Peace, with caution

The announcement that the United States and Iran have reached an agreement, brokered through Pakistan and to be formally signed in Geneva on Friday under Pakistani hosting, is a moment of genuine diplomatic achievement. It is also a reminder that optimism must not be confused with certainty. The same caution is visible in the State Bank of Pakistan’s decision to keep the policy rate unchanged at 11.5 percent, despite the easing of oil prices following the breakthrough.

Pakistan has paid a substantial economic price for a war it did not start. Higher energy costs, disrupted trade routes, rising transport expenses and renewed inflationary pressure have all weakened an economy that was already struggling to move from stabilisation towards growth. Islamabad could have remained a spectator, complained of external shocks and waited for larger powers to settle the matter. Instead, it remained engaged with both sides, carried messages when direct communication was difficult and helped bring the negotiations to the point where an agreement could be announced. That deserves recognition.

Yet the agreement still has to be signed, implemented and then sustained. The Strait of Hormuz is expected to reopen, while a 60-day period will be used to address the harder questions surrounding Iran’s nuclear programme, sanctions and its enriched uranium stock. Those are not minor details but the very issues over which the conflict escalated. The negotiations have been fraught, and there are enough hot heads on all sides to ensure that the path from ceasefire to settlement will remain hazardous.

Israel remains the most obvious danger to the arrangement. It was not a party to the talks, has not achieved all its military objectives and has already shown a willingness to continue operations in Lebanon despite pressure from Washington. Any new Israeli strike could give hardliners in Tehran or Washington the excuse they need to abandon restraint. Pakistan’s diplomatic success, therefore, should be celebrated, but not treated as final until the guns remain silent and the promised measures are carried out.

The State Bank has been similarly correct not to celebrate too soon. Oil prices may have declined, but they remain above their pre-conflict level, while headline inflation rose to 11.7 percent in May and economic activity has begun to moderate. A premature rate cut might have offered temporary relief to businesses, but it would also have risked reinforcing inflation before the effects of the crisis had fully passed through the economy.

There is reason for hope, both diplomatic and economic. However, hope is not yet stability. Pakistan has helped open a door to peace, while the State Bank has resisted opening the monetary taps too quickly. In both cases, caution is not timidity. It is the only sensible response to a fragile success.