Pakistan will remain heavily dependent on concessional loans and emergency aid from multilateral institutions and bilateral donors. The catastrophic floods of August-September 2010 heightened this reliance, as it is estimated that billions of US dollars are likely to be required in the medium term for reconstruction. Western countries are unlikely to tie crisis-linked humanitarian aid to specific political concessions. However, the discovery that Mr bin Laden has been living in Pakistan has cast enormous suspicion on Pakistan's competence and trustworthiness as an ally in the global fight against Islamist militancy. Western countries will therefore now subject to increasing scrutiny the non-humanitarian aid that they allocate to Pakistan, and there is a risk that such funding may be curtailed.

In this context, Pakistan will welcome further offers of investment and aid from China, which is already a staunch and relatively uncritical ally. The Chinese government took pains to express its support for Pakistan in the wake of the raid that killed Mr bin Laden, and Pakistan's prime minister, Yusuf Raza Gilani, reciprocated by making hyperbolic public statements about the strength of the bilateral relationship. The fact that both Pakistan and China see neighbouring India as an adversary will continue to underpin their friendship.

Pakistan's relationship with the US, the country's most important donor and strategic partner by far, is complex and has seen bouts of significant tension. Anti-US sentiment in Pakistan is strong and has been inflamed by recent US actions and policies, and the ostensible allies are deeply mistrustful of one another at the official level. The raid on Mr bin Laden's compound has raised the possibility that the relationship may now be pushed to breaking point. US policy towards Pakistan has sought accountability and co-operation in the fight against terrorism in exchange for billions of US dollars a year in development assistance and military aid. Allegations-some veiled, some explicit-currently abound of official Pakistani complicity in Mr bin Laden's presence in the country. So too do calls to suspend aid: a bill introduced in Congress (the US legislature) on May 5th stipulates that no further US assistance to Pakistan be given unless the US government certifies to Congress that Pakistani authorities had no knowledge of Mr bin Laden's location. Were US financial assistance to be suspended, there would be significant financial and economic repercussions for Pakistan, in addition to the harm done to the country's reputation. However, there would also be important consequences for the US: Pakistan would be likely to cease all bilateral co-operation, and this would vastly complicate US efforts to stabilise Afghanistan and eventually reduce the number of its troops deployed in that country. It would also make it extremely difficult for the US to continue with its policy of carrying out surveillance and conducting targeted assassinations of suspected terrorists on Pakistani soil. Our forecast therefore assumes that despite US politicians' current rhetoric there will be no major curtailment of US financial support to Pakistan. Instead, we believe that the next few months will bring a series of tit-for-tat, retaliatory provocations (similar to the ISI's leaking of the name of the US Central Intelligence Agency's Islamabad station chief to the Pakistani media on May 9th). Periodic spats followed by periods of mutual tolerance describes the essential characteristics of the bilateral relationship as it has been for the past year or so, and the situation in the coming period would thus not represent a sea change. Nevertheless, the provocations now may be more serious than before, and the resolution of tensions on a case-by-case basis may take longer to achieve.

The events of early May have undermined Pakistan's position in relation to its ongoing differences with India. The media in India, and some Indian politicians, have long accused Pakistan of harbouring terrorists, and many observers in India viewed the discovery of Mr bin Laden in Pakistan as a vindication of this charge. In the wake of the al-Qaida chief's death, India publicly accused a number of serving Pakistani army officers of complicity with terrorist groups, including them in a list of people that it wants to be extradited to India to stand trial on charges of terrorism. Pakistan will remain concerned that India will interpret the US's unilateral action within Pakistan's borders as a licence to act similarly and launch a strike on suspected militant operations in Pakistan in the interests of Indian national security. However, the response of the Indian prime minister, Manmohan Singh, to the news of Mr bin Laden's death has been measured. The bilateral dialogue that has resumed, haltingly, following its suspension in November 2008 after the terrorist attacks on India's financial capital, Mumbai, is likely to continue.