Lost Value of Pakistan’s Mineral Economy

Pakistan sits at the top of an extraordinary geological endowment. Underneath its soil, more than 90 different minerals have been identified, ranging from copper, gold, lithium and cobalt to critical rare earth elements (REEs) required for the 21st-century economical, digital, energy and defense architecture. Various estimates have placed the potential value of Pakistan’s minerals between USD 50 trillion and USD 68 trillion. Yet mining contributes only 3.2 per cent to Pakistan’s GDP and less than 0.1 per cent to global mineral exports. This is the core paradox, abundant reserves, limited gains. Globally, the control of critical resources has shaped power and industrial trajectories. Oil defined the 20th century. Rare earths are increasingly defining the 21st. Comprising 17 chemically similar elements, REEs are essential for wind turbines, electric vehicles, semiconductors, fiber optics, satellites, robotics, and precision-guided weaponry. Demand is surging. The International Energy Agency estimates global rare earth demand will rise from 140,000 tons in 2019 to 220,000 tons by 2025, a compound annual growth of around 7 per cent, driven primarily by Asia-Pacific industrialization and the acceleration of the energy transition. 

This demand growth is occurring in an extremely concentrated supply landscape. China holds around 44 million tons in reserves and accounts for approximately 70 per cent of global extraction and more than 85 per cent of refining capacity. Its dominance rests on three interlocking pillars, the vertical integration from mining to advanced manufacturing, aggressive overseas acquisition of concessions across Africa, Latin America and Central Asia, and sustained investment into refining, recycling, and thorium research for advanced nuclear fuel cycles. China has repeatedly demonstrated willingness to use this dominance as geopolitical leverage. During diplomatic tensions with Japan and the United States, Beijing tightened REE export controls, signaling that critical mineral chokepoints can be weaponized. Today, the United States imports over 80 per cent of its REE inputs from China. While Washington is investing in domestic separation technologies, recycling, and supply chain alliances with Australia and Canada, the replacement of Chinese capacity will take years. It is in this strategic context that Pakistan’s rare earth story becomes consequential. Geological assessments by the Geological Survey of Pakistan (GSP) and the Pakistan Atomic Energy Commission (PAEC) have identified REE potential in the granitic and pegmatite complexes of Chagai, in REE-bearing granites in Dir, Swat and Kohistan, in coastal sands of Sindh and Balochistan similar to Indian and Sri Lankan monazite, and across Himalayan igneous belts linked to monazite, xenotime and bastnäsite. Pakistan’s rare earths are potentially valued at over USD 6 trillion in situ. The country also holds world-class copper-gold deposits in the Tethyan belt, lithium occurrences in Gilgit-Baltistan, and some of the largest salt reserves in the world including globally marketed Himalayan pink salt. The government recently claimed that gold reserves valued at approximately USD 636 billion have been identified in Tarbela. If these estimates are commercially verified and proven extractable at scale, such reserves could in theory offset Pakistan’s entire external debt stock. 

Despite this geological abundance, Pakistan is not present in the global REE value chain. Structural conditions explain this absence, weak mining regulation, outdated concession structures, no domestic refining or separation technology, fragmented fiscal powers between federal and provincial governments, poor infrastructure in mineral belts, persistent security risks in Balochistan, and a legacy of unstable contracts that deter global mining houses.  

There are now signs of a strategic opening. In 2025, the Frontier Works Organization (FWO) signed a MoU of USD 500 million with US-based Strategic Metals (USSM). Washington’s interest is structural; the United States needs alternative cost-effective critical mineral supply chains not controlled by China. Pakistan’s interest is equally structural, it needs investment, technology transfer, processing capacity, and new strategic leverage. Islamabad is now attempting a more assertive mineral diplomacy posture. The creation of the Special Investment Facilitation Council (SIFC) signaled an attempt to accelerate mining sector approvals. There are proposals for a National Minerals Harmonization Framework to standardize regulation across provinces. Yet domestic suspicion persists. Critics have framed new mines legislation as externally influenced. China is already strongly positioned through CPEC, and Chinese firms have expressed interest in copper, gold and REEs. Pakistan is attempting to hedge to attract Washington without alienating Beijing. What is missing is institutional credibility. Mining regulation remains fragmented, taxation unpredictable, dispute resolution weak, and environmental protection diluted. Proposals have even been floated to abolish the Pakistan Environmental Protection Agency. This is self-defeating. Pakistan’s mineral belts, especially in Balochistan and the northern areas are water stressed and ecologically fragile. Mining without strict environmental compliance could deepen poverty, inflame local grievances and trigger political backlash similar to Niger Delta “oil curse” dynamics. Nigeria holds the eleventh largest oil reserves globally, yet 40 per cent of its population lives below the poverty line. Geography is not destiny, resource wealth without governance only intensifies inequality. 

Technically, the pathway for Pakistan is clear. The country must move beyond raw extraction and build domestic value addition. This requires transparent concession policies, legally binding environmental and social standards, independent oversight, and a skilled workforce in mineral sciences and advanced metallurgy. Joint ventures must be structured to guarantee technology transfer and domestic processing capacity. Local communities must be treated as shareholders with royalty shares, employment guarantees, grievance redressal systems, and co-ownership of benefit streams. A sovereign wealth fund dedicated to minerals could accumulate revenues for inter-generational equity, similar to Norway’s Government Pension Fund Global which today exceeds USD 1.6 trillion. Externally, Pakistan must pursue multipolar mineral diplomacy, partnering with China, the United States, Gulf sovereigns and mineral technology leaders such as Australia, Canada and South Korea. The aim is not alignment. The aim is leverage. Pakistan sits at the intersection of a once-in-a-century reconfiguration of power around critical minerals. If it approaches this moment with institutional clarity, regulatory predictability, environmental responsibility, and strategic autonomy, it can convert its geological abundance into export revenues, fiscal stability, industrial upgrading and strategic relevance. 

The opportunity is unprecedented but finite. If Islamabad delays, the world will simply build alternative supply chains elsewhere. Energy transitions do not wait. Technology cycles do not pause. Pakistan has a narrow window to shift from resource bystander to resource stakeholder. The difference between trillions of dollars underground and trillions of dollars in national GDP is not geology. It is governance. 

Author's Bio: Alishba Khan is a Qualified Chartered Accountant (ACA) and lives in Islamabad. She works on insurance, climate risk finance, carbon markets and sustainable development across DRR and climate change.