ADNAN AAMIR
Opposition closes in on the government, threatening IMF deal.
Opposition parties in Pakistan's parliament are set to topple the government of Prime Minister Imran Khan, as critics charge his policies are stoking inflation and amount to "selling out Pakistan's sovereignty" to the International Monetary Fund in exchange for loans.
Observers say the development could spark investor outflows and even damage China's Belt and Road Initiative in the country.
The opposition is in the final stages of drafting a "no-confidence" motion against Khan's government, which will be tabled in the National Assembly this week, Nikkei Asia learned from people familiar with the matter.
There are 162 opposition politicians behind the move, which needs 10 more votes for the motion to pass in the assembly of 342 lawmakers. The opposition claims it has secured the support of 24 members of government and can easily topple Khan's administration.Main opposition parties include the Pakistan People's Party (PPP), Pakistan Muslim League Nawaz and JUI-F. Contenders to take over as premier include Bilawal Bhutto Zardari of the PPP and Shehbaz Sharif of the PMLN.On Monday, Bhutto blamed the Khan government for causing inflation and poor stewardship of the economy, as well as its dealings with the IMF.However, Khan remained defiant. "I will fight them until [my last breath]. I will face them and I am completely prepared for whatever [they throw my way]," the prime minister said at a political rally on Sunday.
Analysts fear that toppling the government could further destabilize the economy, which is just emerging from COVID-19 doldrums.
Pakistan's exports between July 2021 and February 2022 have increased 26% to $20.55 billion from the same period the previous year. Fitch Ratings is expecting Pakistan's economy to grow 4.5% this year. The government is hoping to achieve an average growth rate of 5.9% by 2025, based on "China-centric three-year economic growth strategies" that Shaukat Tarin, the country's finance minister, recently mentioned without elaborating.
"The political machinations in Islamabad are and will continue to create near-term uncertainty," said Uzair Younus, director of the Pakistan Initiative at the Atlantic Council, an influential American think tank.
He added that the uncertainty would likely continue for the next 8 to 12 months, given that the next general elections are due before mid-October next year, making it challenging to push through reforms that are politically unpopular.
Government officials said that toppling Khan could lead to an outflow of investments. The country's foreign exchange reserves had risen to $22.88 billion (based on figures from State Bank of Pakistan) from $16.38 billion in fiscal 2018 when Khan assumed power.
"The political instability caused by opposition's efforts to get rid of Khan's government can result in a sharp decline in forex reserves of Pakistan due to capital flight," said a government official not authorized to talk to media.
Analysts said that uncertainty about a new government could make investors nervous about pumping in more money.
"If [investors] have good relations with the current government then they will also be apprehensive about the change and can pull money out," said Ahmed Naeem Salik, a research fellow at the Institute of Strategic Studies Islamabad. He added that if investors pull out, it would be "devastating" for the economy.
Moreover, Pakistan's IMF deal could also become a casualty if the opposition were to succeed. In February, Pakistan received a $1.05 billion tranche from the IMF after a sixth progress review.
Last week, Khan announced a reduction in petrol and diesel prices by 10 Pakistani rupees (5.6 cents) per liter and electricity tariffs by 5 Pakistani rupees per unit until June. These cuts are under the seventh IMF review.
Salik believes that any new government will try to renegotiate fuel prices and electricity prices with IMF. "If these concessions are pulled back, under IMF pressure, then it will have a negative impact on the economy of the country. If concessions are retained, then IMF deal might not survive," he said.
The Atlantic Council's Younus is of the view that given the recent populist decisions made by the Khan government, a new government led by the opposition will have its work cut out, both in terms of reversing recent price cuts and engaging with the IMF. "If oil prices continue to rise, expect Pakistan to initiate negotiations for another IMF program," he added.
Investments worth $50 billion earmarked under the China-Pakistan Economic Corridor (CPEC), part of Beijing's ambitious Belt and Road Initiative, could also be hit.
Krzysztof Iwanek, head of the Asia Research Center at Warsaw's War Studies University, suggested that Khan was central to the development of the CPEC after initial skepticism about his role in it when he first came to power.
"Later, some irritants in relations with Beijing were removed, certain projects within CPEC were modified and priorities were changed to give benefits to other groups, and gradually China-Pakistan relations started to look very cordial again," he explained.
He said that if there was a regime change in Pakistan, priorities within CPEC projects may be reshuffled again to benefit groups connected to the new government.
https://asia.nikkei.com/Politics/Pakistan-PM-Khan-faces-ouster-amid-fears-of-failing-economy
No comments:
Post a Comment