Pakistan appeared to have pulled back from the brink of anarchy yesterday after the Government, under pressure from the army and the US, bowed to opposition demands to reinstate the independent-minded Chief Justice.

But in a grim reminder of the continuing threat from Islamist militants, a suicide bomber killed at least eight people and wounded seventeen last night at a bus terminal in the garrison town of Rawalpindi, near Islamabad, the capital.

The bomber struck as lawyers and opposition supporters were celebrating across the country after President Zardari agreed to reinstate Iftikhar Mohammad Chaudhry as Pakistan’s top judge from March 21.

The celebrations were especially jubilant in the eastern city of Lahore as Nawaz Sharif, the opposition leader, returned to his home town after calling off a protest march by thousands of lawyers and political activists to Islamabad.

The US and Britain congratulated both sides for defusing a crisis that threatened to distract the army from the fight against al-Qaeda and Taleban militants in Pakistan’s northwest – and even to force a return to military rule.

They also urged both sides to take further steps towards reconciliation amid fears that Mr Zardari, now greatly weakened, could soon face more political challenges from Mr Sharif, or legal challenges from Mr Chaudhry.

“There is now a real opportunity for the country to move forward and tackle the pressing challenges it faces, particularly the mortal threat posed by violent extremists,” said David Miliband, the British Foreign Secretary. “There is no room for political divisiveness at this time, and there will be no understanding of a failure to rally the country together.”

The US and Britain had tried to mediate in the crisis over the past few days, with Mr Miliband and Hillary Clinton, the US Secretary of State, speaking by telephone to Mr Zardari and Mr Sharif.

A senior US official said yesterday that Mrs Clinton had given the Pakistani leaders a thinly veiled warning that legislators might block billions of dollars in aid to Islamabad if order were not quickly restored.

“One of the points the Secretary made was that many in Congress are concerned about the situation on the ground in Pakistan,” the official told reporters.

“There are some in Congress who may not feel inclined to support additional assistance to Pakistan and that’s a reality. We’ve heard those types of calls coming from Congress.”

Yousuf Raza Gilani, the Prime Minister, announced Mr Chaudhry’s reappointment in a dramatic dawn television address to the nation after a series of meetings with Mr Zardari and General Ashfaq Kayani, the army chief. Mr Chaudhry was sacked with about 60 other judges by Pervez Musharraf, the former President, in 2007, sparking a nationwide lawyers’ protest movement that then turned on Mr Zardari after he broke a promise to reinstate them.

Mr Zardari had feared that Mr Chaudhry would challenge a pact agreed with Mr Musharraf that granted Mr Zardari and his wife, Benazir Bhutto, since murdered, an amnesty from corruption charges.

Analysts say that Mr Chaudhry is unlikely to take up that case in the near future, to avoid another stand-off between the Government and judiciary that could once again plunge the country into chaos. But it is almost certain to resurface during another political dispute, as are tensions with the Government if Mr Chaudhry pursues other controversial cases.

“There’s a lot of controversy about how far and to what extent the judiciary should move into the turf of the executive,”said Ejaz Haider, a newspaper columnist and political analyst.

Questions also remain over Mr Sharif’s ambitions now that he has proved himself to be Pakistan’s most popular politician with an impressive show of strength by his Pakistan Muslim League (N).

After Mr Gilani’s announcement, Mr Sharif thanked the President and Prime Minister and called off his protest march, but not before claiming credit for the victory and vowing further change.

“From here, God willing, the fate of this nation will change,” he said. “From here, a journey of development will start. From here, a revolution will come.”

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