KARACHI, Nov 23: Pakistan’s spiral into emergency rule after months of political upheaval has cast doubt over how fast policies are being implemented and deterred investors from committing long-term funds into its fast-growing economy.

“From March to today, most of the country has been bogged down in the judicial crisis and then the political crisis,” said Majyd Aziz, former president of the Karachi Chamber of Commerce and Industry (KCCI).

“It impacted very negatively on policies that were imperative,” Aziz said.

But independent economist Asad Saeed said the political woes and growing threat of militancy had raised questions about the sustainability of not only the economy but the state itself.

While speculative short-term investment in stocks, real estate and commodities was largely unaffected, the government’s action against the judiciary boded ill for attracting quality investment from people who expected some level of rule of law and a transparent forum for resolving disputes, he said.

While there were no figures, he said he had anecdotal evidence that investment was being hit.

“I know people in the pharmaceutical sector who have frozen their investment decisions. Others in the hotel sector have started going slow. That sort of thing is happening.”

Sakib Sherani, chief economist at ABN Amro, said political uncertainty slowed economic activity.

“I think that’s certainly the case here ... Investment decisions get put on hold and generally people are waiting to see how this plays out,” he said.

Musharraf has promised to become a civilian president and parliamentary elections are set for Jan. 8.

But more instability looms, with the prospect of two former prime ministers, Benazir Bhutto and Nawaz Sharif, slugging it out with Musharraf for control.

“This is not an environment conducive for the kind of investments that were in the pipeline, projects that banks were discussing just a few months ago,” Sherani said.

It was also becoming difficult to access capital in the international markets or from export credit agencies. Political risk insurance had gone up, he said.

“It’s a question of actually gaining access to specialised capital ... It’s certainly become very problematic since November 3.” The government has put off a plan to sell part of its stake in National Bank of Pakistan through global depositary receipts (GDRs) because of the political uncertainty but aims to go to the market by March.

Moody’s Investors Service and Standard and Poor’s downgraded Pakistan’s debt outlook to negative from stable because of the emergency.

There was a net foreign portfolio outflow of $192.96 million in the first 18 days of November, according to the central bank, while the rupee hit a three-year low last week.

But the stock market, hurt by the emergency, is now only 2.7 per cent down since then and is still up 34.9 per cent this year.

Sherani forecast economic growth in the fiscal year to next June of 6-6.5 per cent, lower than a government forecast of 7.2 per cent, but that was partly because it was an election year.

“That itself is disruptive for momentum, both at the business level, but equally important at the policy level,” he said.

—Reuters