Standard & Poor’s Ratings Services said Monday that Pakistan’s parliamentary election results has set the stage for longer-term stability of our ‘B-’ sovereign credit rating on the country.
Partial results from the elections held on May 11 indicate a strong lead for the Pakistan Muslim League-Nawaz (PML-N). The elections were the first in the country’s history in which an elected government handed power to another elected government.
“This is a key achievement for Pakistan’s maturing democracy, in the face of general economic malaise, widespread and incessant sectarian and political violence, large-scale domestic insurgencies, and ongoing tension with neighboring India,” said Standard & Poor’s credit analyst Agost Benard.
In a commentary titled “Successful Elections Are Crucial As Pakistan’s Balance Of Payments Pressures Mount,” published April 4, 2013, we outlined our view that timely, successful, and credible elections were essential for Pakistan to deliver a government with a reasonable chance of tackling the country’s economic imbalances, including a looming balance of payments crisis.
Preliminary election results indicate such an outcome. The elections took place on schedule, without major shortcomings that would result in a disputed outcome, and with a large voter turnout despite intimidation and bombings on election day by extremist elements.
The 60% voter turnout, compared with 44% in the 2008 elections, ensures greater legitimacy for the new government. Moreover, the results suggest that PML-N is likely to have a lead that will enable it to form a coalition without the support of major political rivals or the minor parties.
“We believe the election outcome puts the incoming government in good stead to sew up an IMF deal soon,” Mr. Benard said. This is needed to stabilize external finances and to provide the policy framework for necessary fiscal and energy sector reforms. If successful, these efforts will underpin the continued stability of the sovereign ratings at the current ‘B-’ level.
IMF team to visit Pakistan in June
A team of the International Monetary Fund (IMF) will visit Islamabad in late June to continue the policy discussions with the new government on mitigating economic vulnerabilities in Pakistan. Answering a question at a press conference whether the Fund had offered $5 billion aid to Pakistan and were there any conditions attacked with it, Gerry Rice, IMF Director Communications Department, said that there has been no formal request for a programme from the Pakistani authorities as yet. Rice however admitted that the authorities met with the Fund during the spring meetings a few weeks ago. He said discussions there cantered around the difficult economic challenges facing Pakistan, and our urging of the authorities to begin taking the necessary actions to help stabilize the economy and lay the groundwork for future growth.
