KARACHI: Pakistan’s long-delayed economic reforms and privatization program may become more challenging in the face of the potential installation of a coalition government, as no political party won a clear majority in Thursday’s general election.
The new administration is expected to choose old solutions that have already been tested in the last 30 to 40 years. In one of the simplest measures, they will raise energy prices instead of implementing politically tough energy reforms. As a result, inflation rates will continue to be high. According to experts, the Pakistani rupee is expected to remain stable against the US dollar and other major currencies in the short term. However, the stock market and Eurobonds may come under pressure amid increased political uncertainty as it is unclear who will form the next government.
Speaking to The Express Tribune, independent analyst Adnan Agar opined that Pakistan Muslim League-Nawaz (PML-N) has an economic team unlike Pakistan Tehreek-e-Insaf (PTI) and Pakistan Peoples Party (PPP).
However, former PML-N Finance Minister Ishaq Dar had a “hostile relationship” with the International Monetary Fund (IMF), he recalled, adding that Dar would continue with its old policy of keeping the rupee-dollar parity in check, flouting the terms of the new loan program .
“Whoever forms the government will look to the IMF to step into the new program after it gets the last tranche of $1.1 billion under the ongoing standby to achieve economic stability and growth and continue paying off the foreign debt without any interruption ,” he said.
Agar stressed the urgent need for Pakistan to adopt tax reforms such as taxation of agriculture and real estate sectors to increase revenue collection and bid farewell to IMF forever. However, he raised the question “how can the elite (in government) tax themselves”.
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Furthermore, they would raise electricity and gas prices to solve the revolving debt problem instead of solving line losses and power theft. They can continue to tax businesses already struggling with high levies instead of going after the rich, said Agar, who is also director of research at AA Gold Commodities.
Chase Securities Research Director Yousuf M Farooq said Pakistan cannot afford more political uncertainty at a crucial time when it needs strong leadership to bring the economy out of crisis.
“Pakistan’s stock market and Eurobonds will remain volatile unless political temperatures cool down by Sunday evening,” he said.
He pointed out that the PPP has supported economic reforms in the past and will continue to do so in the future. However, PPP Chairman Bilawal Bhutto-Zardari, he said, has openly opposed the privatization of state entities, but added that the privatization program can remain on track under the Special Investment Facilitation Council (SIFC) platform.
