AIRLINK 74.00 Decreased By ▼ -0.25 (-0.34%)
BOP 5.14 Increased By ▲ 0.09 (1.78%)
CNERGY 4.55 Increased By ▲ 0.13 (2.94%)
DFML 37.15 Increased By ▲ 1.31 (3.66%)
DGKC 89.90 Increased By ▲ 1.90 (2.16%)
FCCL 22.40 Increased By ▲ 0.20 (0.9%)
FFBL 33.03 Increased By ▲ 0.31 (0.95%)
FFL 9.75 Decreased By ▼ -0.04 (-0.41%)
GGL 10.75 Decreased By ▼ -0.05 (-0.46%)
HBL 115.50 Decreased By ▼ -0.40 (-0.35%)
HUBC 137.10 Increased By ▲ 1.26 (0.93%)
HUMNL 9.95 Increased By ▲ 0.11 (1.12%)
KEL 4.60 Decreased By ▼ -0.01 (-0.22%)
KOSM 4.83 Increased By ▲ 0.17 (3.65%)
MLCF 39.75 Decreased By ▼ -0.13 (-0.33%)
OGDC 138.20 Increased By ▲ 0.30 (0.22%)
PAEL 27.00 Increased By ▲ 0.57 (2.16%)
PIAA 24.24 Decreased By ▼ -2.04 (-7.76%)
PIBTL 6.74 Decreased By ▼ -0.02 (-0.3%)
PPL 123.62 Increased By ▲ 0.72 (0.59%)
PRL 27.40 Increased By ▲ 0.71 (2.66%)
PTC 13.90 Decreased By ▼ -0.10 (-0.71%)
SEARL 61.75 Increased By ▲ 3.05 (5.2%)
SNGP 70.15 Decreased By ▼ -0.25 (-0.36%)
SSGC 10.52 Increased By ▲ 0.16 (1.54%)
TELE 8.57 Increased By ▲ 0.01 (0.12%)
TPLP 11.10 Decreased By ▼ -0.28 (-2.46%)
TRG 64.02 Decreased By ▼ -0.21 (-0.33%)
UNITY 26.76 Increased By ▲ 0.71 (2.73%)
WTL 1.38 No Change ▼ 0.00 (0%)
BR100 7,874 Increased By 36.2 (0.46%)
BR30 25,596 Increased By 136 (0.53%)
KSE100 75,342 Increased By 411.7 (0.55%)
KSE30 24,214 Increased By 68.6 (0.28%)
Print Print 2024-02-15

Moody’s speaks of elevated political uncertainty

  • Prolonged delays in formation of govt will increase policy and political uncertainty at a time when it faces very challenging macroeconomic conditions
Published February 15, 2024

ISLAMABAD: Political uncertainty persists in Pakistan following inconclusive election results, a credit negative, says Moody’s Investors Services (Moody’s).

The rating agency in its latest report on Pakistan stated that overall, uncertainty around Pakistan’s ability to quickly negotiate a new International Monetary Fund (IMF) programme after the current one expires in April 2024 remains very high.

Pakistan’s government liquidity and external vulnerability risks will remain very high until there is clarity on a credible longer-term financing plan.

It further stated that on 8 February, Pakistan (Caa3 stable) held its general election, with the vote count concluding on 11 February. The results point to a hung parliament because no party has won enough seats – at least 134 out of the 266 contested seats – to form the majority government.

Moody’s says timely election result to reduce uncertainty in Pakistan: report

While negotiations between parties to form a coalition government are currently under way, prolonged delays will raise political and policy uncertainties at a time when Pakistan faces significant macroeconomic challenges, particularly its very weak external and liquidity position.

According to Pakistan’s Election Commission, independent candidates mostly backed by Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) party won 101 seats. Pakistan Muslim League-Nawaz (PML-N) led by former Prime Minister Nawaz Sharif, was the second with 75 seats. Pakistan Peoples Party (PPP) came in third with 54 seats. Other smaller parties won the rest of the seats.

The inconclusive results exacerbated political tensions amid allegations of vote rigging and tampering by PTI leading to protests in various cities across the country. The results also begin a complex process of parties trying to secure support from other parties in a bid to lead a coalition government.

Prolonged delays in the formation of a government will increase policy and political uncertainty in the country at a time when it faces very challenging macroeconomic conditions.

Pakistan’s foreign exchange reserves remain very low at $8 billion as of 2 February, sufficient to cover only about six weeks of imports and well below what is required to meet its external financing needs for the next three to four years.

Based on the IMF report published in January, Pakistan’s external financing needs are about $22 billion in fiscal 2025 (ending June 2025) and about $25 billion annually in fiscal 2026 and 2027.

The country will need a longer-term financing plan to meet its very large financing needs for the next few years, after its current IMF programme ends in April 2024.

Even if a combination of parties successfully forms a multiparty coalition government, the coalition may not be very united and politically strong.

The new government will face challenges in securing consensus to pursue difficult but necessary reforms, including revenue raising measures, to improve Pakistan’s macroeconomic conditions.

Moreover, there is also uncertainty around the extent of public protests because they may challenge the legitimacy of the new government. Social tensions may increase, which would likely constrain the government’s ability to undertake reforms.

Copyright Business Recorder, 2024

Comments

Comments are closed.

Aslam Tanoli Feb 15, 2024 12:44pm
Can we not arrange fair elections
thumb_up Recommended (0)
KU Feb 15, 2024 12:57pm
This is putting it mildly because Moody's is not aware of the ground realities, yet. Another new normal is in the offing, more on the same lines, but with the blessings of state pillars.
thumb_up Recommended (0)