Pakistan risks macro economic instability due to the “heightened” political uncertainty and “strife” among government branches after Nawaz Sharif’s ouster as prime minister, an international rating agency has warned. The New York-based Moody’s has expressed fears that Sharif’s disqualification may impact continuity of policies and adversely hit its rating, according to the Dawn newspaper. “If heightened political uncertainty and strife among the various branches of government disrupt the administration’s economic and fiscal agenda, macroeconomic stability and the government’s access to external finance could be impaired, weighing on Pakistan’s credit profile,” it quoted the agency as saying yesterday.The Supreme Court’s ruling ousting Sharif in the Panama Papers scandal included an instruction to the National Accountability Bureau to initiate further investigations in the corruption case. “High domestic political risk [is] embedded in Pakistan’s credit profile,” Moody’s said.
It explained that the probability of political events that could affect Pakistan’s sovereign credit profile was high and such events would have a large impact on policymaking and thereby on the economy and the government’s access to finance. Sharif was disqualified by the Supreme Court on Friday from continuing in his office for dishonesty. The 67-year-old veteran politician resigned from his position that evening. “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, the rating agency said that some political continuity would be maintained in the near term as Sharif had announced that his brother Shahbaz would replace him as Pakistan’s prime minister. In the meantime, Shahid Khaqan Abbasi will serve as the premier. He was elected by the National Assembly yesterday.