WHILE the government's macroeconomic stabilization programme has led to improvement in key economic indicators, a number of vulnerabilities are keeping the pace of recovery considerably slow. This explains the IMF assessment of the economic outlook remaining fragile for the medium term. The global financial crisis might not have had as devastating an impact on Pakistan as it did on economies more closely linked with that of the US, but a slower global recovery, causing constriction of demand, continues to affect the country's exports. The global financial crisis could presumably also have caused the delay in the disbursement of the $5.7 billion pledged five months back by the FoDP in Tokyo. The delay could exert pressure on the economy, as was pointed out by the State Bank Governor last month. With the inflow of funds, the government could have increased allocations for development programmes. While a decline in inflation has been reported, the process has been slower than expected. However, this led the State Bank to announce a cut of 100 basis points in its policy rate to 13 percent last month. There is a dire need to slash the interest rate to cope with the economic slowdown. What acts as a hurdle is the level of inflation. There are fears that in case petroleum prices register an upturn, the management of inflation might become more difficult. The reports regarding the rise in the prices of some of the essential items add to one's worries regarding inflation. In November, Pakistan was forced to turn to IMF for a rescue package after the country's foreign-exchange reserves shrunk 75 percent in a year to $3.5 billion and the current-account deficit widened. Both the current account and budget deficits are by and large under control, thanks to the macroeconomic stabilization programme, the contraction of imports and the continuing growth of remittances. In case the government succeeds in putting an end to loadshedding by December after the installation of the Rental Power Stations, industry could start functioning at full gear. While lower interest rates tend to revive the confidence of investors, other vital matters that act as disincentives also need to be addressed. These include political stability, governance and law and order. The rivalry between the PPP and the PML(N) continues to raise the political temperature from time to time. Stories spread by vested interests, like the "minus one" formula, also create the perception of instability. Economic recovery could suffer a setback in case important players display shortsightedness. What is required is a display of responsibility on their part.