Pakistan’s recent agreement with World Liberty Financial (WLF) amid rising economic turmoil highlights the lengths to which the nation is prepared to go in pursuit of immediate solutions, even at the potential cost of increased instability. This economic gamble comes as the country grapples with internal separatist movements, renewed militancy, and tense relations with Afghanistan and India.
This intersection of economic decline and political disintegration now poses a significant threat to the internal cohesion of Pakistan.
Background of the World Liberty Financial (WLF) deal
World Liberty Financial (WLF) is a cryptocurrency firm, reportedly 60% owned by the family of current U.S. President Donald Trump. The collaboration between Pakistan and WLF was finalized in April 2025, with the declared objective of positioning Pakistan as a ‘South Asian crypto hub,’ concentrating on decentralized finance (DeFi) and blockchain technology.
The deal was signed between WLF and the hastily launched Pakistan Crypto Council, which has appointed Binance founder Changpeng Zhao as an adviser. WLF representatives, including Trump associate Zachary Witkoff, visited Islamabad to meet Prime Minister Shehbaz Sharif and army chief General Asim Munir, raising speculation about the actual intent behind the deal.
Brief on Pakistan’s economic challenges
Since 2022, Pakistan has been in a severe economic crisis marked by soaring inflation, a falling currency, dwindling foreign reserves, and rising external debt.
In FY 2024-25, GDP shrank by -1.5%, the lowest in over 20 years. Inflation peaked at 38% in May 2023 before dropping to 0.7% by April 2025, driven precariously by currency devaluation and rising food and energy prices. The industrial and agricultural sectors face a bleak future, worsened by India’s latest revocation of the Indus water treaty after the Pahalgam attacks. Poverty has risen, with about 42.3% of the population below the lower-middle-income threshold in the financial year 2024.
Foreign reserves have fallen to $2.1 billion, barely enough for three weeks of imports, forcing Pakistan to rely heavily on IMF support, including a recent $7 billion package with strict conditions like subsidy cuts and privatization of state enterprises. Currently, over 60% of federal revenue goes to servicing external debt, trapping the country in an unsustainable loop of borrowing to repay debt.
Implications of the deal with World Liberty Financial (WLF)
Considering Pakistan’s challenging situation, the agreement with WLF is perceived by some as a desperate measure to attract foreign investment and enhance its digital economy. However, critics contend that an emphasis on cryptocurrency and DeFi initiatives may distract from addressing more pressing structural issues, such as improving tax collection, reducing debt, and stabilizing the currency. Pakistan’s tax revenue, incidentally, remains among the lowest in the world.
It is pertinent to note that the WLF’s close relationship with the Trump family brings into question the underlying motivations for the deal, suggesting that it may have been influenced more by political connections than by a solid economic rationale. China is reportedly cautious about this development on the US-Pakistan front, additionally having expressed concerns about the potential for cryptocurrencies to undermine financial stability. Any such crisis stands to endanger Chinese infrastructure projects in Pakistan, triggering it to distance itself altogether.
Political unrest by sub-national groups in Pakistan
Pakistan’s internal stability is further jeopardized by escalating unrest in Balochistan, Sindh, and Khyber Pakhtunkhwa (KP), compounded by the growing threat from Tehrik-i-Taliban Pakistan (TTP) and the deteriorating ties with the Taliban government in neighboring Afghanistan.
Balochistan has witnessed increasingly sophisticated attacks by outfits like the Balochistan Liberation Army (BLA), whose operations, such as the high-profile Jaffar Express hijacking in March 2025, showcase their challenge to state authority. In Sindh, protests against the controversial Cholistan canal project have turned violent and reignited separatist demands for establishing a sovereign state called Sindhudesh. In Khyber Pakhtunkhwa, the Taliban government of Afghanistan is outrightly refusing to recognize the Durand Line and openly supporting the Pashtunistan movement, seeking to unite Pashtun communities along the Afghanistan-Pakistan border into a sovereign state.
The TTP’s resurgence is particularly concerning, as it has become the world’s fastest-growing terrorist group, with a 90% increase in deaths attributed to its attacks. The group has expanded its operations beyond KP, carrying out attacks in Islamabad, Karachi, and Balochistan, and has reportedly received logistical and financial support from the Afghan Taliban. This alliance has enabled the TTP to sustain and intensify its insurgency, further destabilizing Pakistan’s internal security.
In conclusion
Pakistan’s internal economic and political turmoil is rapidly eroding national unity. Economic challenges, including rising inflation, shrinking GDP, heavy debt, and dwindling foreign reserves, have hampered the government’s ability to deliver essential services and sustain growth. The controversial deal with World Liberty Financial (WLF) underscores Pakistan’s misguided attempts to tackle the crisis, diverting attention from the vital structural reforms needed for economic stability. Simultaneously, political unrest fueled by separatist movements in Balochistan, Sindh, and Khyber Pakhtunkhwa, along with the resurgence of groups like the TTP, is increasing internal security threats. These intertwined and mutually reinforcing economic vulnerabilities and widespread political unrest undermine governance, weaken state institutions, and exacerbate public discontent, creating fertile ground for Pakistan’s further fragmentation.
