Pakistan: US agency expresses concern over uncertainties surrounding upcoming general elections
Dec 14, 2023
Islamabad [Pakistan], December 14 : The US-based global rating agency Fitch expressed concern over the uncertainities surrounding the upcoming elections and the potential for ensuring political volatility, which could impact the implementation of structural reforms and pose economic challenges, Dawn News reported on Thursday.
It reported that the agency maintained Pakistan's long-term foreign currency issuer default rating at 'CCC' and noted that it expects general elections to take place as scheduled and produce a coalition government "along the lines of Shehbaz Sharif's government".
The agency has not changed its rating because of last month's IMF staff-level agreement on the first review of Pakistan's nine-month standby arrangement (SBA).
"We expect elections to take place as scheduled in February and a follow-up IMF programme to be negotiated quickly after the SBA finishes in March 2024, but there is still the risk of delays and uncertainty around Pakistan's ability to do this," Fitch said in a statement, adding that the "elections could endanger the durability of recent reforms and leave room for renewed political volatility", Dawn News reported.
It expected IMF's board approval of the recent staff-level agreement to be "unproblematic" and noted that the successful programme review reflected continued fiscal consolidation, energy price reforms in the face of a public backlash and moves towards a more market-determined exchange rate regime.
Noting risks to policy implementation, the rating agency said parties across Pakistan's political spectrum had an extensive record of failing to implement or reversing reforms agreed with the IMF.
"We see a risk that the current consensus within Pakistan on the measures necessary to ensure continued funding could dissipate quickly once economic and external conditions improve, although Pakistan now has fewer financing options than in the past," it said, Dawn News reported.
Therefore, any follow-up IMF programme would likely require Pakistan to "undertake sweeping structural reforms in opposition to entrenched vested interests".
Dawn News reported that Fitch expected general elections to take place as scheduled in February and to produce a coalition government "along the lines of Shehbaz Sharif's government".
