It is now increasingly clear that threats to the prospects of next International Monetary Fund (IMF) programme have become real in view of growing political uncertainty in the country.

That is why perhaps a global rating agency, Fitch, has pointed out that the “close outcome of Pakistan’s election and resulting near-term political uncertainty may complicate the country’s efforts to secure a financing agreement with the IMF”, arguing that a new deal is key to the country’s credit profile which “we assume one will be achieved within a few months, but an extended negotiation or failure to secure it would increase external liquidity stress and raise the probability of default.”

The foregoing clearly suggests that the country is once again moving towards a sovereign default. Pakistan faced a near-identical situation in 2022 following the exit of the then Pakistan Tehreek-e-Insaf (PTI) government through a vote of no-confidence against prime minister Imran Khan. The Pakistan Democratic Movement (PDM) government, which had succeeded the PTI’s, successfully cut a deal with the IMF to what it said help the country avert a sovereign default.

Having said that, I wish to state that the present state of political uncertainty or turmoil in the country is far more profound than what it was in 2022 owing to a variety of reasons. The question is what needs to be done to successfully thwart the threats of a sovereign default.

A simple answer to this question can be offered in just two words: political stability. Achieving even a modicum of political stability at this point in time, however, appears to be a herculean task, to say the least, in view of rising political temperature. Yes, political temperature is rising, but it is rising as rapidly as was feared after the people of this country threw up an unprecedentedly polarized mandate.

Hashim Minhas

Rawalpindi

Copyright Business Recorder, 2024

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