Pakistan's economy Full fear and credit: Economist

PAKISTAN is one of the few countries in the world that enjoys more macroeconomic stability today than it did on September 14th, the day before the bankruptcy of Lehman Brothers turned the world upside down. In those prelapsarian days Pakistan’s currency was tumbling; its foreign-exchange reserves covered barely two months of imports; and the cost of insuring its sovereign debt against default was almost 1,000 basis points (10%). Worst of all, the IMF had landed in Islamabad.

In the months since, Pakistan’s government has in effect conceded the Swat valley, a picturesque tourist spot, to the Taliban. It has suffered savage terrorist attacks on a police academy and the visiting Sri Lankan cricket team. It has also handed the political initiative to its rivals in the opposition party. But despite all this turmoil, it has found some macroeconomic steel.

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