Pakistan Elections 2024: Likely Outcomes

According to a report by Pakistan’s leading brokerage house, Topline Securities, after a lot of uncertainties, Pakistan Elections are all set for February 8, 2024, to elect representatives for the National and Provincial Assemblies for the next five years.

Many political analysts a few weeks back were not sure about timely elections due to legal, operational, and weather-related issues. Now it seems that all these issues have been settled, and the process is likely to be completed on time.

According to detailed strategy note titled 'Stock Market Recovery Has Just Begun; Index Likely to Reach 75,000 in 2024,' dated November 18, 2023, mentioned that things are now looking stable, and elections are likely to happen on February 8, 2024, contrary to earlier fears that elections may be delayed for a few years.

A smooth transfer of power to an elected government will help overcome concerns of bilateral and multilateral lenders, including the IMF, at a time when Pakistan is facing a severe external debt repayment challenge.

IMF in its country report in July 2023, stated that the new Stand By Agreement (SBA), can play a crucial role in anchoring policies ahead of the national elections due in the fall and until a new government is formed. IMF team also met with leaders of major political parties in Pakistan to get assurances of support for key objectives ahead of final approval of US$3 billion SBA in July 2023 crucial to save the country from default.

With only two weeks left for the Elections, political activities and election campaign is not what it used to be. This could be due to lack of interest by political parties or may be due to lesser competition in most of the constituencies after PTI did not get the “Bat” symbol.

Looking at the manifestos and promises of major parties, it seems no one is addressing the key economic challenges faced by Pakistan. Most of the parties are focusing more on the popular measures to gain public confidence amid record high inflation.

Comparing the performance of three large political parties in their last tenure, PML-N and PTI have performed relatively well on key economic indicators as against PPP. This has also being endorsed by a recent news analysis by Bloomberg whereas per Misery Index, PML-N (score 14.5%) has better record on managing the economy followed by PTI (score 16.1%) and then PPP (score 17.2%).

Considering the recent developments, the question investors are interested in is not who will win the elections but whether the new government will get a majority or if it will be a weak coalition government. As reported by leading political experts, it looks like PML-N will form a new coalition government. This is also supported by few recent surveys.

The brokerage house believes that in case one party gets 50% plus seats, that will definitely boost investors' confidence and markets will react positively. This will also give a positive signal to the IMF and other lenders. On the contrary, a coalition government with support of smaller parties will remain fragile and may struggle to implement the much-needed economic reforms.

Another key area to look for is how the new government will manage economic challenges, especially to deal with the IMF for a long-term program. Considering the not-so-pleasant experience with the PML-N nominated Finance Minister in the last opposition-led government of PDM, investors are eager to see the finance team of the new government.

The new government and its Finance Minister can play a significant role in negotiating with friendly countries for debt rollover/debt re profiling and finalizing a new IMF program that requires a lot of painful reforms.

Furthermore, it will be interesting to evaluate the new government's relationship with the establishment. Pakistan has a poor history of worsening civil-military relationships that have badly affected the political continuity, with negative implications for the economy and the markets.

Pakistan Stock market recovery is likely to continue in the year 2024. The brokerage house expects benchmark KSE-100 total return index to reach 75,000 by December 2024. However this is based on current low PE multiples without assuming any re rating amid high risk of debt sustainability. Investors may also see a post election rally in line with historical trend.

Smooth transfer of power to new government after elections, new long term funding program from IMF and expected fall in Interest rate will be the key drivers of equity market in 2024.

In spite of recent rally, Pakistan market is currently trading at PE of 3.7x based on 2024 estimated earnings. This is far lower than last 5 year and 10 year average PE of 6x and 8x respectively. This is even lower than countries that have defaulted on external debt. 

The brokerage house prefers high quality private sector companies with strong cash flows. In cyclical sectors it prefers Cement and Steel due to expected decline in policy rate and better volumetric sales. It also likes Banks due to unmatched valuation.

Its 2024 top picks include Meezan Bank (MEBL), United Bank (UBL), MCB Bank (MCB), Mari Petroleum (MARI), Lucky Cement (LUCK), Maple Leaf Cement (MLCF), Fauji Cement (FCCL), Engro Corporation (ENGRO), Pak Elektron (PAEL), Indus Motors (INDU) and Interloop (ILP).

On the other hand some mid and small caps have the potential to provide above average gains that includes Pakistan Aluminium Beverage Cans (PABC), Mughal Iron & Steel (MUGHAL), Image Pakistan (IMAGE), Tariq Glass (TGL), Century Paper & Board (CEPB), Panther Tyre (PTL), and Murree Brewery (MUREB).

 

Bangladesh Elections: Battle of Begums

For the last three decades, the politics of Bangladesh have been the story of the two biggest political parties – Awami League and Bangladesh Nationalist Party – both headed by begums.

Prime Minister Sheikh Hasina leads the Awami League, a party founded by her father and Bangladesh’s first president Sheikh Mujibur Rahman. The Bangladesh Nationalist Party (BNP) is headed by Khaleda Zia, the country’s first woman prime minister.

The electoral politics in Bangladesh since 1991 has mostly been a Hasina versus Zia story. The two have served as the prime minister, in phases, since the last two decades.

Just ahead of the 2018 polls, Khaleda Zia was convicted in corruption cases and barred from contesting elections. The BNP, which contested the election after forming an alliance, won just seven seats, while the Awami League won 302 of the 350 seats.

Khaleda Zia, who was sentenced to 17 years in prison in 2018, was released from jail in 2020 and is under house arrest. The Bangladesh government hasn’t allowed her to fly out for medical treatment despite claims that she was at high risk of death.

The elections of 2014 and 2018 have been called out by opposition parties and the western media for not being free and fair. The same aspersions are being cast this time too.

“The January 2024 election in Bangladesh is going to take place without any credible opposition and with the predictable outcome that Sheikh Hasina will win for the fourth consecutive term and the Awami League will form the government. Top leaders of the major opposition BNP are in jail and hundreds and thousands of their activists are in prison,” Mubashar Hasan, an author and expert on Bangladesh politics, tells IndiaToday.In.

“The BNP is set to boycott the election as it is demanding an election under a neutral caretaker government. However, Hasina dismissed that demand, and she is going to organize an election under her administration. Against this backdrop, the next election will push Bangladesh firmly into an authoritarian trajectory,” says Hasan, a post-doctoral research fellow at the University of Oslo, Norway.

The BNP is demanding that Sheikh Hasina step down and a caretaker government be installed for the general election to be a free and fair exercise. It has taken to the streets and Bangladesh has seen large-scale violent protests in recent weeks.

Some 10,000 people, mostly opposition activists, have been arrested since October 28. Thousands of grassroots leaders have fled to remote corners of the country to avoid arrest.

Mubashar Hasan says millions of people who support the BNP are feeling disenchanted and deprived of their political rights. “There is a real worry that radical Islamist and militant Islamist outfits could manipulate such mindsets to recruit would-be jihadists,” says the Bangladesh expert.

Pakistan polls likely to be delayed

According to Saudi Gazette, Pakistan's parliament has been formally dissolved, but polls to be held within 90 days may be delayed. The electoral commission says electoral boundaries must be redrawn to reflect fresh census data, a months-long process.

Last week, former Prime Minister Imran Khan was arrested and sent to jail, and then barred from politics for five years. He had openly challenged the powerful military establishment and claimed it was petrified of elections.

With President Arif Alvi's order on Wednesday to dissolve the National Assembly, a caretaker government will take charge. Outgoing Prime Minister Shehbaz Sharif and his government have been given three days to name an interim leader.

According to an Election Commission of Pakistan official, "The elections will be held once the census is done, which will take about four months' time. As a result, the elections may be delayed till next year."

Sharif, who warned that the country cannot progress without national unity, also told reporters recently that polls may not be held this year.

Some feel the election is being delayed as the ruling Pakistan Muslim League Nawaz (PML-N) coalition isn't confident about winning at the polls, due to Khan's enduring popularity, as well as the effects of runaway inflation despite a bailout from the International Monetary Fund.

Despite their once close relationship, Khan has rattled the military like no other politician before him. Senior analyst Rasool Bakhsh Raees even reckons that the former cricket star's detention will increase his popularity.

In May, Khan's arrest on corruption charges sparked nationwide protests that saw at least eight deaths and some 1,400 arrests, amid unprecedented attacks on military property and buildings.

The 70-year old, who is appealing his conviction on graft charges, has claimed that the military's goal was to "eventually put me into prison and to crush my party."

But the rule remains the same: anyone who challenges Pakistan's military, even someone with the charisma and international stature of Khan, must go. The former cricket star is simply the latest politician since the 1970s to find this out the hard way.

Former senator Afrasiab Khattak said, “There are two systems of government operating in parallel. Now, the unsanctioned, de facto force wants to take over the parliamentary process.”

"Pakistan's military has always been powerful, but they want more powers so that their unsanctioned rule is not challenged either by politicians, activists, or journalists."

Two draconian laws were tabled in the National Assembly last week, in a bid to further enhance the powers of the military and intelligence agencies.

Proposed amendments to the century-old Official Secrets Act will broadly empower the Inter-Services Intelligence (ISI) and Intelligence Bureau (IB) to arrest citizens over "suspected breach of official secrets". In addition, a new bill recommends a three-year jail term for anyone who discloses the identity of an intelligence official.

The amendments provoked a ruckus in parliament, with both the opposition Pakistan Tehreek-e-Insaf (PTI) and PML-N's coalition partners calling the government out for passing draconian laws in haste and without discussion.

Senator Mushtaq Ahmed of Jamaat-e-Islami also warned that the Official Secrets Act amendment will grant intelligence agencies extraordinary powers of arrest and search without warrant. This will have an impact on the human rights, individual rights and press freedom across the country.

The Pakistani intelligence services are regularly accused of illegally detaining opposition members, politicians, activists and journalists, with human rights organizations noting the increasing number of enforced disappearances every month.

In the month of July alone, 157 more cases of enforced disappearances were reported, according to the government-led Commission of Inquiry on Enforced Disappearances.

The bills have been sent to President Alvi, a co-founder of the PTI, and must be signed by him before they can be legislated into law. 

Pakistan: Growing uncertainty about election

The developments on the weekend have introduced an element of uncertainty by bringing up the prospects of a delay in national elections.

It is believed that Pakistan may find it easier to comply with the ongoing IMF program under a caretaker setup, which is a plus. However, inordinate delays in holding elections may risk timely entry into a successor program which would be a key dampener.

Prime Minister Shehbaz Sharif has proposed to dissolve the National Assembly on August 9, 2023 three days before the government’s term will end. The timing is important as early dissolution allows for elections to be held within ninety days, instead of sixty days if assemblies complete their tenure. The members of the coming caretaker government have yet to be announced.

It has also been decided that elections will be held as per the new census which concluded earlier in the year (Pakistan’s population is now 241.49 million).

The initial reaction by the law minister as well as the Election Commission points towards a potential delay in elections, perhaps by a few months, subject to how quickly new constituency boundaries can be drawn up under the 2023 census. This brings up the prospects of an extended caretaker setup, as continues to be the case in Punjab and Khyber Pakhtunkhwa provinces.

The weekend developments include Imran Khan’s arrest following a lower court ruling in a graft case. Unlike in May, when Khan’s arrest was followed by public uproar, there has barely been any protest this time around.

Although, the ruling is likely to be challenged in higher courts, and may well be overturned, the writing is on the wall - Imran Khan is unlikely to be allowed to participate in elections whenever they do take place, with the next government likely to be led by either the PML-N or the PPP. 

The developments on the weekend have introduced an element of uncertainty by bringing up the prospects of a delay in national elections.

It is believed that Pakistan may find it easier to comply with the ongoing IMF program under a caretaker setup, which is a plus. However, inordinate delays in holding elections may risk timely entry into a successor program which would be a key dampener.

Prime Minister Shehbaz Sharif has proposed to dissolve the National Assembly on August 9, 2023 three days before the government’s term will end. The timing is important as early dissolution allows for elections to be held within ninety days, instead of sixty days if assemblies complete their tenure. The members of the coming caretaker government have yet to be announced.

It has also been decided that elections will be held as per the new census which concluded earlier in the year (Pakistan’s population is now 241.49 million).

The initial reaction by the law minister as well as the Election Commission points towards a potential delay in elections, perhaps by a few months, subject to how quickly new constituency boundaries can be drawn up under the 2023 census. This brings up the prospects of an extended caretaker setup, as continues to be the case in Punjab and Khyber Pakhtunkhwa provinces.

The weekend developments include Imran Khan’s arrest following a lower court ruling in a graft case. Unlike in May, when Khan’s arrest was followed by public uproar, there has barely been any protest this time around.

Although, the ruling is likely to be challenged in higher courts, and may well be overturned, the writing is on the wall - Imran Khan is unlikely to be allowed to participate in elections whenever they do take place, with the next government likely to be led by either the PML-N or the PPP.