Nawaz Sharif’s disqualification as the Prime Minister of Pakistan could pose risks to continuity of policies and impact adversely on its rating, New York-based credit rating agency Moody’s has said.
“If heightened political uncertainty and strife among the various branches of government disrupt the administration’s economic and fiscal agenda, macro-economic stability and the government’s access to external finance could be impaired, weighing on Pakistan’s credit profile,” the agency suggested on Tuesday.
Investigations into the financial affairs of Sharif and his family followed the 2015 publication of the Panama Papers, which disclosed his children’s vast and previously unreported wealth, Dawn online reported.
“High domestic political risk (is) embedded in Pakistan’s credit profile,” said Moody’s.
The agency explained the probability of political events that could affect sovereign credit profile was high and such events would have an impact on policymaking and thereby on the economy and the government’s access to finance.
The South Asian nation’s politics has long been “characterised” by coups and strife between the executive, judiciary and military. The persistence of heightened political risk has weakened government effectiveness and its control over corruption, it maintained.
Following the country’s first democratic transfer of power in 2013, when the Pakistan Muslim League-Nawaz (PML-N) secured absolute majority, it appeared that Sharif might become the first premier in the history of the country to complete a full five-year term.
“His ouster now could trigger another period of political instability, undermining Pakistan’s ability to address pressing domestic economic challenges, bolster investor confidence and attract external financial support from official creditors and donors,” Moody’s said.
Talking about uncertainty regarding policy continuity beyond Sharif’s immediate succession, it said political continuity would be maintained in the near term as the former Prime Minister had announced his brother Shahbaz Sharif as his successor and standard bearer of the PML-N.
Prior to becoming Prime Minister, he must step down as Punjab Chief Minister and get elected to the parliament on the seat vacated by his brother. Shahid Khaqan Abbasi will serve as the Prime Minister till then.
Given the PML-N’s support in Punjab and Shahbaz’s popularity, his victory in the by-election appears highly likely.
However, with the next election due by August 2018, the change in PML-N leadership and the ongoing investigation could disrupt the policymaking process and economic reforms.
Nawaz Sharif oversaw a major expansion of Pakistan’s economic relationship with China through the China-Pakistan Economic Corridor (CPEC) project.
“However, security-related issues and Pakistan’s weak track record of public project implementation suggest the pace of execution will be relatively slow.
“Continued support for the CPEC project across all branches of government will be critical to its success and full implementation,” said Moody’s.For all the latest World News, download NewsX App