Moody’s Investors Services (Moody’s) highlights heightened political uncertainty in Pakistan post-inconclusive election results. The delay in government formation is deemed a risk, particularly amidst challenging macroeconomic conditions.
The rating agency’s latest report underscores Pakistan’s struggle to swiftly negotiate a new IMF program post-April 2024. Until a credible longer-term financing plan is established, the country’s liquidity and external vulnerability risks remain significant.
Following the general election on February 8th, where no party secured a majority, negotiations for a coalition government are ongoing. However, prolonged delays exacerbate political and policy uncertainties, amid Pakistan’s economic challenges.
Independent candidates, mostly backed by Imran Khan’s PTI, won 101 seats, with PML-N and PPP securing 75 and 54 seats, respectively. Allegations of vote rigging by PTI fueled protests nationwide, further complicating the government formation process.
With foreign exchange reserves at a precarious $8 billion, Pakistan faces immense financing needs in the coming years. Despite potential coalition formations, unity and political strength remain uncertain, hindering necessary reforms.
Additionally, public protests pose a legitimacy challenge to the new government, potentially impeding reform efforts.
