dependence on irrigation and the sensitivity of the Aral Sea region. The main conclusion is that the Qosh Tepa problem cannot be resolved solely through political statements or by relying on external pressure on Kabul. A more sustainable approach is a combination of internal water modernization, continuous monitoring, data exchange, and practical engagement with Afghanistan. The sooner the issue is moved onto a technical and institutional plane, the greater the chances of reducing uncertainty and preventing the water problem from becoming a source of long-term regional tension. For Tashkent, the Qosh Tepa Canal is not only a challenge but also an opportunity to strengthen its own water policy, accelerate irrigation reforms, and advance a new model of regional dialogue on the Amu Darya. Such an approach will allow Uzbekistan to defend its national interests while maintaining pragmatic engagement with Afghanistan. * The Institute for Advanced International Studies (IAIS) does not take institutional positions on any issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of the IAIS.

In her article published in the Central Asia-Caucasus Analyst, Nargiza Umarova, Head of the Center for Strategic Connectivity at IAIS, examines how closer transport cooperation between Afghanistan and Iran could reshape regional connectivity. The analysis focuses on the proposed Herat–Mazar-i-Sharif railway and its potential to link Central Asia and China with Iran, Türkiye and European markets. The article explores how maritime shipping risks, Afghanistan’s strained relations with Pakistan and China’s efforts to diversify overland routes are driving interest in alternative railway corridors. Umarova highlights the opportunities these developments could create for Uzbekistan, including broader access to southern markets and connections between emerging transport networks, while noting unresolved infrastructure and implementation challenges. Read on CACI Analyst * The Institute for Advanced International Studies (IAIS) does not take institutional positions on any issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of the IAIS.

In their brief, Odilbek Manabov and Sabina Gulyamova, Research Assistant at the Center for Sustainable Development, examine the expanding role of Chinese companies in Kyrgyzstan’s water infrastructure, focusing on irrigation, hydropower, wastewater treatment and related engineering projects. The authors distinguish between Chinese state-backed financing and contracts awarded to Chinese firms through multilateral institutions, arguing that this distinction is essential for accurately assessing Beijing’s involvement. The brief also analyses the strategic dimension of Kyrgyzstan–China water relations, particularly the significance of transboundary rivers feeding China’s Tarim Basin, the absence of a dedicated bilateral water-sharing framework, and the risks associated with technological dependence and limited domestic maintenance capacity. It concludes that Chinese participation can help Kyrgyzstan address major infrastructure gaps, but stresses the importance of strengthening local expertise, ensuring financial sustainability, improving hydrological data exchange and preserving effective regional coordination on water and energy issues. Read on The Times of Central Asia * The Institute for Advanced International Studies (IAIS) does not take institutional positions on any issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of the IAIS.

Co-authored with  Sibghatullah Arsalai , a political economy specialist, researcher and analyst, policy advisor, and business strategist with over a decade of experience in geopolitical and geoeconomic affairs, regional diplomacy, national security, and private-sector development. He previously held senior positions at the Office of the National Security Council of Afghanistan, where he contributed to peace negotiations, regional cooperation, national strategic planning, and political and economic risk assessment. He currently serves as a Freelance Researcher and Senior Advisor to Sahil Marble Mining and Processing, focusing on regional connectivity, international market expansion, and strategic business development. Arsalai holds an M.S. in International Political Economy from the University of Texas at Dallas through Fulbright Scholarship and a B.B.A. from the American University of Afghanistan. His research interests include geopolitics, geoeconomics, political economy, regional connectivity, and strategic affairs in Afghanistan, Central Asia and South Asia.   Abstract: The paper is inspired by participation in a workshop named “Generating an Economic Vision for Afghanistan” in Tashkent in December 2025. The workshop was co-hosted by the Institute for Advanced International Studies, University of World Economy and Diplomacy, and the Kroc Institute for International Peace Studies, University of Notre Dame. The participants came from Central Asian countries, Afghanistan and the United States. The participants from Uzbekistan showed vision, preparedness and willingness to tackle challenges regarding Afghanistan in a pragmatic manner. From Central Asian perspective, it is concluded that Afghanistan is no more seen as a security threat but an economic opportunity, and if properly integrated to the Central Asian region, can prosper itself and benefit the region. This paper is an effort to advance this shared vision. * The Institute for Advanced International Studies (IAIS) does not take institutional positions on any issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of the IAIS.