The government has protested at nuclear tests by India in mid-May and hinted it could carry out its own nuclear trial in retaliation. There was panic selling on the Karachi Stock Exchange on 13 May which lost 3.8 per cent on fears of a weapons race and a loss of confidence by foreign investors.

'India's actions, which pose an immediate and grave threat to Pakistan's security, will not go unanswered,' Foreign Affairs Minister Gohar Ayub Khan told the Senate on 13 May. Earlier in the day, the government, defence chiefs and the architect of Pakistan's own nuclear programme, Abdul Qadeer Khan, had met behind closed doors to consider Pakistan's response to the Indian tests. India said on 12 May it had tested three nuclear bombs. The following day, it announced it had set off two more nuclear explosions.

Ayub Khan, who had told Reuters Television that the Indian leadership had 'gone berserk', dismissed as inadequate sanctions enacted by US President Clinton against India on 13 May. Clinton had telephoned Prime Minister Nawaz Sharif to urge restraint.

The official statement following the government's meeting on 13 May gave no clue as to whether Islamabad would show its hand and carry out the nuclear test which it has long said it is capable of conducting. Diplomats and officials believe that if Pakistan opted to show its capabilities, it could conduct a test within a week, shunning world appeals not to raise the stakes any further between the two neighbours. There was some speculation that Pakistan may take the moral high ground, letting India be the object of world condemnation.

Business people and analysts in Karachi have drawn attention to the potential cost of a south Asian weapons race, saying that neither Pakistan nor India could afford one. There were fears that the government would increase its defence allocations in the coming budget due in June.