As pressure intensifies on Musharraf to deal with al-Qaeda and Taliban militants on his territory, most analysts said he had no choice but to call national elections, due early next year, as they offered the only solution to the multi-dimensional crisis he is facing.

"Musharraf's failure to sign the emergency bill indicates the political and civil forces have gained strength and they can deter undemocratic moves of the government," said political analyst Rasool Baksh Rais.

"Now there is no escape for the general except to give up his military uniform, hold free, fair and impartial elections, otherwise the country will be in a big turmoil," said Rais, who teaches political science at Lahore University of Management Sciences (LUMS).

He said Musharraf had ruled Pakistan without any serious challenge until lawyers launched a movement for the reinstatement of chief justice Iftikhar Muhammad Chaudhry who he suspended on misconduct charges in March.

The Supreme Court overturned Musharraf's order last month after widespread street protests led by lawyers and opposition political parties, dealing him a humiliating political blow.

"A dictator cannot function authoritatively without a subjugated judiciary and now he has to put up with an independent judiciary," said Rais.

Musharraf on Thursday decided not to impose a state of emergency in Pakistan, apparently ignoring the advice of aides who wanted strong action to prevent more instability in the troubled nation.

Since Pakistani troops stormed Islamabad's Red Mosque a month ago to dislodge militant gunmen, there has been a steady uptick in attacks on troops in tribal zones as well as suicide bombings and other attacks across Pakistan.

Pressure is also building, both domestically and internationally, for him to deal with escalating violence in the border areas that have become a haven for militants associated with al-Qaeda and the Taliban and from where they plan attacks inside Pakistan, over the border in Afghanistan and worldwide.

Any declaration of a state of emergency would have handed ammunition to his political rivals, analysts said, but opposition and public agitation for a return to democracy was unlikely to fade.

Pakistan's top court is hearing a petition by ex-premier Nawaz Sharif, whom Musharraf banished in December 2000 after overthrowing him in a coup, challenging his exile to Saudi Arabia.