Pakistan economy can still hit targets: FinMin

However, foreign investment has already begun to slow and economists have raised doubts about the willingness of overseas investors to continue to support Pakistan.

Bhutto's killing, blamed by the government on al Qaeda, robbed the country of its most popular opposition politician and put in jeopardy Pakistan's planned transition to civilian-led democracy at general elections now scheduled for Feb. 18.

But the Karachi stock market took only a few trading sessions to bounce back from Bhutto's killing, which had triggered violent unrest and paralysed the economy for three days. By last Friday's close, it had already recovered around two-thirds of its losses.

On Saturday, the central bank reinjected a note of pessimism, warning about inflation, virtually ruling out an interest-rate cut and also highlighting the country's twin current-account and fiscal deficits.

"All key fiscal performance indicators have deteriorated significantly," the State Bank of Pakistan said in its quarterly report for the three months ended Sept. 30.

The bank said annual inflation was likely to average 6.5-7.5 percent in 2007/08, compared with its target of 6.5 percent, and that prices were not only under pressure from rising crude oil and food costs but also from an expansion in money supply.