By Usman Ahmed
ISLAMABAD: The emergence of Pakistan Muslim League – Nawaz (PML-N) as Pakistan’s powerful ruling party is being hailed by the business community, international agencies and stock markets as KSE-100 index has hit the 20,600 level for the first time in history.
The benchmark index of top 100 shares listed on the KSE has surged to 20,647 points. The market has risen approximately 22 per cent this year so far.
Business Community
Senior economic experts and leading brokerage houses said they were expecting a hung parliament and thus a weaker and unstablegovernment to come into power as a result of the elections.
The election results defied analysts’ predictions of a weak parliament as the PML-N looked able to form a government without the help of its traditional rival the Pakistan Peoples’ Party and new challenger Imran Khan’s Pakistan Tehreek-i-Insaaf.
Investors are hopeful of an economic revival under Sharif, whose pro-business policies earned him a good reputation among traders and industrialists during his two previous tenures in the 1990s.
He liberalised the economy by launching a privatisation programme and liberalised the financial sector allowing foreign investors to step into Pakistani capital markets,” Sohail said.
Mooday’s, Standard & Poor’s
International rating agencies Mooday’s and Standard & Poor’s have also expressed satisfaction over the victory of PML-N in general elections.
(Nawaz Sharif’s) PML-N’s near majority should provide it with sufficient political room to shape its own agenda. However, the new government will inherit the effects of overall policy inertia,” Moody’s said in a research report.
The agency further said “the previous civilian government which served out its full term had been unable to come to grips with these same challenges.”
From a credit perspective, stable relations with the US would be key and any material flare-up in relations with neighbouring India could also have implications for Pakistan’s credit fundamentals, it said.
Stable relations with the US would be key as they would support the continued disbursal of Coalition Support Funds, which were suspended briefly in 2012…. And finally, any material flare-up in relations with neighbouring India could also have implications for Pakistan’s credit fundamentals,” Moody’s said.
Securing external support and reform progress will be central for bolstering Pakistan’s credit profile, Moody’s said and added that managing political risks will also be important.
While the likely victory margin for the Nawaz Sharif-led Pakistan Muslim League (Nawaz) or PML-N provides a seemingly strong mandate for governance, the in-coming government faces a number of key credit challenges that will be difficult to manage regardless of which coalition partner, if any, is required to achieve a Parliamentary majority,” Moody’s noted.
Standard & Poor’s Ratings Services noted that the elections were a positive for the nation and would help the country’s chances of getting international funding.
We believe the election outcome puts the incoming government in good stead to sew up an IMF (International Monetary Fund) deal soon,” Standard & Poor’s credit analyst Agost Benard said in a press release.
“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,” Benard said.
PML-N’s economic manifesto
If we analyze the economic manifesto of PML-N, the party has a correct realization of the problems that Pakistan faces — high and unsustainable fiscal and Balance of Payments (BoP) deficits; high and rapidly increasing burdens of domestic and external debts, which have resulted in large debt servicing; poorly performing public sector enterprises; no controls on non-development public sector expenditure; declining government outlays in such critical areas as education, health and skill development; very serious energy shortages; and very little investment in improving the economy’s technological base.
Among the promises it has made are major improvements in all these areas. The manifesto is strong on the need for improving the physical and human resource base of the country. It promises that the state will work closely with the private sector to build roads, bridges, ports and (presumably) improve the railway system.
It also promises to increase the amount of electric power that is generated, especially by using the country’s enormous coal reserves — Thar coal, we are told, has 175 billion tonnes of reserves, enough to generate 100,000 MW of power for a hundred years. Exploiting this, along with renewable sources of energy will help to close the inequality of access that currently exists.
The manifesto indicates that power shortage is causing a loss of $5 billion a year to the economy and a loss of a million jobs. This has also reduced export earnings by $2.5 billion. As much as 40 per cent of the population does not have access to electricity.
Recognising that the provinces under the Eighteenth Amendment now have a lot of authority in economic matters, the party makes two interesting proposals. It will set up a wholesale market for energy, presumably one in which the energy-surplus provinces could sell to those who are in deficit.
It will also tackle the shortage of public funds for the building of needed infrastructure by allowing cities to raise capital from the market. Credit-worthy cities could sell infrastructure bonds to raise the amount needed for specific projects, according to party manifesto details published in a leading daily the Express Tribune.
Ties with India
The Lahore Agreement which was agreed upon by Nawaz Sharif and Atal Behari Vajpyee had given a new dimension to Pakistan-India ties. The process stalled due to Kargil misadventure but it was restarted in 2002 by the military ruler Pervez Musharraf but it suffered many deadlocks and discontinuity. However, PML-N’s victory in recent general polls and simple majority in the center have blessed a new life to the initiatives that were taken during Sharif’s tenure (1996-99).
Its an understanding among the Pakistani business community that India is a growing economy and trade ties with the neighbor will boost the economic activities in the region that will certainly bring stability in the region. India also understands that Pakistan’s geographical contiguity to the energy-rich central Asia can help quench its ever growing energy needs. The smooth transition of power in Pakistan after the completion of five-year democratic tenure in Pakistan has been hailed by New Delhi as well.
In a sign of his eagerness for a fresh start, Prime Minister Manmohan Singh was among the first to congratulate Sharif, saying he hoped they could chart “a new course” and inviting him to “visit India at a mutually convenient time”.
Singh’s felicitation to Sharif is the reflection of this fact that the leaderships of the two countries realize the importance of each other and it was taken as a positive sign by the businessman community.
Talking to an Indian news channel, NDTV, Nawaz Sharif said that his government would work to improve mutual ties particularly in the field of trade and economy.
Analysts believe that trade will be the top priority of Sharif’s government in Islamabad.
His pro-business outlook means he will make cross-border trade a priority and ensure that barriers to exports between the two countries are removed soon,” Former Indian foreign secretary Lalit Mansingh told AFP.
The stability of democratic system is vital for Pakistan’s economy. The smooth transition of power in the wake of recent parliamentary elections have further strengthened this notion. Pakistani industries can significantly minimize production cost by importing cheap raw material from India. In addition, Pakistan can also enhance its exports by capturing a market of more than one billion people. Thus, normalizing ties with India can uplift Pakistan’s flagging economy and help overcome key economic problems such as unemployment, inflation, balance of payment and deteriorating foreign direct investment.
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