February 14, 2024 (MLN): The political uncertainty in Pakistan following the elections, where no political party won an outright majority, is credit negative, according to Moody's, as Bloomberg reported.
"While negotiations between parties to form a coalition government are currently underway, prolonged delays will raise political and policy uncertainties at a time when Pakistan faces significant macroeconomic challenges, particularly its very weak external and liquidity position," analysts including Grace Lim wrote in a note.
The analyst further said that a coalition government may not be very united and politically strong, and it will face challenges in securing consensus to pursue difficult, but necessary reforms, including revenue-raising measures.
There is also uncertainty around the extent of public protests because they may challenge the legitimacy of the new government.
Moreover, social tensions may increase, which would likely constrain the government's ability to undertake reforms.
