Pakistan's mediation yields rare diplomatic capital

KARACHI:

Pakistan's role in brokering a peace deal in the United States-Iran war has led to widespread diplomatic acclaim that could bring Islamabad some economic benefits, but analysts question whether such gains can help resolve the fault lines in its economy.

"A nation that delivers stability at home and helps advance stability abroad becomes a more credible destination for investment," said finance ministry Adviser Khurram Schehzad. "A growth-oriented economic agenda, coupled with a reputation as a force for peace and stability, places Pakistan in a uniquely favourable position to attract investment into its people, infrastructure, technology and future growth sectors."

Alex Vatanka, senior fellow and director of the Iran programme at the Middle East Institute in Washington, said one gain for Pakistan was the "huge potential to be a more integrated part of the broader Middle East," and eventually forging broader economic partnerships in the region that would also encompass defence.

Another possibility was that sanctions relief on Iran could allow "huge trade between Iran and Pakistan," particularly through their Balochistan land border, said Miftah Ismail, a former finance minister. He added the diplomatic role had enhanced Pakistan's international prestige, but that had no effect on the high costs, weak exports and external repayments that keep it dependent on the IMF.

Asim Ijaz Khawaja, a professor at Harvard University and director of the Harvard Center for International Development, said Pakistan should resist short-term financial concessions that do not raise productivity.

Hamish Falconer, Britain's minister for the Middle East, thanked Islamabad for its peacekeeping role during a visit last week and told Reuters the UK saw "huge scope for deepening trade links" with Pakistan and that a British trade minister was expected to visit in the coming months. Diplomats from two other Western countries have also said their governments are exploring strengthening economic ties following Islamabad's peace efforts.