KARACHI: Pakistan’s political crisis has intensified alongside the economic challenges, as the Supreme Court’s polarized judiciary is divided on several matters. This has further damaged investors’ confidence that was already shaken due to fears of default on foreign loans, as uncertainty hovers over the election schedule.
While national elections are due by October 2023 according to the constitution, the dissolution of two Provincial Assemblies ahead of schedule and judicial orders to hold early elections have made the situation untenable. A poll conducted by Topline indicates that 60-70% of respondents believe that the elections will be held before October or in October 2023, while 20-30% think it will be delayed.
If the national elections are held in 2023, there is a high probability that Prime Minister Imran Khan’s PTI party may win the most seats in the National Assembly, unless Khan is disqualified due to under trial cases against him or his party breaks up.
Another scenario that has been discussed is that the present coalition government (PDM) might extend its office term beyond October 2023, invoking Article 232 of the constitution under the garb of ‘emergency’ due to security concerns or financial crisis. If the government takes such measures, the opposition may challenge the matter in the court of law, further lingering the crisis.
Another option could be military rule, although the chances of direct military rule are slim, according to Topline’s poll.
Efforts at dialogue between political parties have begun to sort out the elections-related matter. An out-of-court settlement through dialogue can cool political heat and lead to a decision regarding the elections for the national and provincial assemblies.
The uncertain political situation is expected to continue reflecting on the market, economy, and currency. However, once the current political battles are settled, the focus will shift to the economy. The crucial factor or Achilles heel of Pakistan’s current debt is the short-term rollovers that have increased by 9 times to over US$12 billion since 2015.
External debt restructuring is the litmus test, the mode of restructuring, and how orderly or disorderly it is done will determine Pakistan’s economic vulnerabilities. Pakistan’s new government should ideally try to convert its short-term external loans with long-term with the help of friendly countries like China, Saudi Arabia, UAE, etc. If that is not doable, then Pakistan should try the G-20 common framework of debt restructuring, which is less painful and will help in economic recovery.