ISLAMABAD -- The regime of Pakistani President Gen. Pervez Musharraf is eager to find a way out of the military standoff with India, knowing full well that a war between the two nuclear-armed neighbors could easily erase the few gains the country has made in the past six months.

Pakistan's internal security may be challenged by Islamic militants who oppose Musharraf due to his decision to ally Pakistan with the United States in its war on terrorism.

With its foreign-exchange reserves at an all-time high of more than $5 billion -- almost five times the level of a year ago -- Pakistan's fortunes appear to be improving in some respects.