Suspending a presidential decree is no ordinary matter. As events unfolded over the weekend, the conflict brewing between government and judiciary for a year finally came out in the open. While the government is adamant that there is no clash between the judiciary and the executive and that democracy isn under a threat, analysts seem to disagree with that notion.
There seems to be a general agreement among political analysts that the executive does not have any viable option but to accept the ruling of the court. While it does seem like an embarrassing U-turn, it is the remedy that may allow the government to cling onto power, at least for the time being. Most concur that army intervention at this point seems unlikely mainly because of war on terror.
Economic analysts cite the security situation and uncertainty amid PPP regimes tussle with judiciary as the main drivers of equities in the current fiscal year.
Withdrawal of notifications by the government and appointment of judges in consultation with the CJP is seen positively by one analyst. As a result, a 2-3 percent rally on the stock market is expected in such a scenario. In the event of governments failure to implement the order announced by a three-member SC bench on Saturday, a narrow band of trading between 9500-9800 on the KSE-100 index combined with low trading volumes is in the offing.
Political stability in particular is the key ingredient for inflow of foreign investment. In present circumstances, investors are hesitant to work under weak institutions and adhocism. This was demonstrated in broad terms at the FoDP forum in the UAE last month. Much of the aid expected to flow into Pakistan might bypass the government channels due to corruption and lack of continuity.
Successive governments are known for policy reversals of their predecessors. Reforms instituted by a government will be overturned by its successor. Whatever little progress may have been achieved becomes null and void.
Perhaps the most significant highlight of this crisis is the issue of governance. The government in Islamabad has to work hard to hold onto their seats. Politicians are unable to focus on the problems of economic impact that results from this lack of attention.
Political and legal activists have realized that taking to the streets gets things done. The Long March for the restoration of the judges is one such example. An unfortunate by product of such activities is the closure of business activity in the urban centers, the cost of which can go up to an estimated Rs10 billion per day of closure in Karachi alone.
The current crisis may add some steam to the stock market and the economy at large if the government rescinds its decision without any further loss of time. In the medium to long term, similar crises are bound to resurface. Such problems are bound to undermine not just the power of the executive but also the confidence that various stakeholders have in its ability to keep the institutions together.
Stability on the political front will be a precursor to economic stability as well, hence the need for the resolution of this crisis at the earliest.
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