March 24, 2022 (MLN): As time gets closer to convene the no-confidence vote against Prime Minister Imran Khan, the chaos on the political front is aggressively pushing the country towards an economic jam as no clue of settling dust in any direction could be picked by now.  

No-confidence motion- as per Article 54 of the Constitution of Pakistan was requisitioned by the opposition parties to the National Assembly secretariat while claiming PM Khan’s weak governance, and poorly managed economic and foreign policies but this move by opposition parties is not showing any sign of betterment as it has pushed the struggling economy into another dark well of uncertainty.

According to the media reports, Pakistan’s parliament will convene a no-confidence motion on Friday. However, it was supposed to be called by March 22, 2022, as it was signed and submitted on March 8, 2022, by one-fourth of the members of the house, which gives the speaker a maximum of 14 days to summon a session. Over the delay, the opposition parties portray their concerns and claimed that the speaker of the National Assembly has violated the constitution.

On the other hand, PM Imran Khan is confident enough to overthrow the motion as he said in his recent statement, “Despite the opposition laying out all of their cards, the no-confidence motion would not be successful.”

“I will play till the last ball and I will surprise them a day before,” he added.

This political tussle between Premiere and opposition is being reflected in macroeconomic instability particularly the investors in the capital market are taking a cautious stance- showing fear of political turmoil as the KSE-100 index witnessed multiple sessions of losing more than 1,000 points since March 8.

The story is not different for the local currency as it is facing the same brunt of political upheaval. By now, the Pakistani rupee (PKR) has crossed the phycological level of 180 per US dollar within no time and at the time of writing it stood at PKR181.73 per USD in the interbank market.

Meanwhile, the economists and capital market experts are of the view that the political dust needs to be settled at the earliest to unjam the economy which has been sidelined during this political show.

Fahad Rauf, Head of Research at Ismail Iqbal Securities told Mettis Global, “The rise in political noise has increased concerns among the investors, which is evident from the performance of forex and Stock market. In addition, the continuity of the IMF program might also be impacted by the political uncertainty and populist measures, which could further pose risks to currency and the market.

He went on to say that irrespective of the result of the No-confidence motion, populist measures like PM’s relief package are likely to continue, which would have a bearing on the economic reform path.

These measures would control inflationary pressures in the short term but would require harsh corrective actions, later on, he added.

While speaking to Mettis, Ahsan Mehanti, Director Arif Habib Group said, “the submission of No-confidence motion has shattered the confidence of local and foreign investors in Pakistan’s economy.”

Voting should be soonest and with no political confrontation to reduce possible economic impact, he emphasized.

Given the current political environment in the country – there is too much uncertainty as to where will this dust settle. However, we are of the view that as the uncertainty around politics will soon fade away which will help the capital market to regain momentum, Arvind Anand, Head of Research at Fortune Securities noted.

“All in all, the real concern is allies, if they tilted towards the opposition, the present government will be in a difficult state,” Shayan Jan, Equity Trader at Intermarket Securities said.

“This latest episode of political unrest is aimed at crippling the economy at a time when the economy has shown rapid recovery from the COVID pandemic shock, termed by the IMF as the worst global economic crisis since the Great Depression of the 1930s,” the statement issued by Finance Division said.

The present government is hopeful that Prime Minister Imran Khan will not only defeat the no-confidence vote but will also lead Pakistan into a decade of high growth and prosperity built on his vision of a social welfare state. On the other hand, it seems that the game is in the hands of allies, if they support the opposition, the government would lose. 

If we look into history, the no-confidence motion was requisitioned against Prime Minister Benazir Bhutto in 1989 and Prime Minister Shaukat Aziz in 2006 but both of the times, the majority of the votes were in favour of premiers which helped them to retain the same position.

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