PAKISTAN’S management of the conflict with India, in which it got the better of its adversary, showed how effectively it met the latest external challenge to its security.

This generated a surge in national pride and self-confidence. Civil-military relations appear to be smooth and friction-free. Progress has also been made in achieving short-term macroeconomic stability as a result of the government’s measures. The country no longer faces an economic emergency as it did a year ago when it was teetering on the brink of sovereign debt default. Leaderless and divided, the opposition poses little threat to the government, at least for now. All this has created an aura of stability and indicates a positive near-term outlook.

While it is important to acknowledge the gains Pakistan has recently made on various fronts, caution is warranted as the foundation for longer-term political and economic stability remains to be built. This requires addressing structural issues and dealing with the country’s enduring fault lines. It is a task waiting to be done.

Take the case of the economy. An IMF bailout programme and implementation of several of its conditionalities have helped to stabilise the economy. But economic recovery remains fragile and the country still has to make the transition from stabilisation to growth and investment. Moreover, stabilisation has yet to involve building sufficient capacity to repay loans without resorting to more borrowing at a time when debt levels are unsustainable and external financing needs are large in the coming years. Constant requests for loan rollovers to lenders indicate the persisting lack of repaying capacity.

The country remains mired in a low-growth, low-investment, high-debt equilibrium trap. There is no escape from this unless structural issues are tackled.........

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