THE PTI’s victory in the Punjab by-polls has not only increased political uncertainty by putting a question mark over the fate of the PML-N-led coalition government, it has also deepened economic anxiety, despite the conclusion of a staff-level agreement with the IMF after months of hard negotiations. Markets remain jittery although the government says it has commitments of $4bn in assistance from friendly countries, besides $1.2bn in IMF funds. Share prices are falling and the rupee depreciated rapidly to record lows over the last two days because of the prospect of early elections, which the PTI is demanding. After sweeping the by-polls to regain its majority in the Punjab legislature, party leader Imran Khan has said that the country must get ready for polls as “any other path will only lead to greater political uncertainty and further economic chaos”. International creditors are not expecting stability to return in the foreseeable future. The country has a bond repayment due in December — and markets are watching closely to see if Pakistan can meet its obligations in time. The ongoing political and economic crisis has seen the bond’s yield surge since February, to reach a record 42pc this month after trading below 10pc since it was issued in 2017, Bloomberg reported.

One of the three major global credit rating agencies, Fitch, revised down Pakistan’s outlook from ‘stable’ to ‘negative’ a day after the by-polls, citing several reasons for the move, including adjustment risks, (foreign) financing, political hazards and declining reserves. This development came a day after Moody’s (which had downgraded Pakistan’s outlook to negative last month) termed the expected revival of the IMF package as ‘credit positive’. Both agencies have flagged political risks to the IMF programme implementation. “Renewed political volatility cannot be excluded and could undermine the authorities’ fiscal and external adjustment, as happened in early 2022 and 2018, particularly in the current environment of slowing growth and high inflation,” Fitch said. The political and economic developments of the last two days will have a direct bearing on the welfare of ordinary people trying to cope with multi-year high inflation, increasing job losses and eroding purchasing power. Expecting the economy to stabilise during a time of political uncertainty will be naïve if not outright foolish. It is time for politicians of all hue, especially the PTI, to sit together to build a consensus on political and economic issues critical to the future of this country and its people.

Published in Dawn, July 20th, 2022