The writer is special adviser to the Jang Group/Geo and a former envoy to the US and the UK.

The greatest danger to the country’s stability today comes from a worsening economy. This danger has been further heightened by the far-reaching economic impact of Karachi’s descent into bloody mayhem. The economic outlook has been steadily deteriorating. With policy paralysis setting in and no corrective actions or reform measures in sight, an economic breakdown might be unavoidable. Political leaders are already in campaign mode and prone to fiscal profligacy in distributing patronage to garner votes. There are two views on Pakistan’s near term economic prospects. The official view is that the country will continue to coast along and face no serious economic peril as a number of advantageous factors are in play. They include a marked improvement in the current account of the balance of payments. Foreign exchange reserves have increased to $18 billion. This includes nearly $8 billion from an IMF standby loan. It also reflects unexpected export earnings of over $24 billion this year ($19 b last year) and an unprecedented rise in remittances of $11 billion, up from $8.9 billion in 2010. What are in fact windfall – and transient – factors have produced a sense of official complacency. Full story