ISLAMABAD: Global credit rating agency Fitch has predicted the possibility of a technocrat setup in Pakistan in case the Pakistan Muslim League-Nawaz (PML-N) government is ousted. In its report on Pakistan, the rating agency predicted that the PML-N led coalition government will remain in power for the next 18 months with no immediate plans for fresh elections.
The incumbent government will continue to implement the reforms mandated by the International Monetary Fund (IMF) that will enable the economy to grow. However, Fitch mentioned that the political upheaval might affect the economic activities in Pakistan along with the impacts of climate change including floods and drought.
According to the rating agency, former prime minister Imran Khan is unlikely to get released from jail in the foreseeable future despite getting relief in a number of cases. The agency went on to predict that the next general elections in Pakistan will be held in 2029.
On the economic front, Pakistan’s current account deficit is projected to remain 1% in FY2024/25. The Fitch report suggested that the State Bank of Pakistan (SBP) might reduce its key policy rate from 22% to 16% in 2024.
A day earlier, Moody’s said that Pakistan’s recent staff-level agreement with the International Monetary Fund (IMF) will improve funding prospects for the cash-strapped South Asian nation.
The Shehbaz Sharif-led government and the IMF reached a three-year, $7 billion aid package deal on Saturday, providing much-needed respite to the nation. This agreement marks a critical step towards stabilizing Pakistan’s economy, which has been under severe strain.
Moody’s commented that the new IMF programme would enhance Pakistan’s (Caa3 stable) funding prospects. However, Moody’s cautioned that the government’s ability to sustain reform implementation is crucial for Pakistan to continually unlock financing throughout the IMF programme’s duration, thereby easing government liquidity risks durably.
Moody’s also acknowledged potential challenges, noting that social tensions arising from the high cost of living could impede reform implementation, especially with higher taxes and future adjustments to energy tariffs. “Moreover, risks that the coalition government may not have a sufficiently strong electoral mandate to continually implement difficult reforms remain,” the agency added.
Incarcerated PTI leader Imran Khan “will remain imprisoned for the foreseeable future” despite his successful legal appeals in April and June, Business Monitor International (BMI), an arm of the Fitch credit ratings agency, has said in its latest country risk report for Pakistan.
Imran’s sentence in the Toshakhana reference was suspended on April 1 while he was acquitted by the Islamabad High Court (IHC) in the cipher case in June. Various courts have also acquitted him in several other cases filed against him since the events of May 9, 2023 — the day when his first arrest had caused riots across the country, following which the state launched a crackdown against him and his party.
An Islamabad district and sessions court had also recently accepted the appeals filed by Imran and his spouse against their conviction in the Iddat case.
Shortly after the court acquitted him in the Iddat case, however, the National Accountability Bureau (NAB) re-arrested Imran and his spouse in a new Toshakhana case, leaving his possible release from prison hanging in the balance.
“Although opposition leader Imran Khan has recently won several recent legal appeals, we expect that he will remain in prison over the foreseeable future,” the agency said in its country risk report. The report added that analysts were “surprised when judges — who were expected to side with the government — quashed two of the legal cases against Khan”.
The agency elaborated that “even in the unlikely event that Pakistan’s usually government-friendly judicial system overturned all of the over 100 charges against Khan, we expect that the government would bring a new case against him rather than allow the popular opposition leader to go free”.
Regarding the International Monetary Fund’s (IMF) programme, the firm said that it expected the Shehbaz Sharif-led coalition government to “remain in power over the coming 18 months and will succeed in pushing through with IMF-mandated fiscal reforms”.
BMI stated two key reasons why it expected the alliance to endure over the medium term; the powers that be throwing their “support behind the PML(N)-led government” and Imran’s supporters not being able to organise a large-scale protest movement.
The company also wrote that the government “is only likely to collapse in the event of a sharp increase in violence or a painful economic crisis prompting a widespread protest movement”.
It, however, predicted that fresh elections were unlikely to happen.
“Another election would raise the prospect that Khan’s allies would gain a parliamentary majority,” the report said.
On economic reforms, it predicted that Pakistan’s real GDP growth will average 3.5 per cent over the next decade. However, it cautioned that falling agricultural production, currency weakness, and political instability “that caused growth to stall in 2022/23 could easily reoccur”.
Moreover, it expected political risk to “remain elevated, which will put pressure on the rupee”.
Citing local sources, the agency said that the jailed leader “remained the country’s most popular politician” which will make it “difficult for the government to push through painful fiscal reforms and makes protests likely”.
“The economic recovery is fragile and another shock would quickly push up the cost of servicing Pakistan’s large government debt burden,” it said.