Punjab’s economic and political importance is unparalleled
for any party looking to form a government in the center. The province has a
population of about 110 million, making up 52% of the country’s populace.
In the FY23 budget, Punjab had budgeted a surplus of PKR125
billion, and federal allocations of PKR1.7 trillion were envisaged for the
province (50% of the divisible pool). Any alterations to the budgeted
provincial surplus, though unlikely, can result in trouble for future tranches
from the IMF.
PTI Chairman, Imran Khan, has repeatedly asked for fair and
free elections ever since his ouster in April this year. Following the recent
events, PML-N Chief, Nawaz Sharif, also stated that he was in favor of holding
early general elections as delaying the same would be disadvantageous to the
country.
With Punjab firmly under the PTI coalition and its nominee
Pervaiz Elahi at the helm of the provincial government, PTI is now expected to
make a move towards the National Assembly and make its government in the
center.
The political crisis in the country which started after the
dismissal of Imran Khan from his office has seen Pak Rupee depreciate by 27%
against the Greenback.
The current political uncertainty comes at a time when the
country is already struggling with soaring current account deficit and colossal
foreign debt repayments which in confluence with the political uncertainty had
put serious pressure on the currency.
The current political and economic uncertainty has resulted
in markets starting to price in default risk, resultantly the yields on
Eurobonds/Sukuks have reached all-time high, with the December 2022 maturity
instrument yields soaring to 45.6%.
At the same time, the PKR depreciation has continued
unabated, despite Pakistan having reached an SLA, where concerns over filling a
US$4 billion funding gap identified by the IMF remain.
Analysts expect the IMF program to resume soon irrespective
of political developments, toning down the uncertainties surrounding Pakistan’s
external vulnerability.
However, domestic issues (elections, inflation, interest
rates) are likely keep Pakistan’s equities market under pressure.
