India criticized the decision to free Hafiz Saeed, founder of the banned group Lashkar-e-Taiba.
Analysts say political leaders could strengthen militants' appeal if they do not manage deep ethnic tensions – which resulted in clashes that killed 30 people last week.
To bolster tenuous progress, the Army must push on to drive the Taliban out of Swat Valley, according to some analysts.
The tenuous peace deal with the militants comes under increasing strain as Taliban take areas closer to Pakistan’s capital.
In Tokyo, nearly 30 countries pledged $5.28 billion to bolster its weak economy and government.
The move came shortly after a Taliban group in the nearby Bajur region declared a unilateral cease-fire.
China and Russia join calls to avoid brinksmanship.
Army Chief Ashfaq Kayani has been curtailing the political influence of a military accustomed to running the country.
It targeted a camp of the group linked to the Mumbai attacks Sunday.
As part of their own 'surge,' they destroyed more than 160 Humvees and trucks bound for Afghanistan.