Karachi, April 04, 2022 (PPI-OT): Pakistan Strategy: Political noise reaching fever pitch

In an unprecedented and somewhat controversial development, PM Imran Khan recommended President of Pakistan to dissolve parliament and hold fresh elections after the no-confidence motion against him was dismissed by the Deputy Speaker of National Assembly, here on Sunday.

Earlier in the session, the Deputy Speaker had declared the motion for a no-confidence vote against the Prime Minister unconstitutional, pointing to “foreign powers” interfering in Pakistan’s democracy.

Speaker’s decision to block the no-confidence vote in parliament against Prime Minister, and the subsequent dissolution of the assembly, triggered a political crisis and united opposition appealed against the move in the Supreme Court which will give its verdict on subject matter in coming days.

The current political upheaval is adding to a surge in country’s default risk. The nation’s default risk, as measured by 5yr CDS, has climbed to the highest since 2013 after nearly doubling last month. The currency has depreciated by 3.8%, since the start of Mar’22, to PkR184.1/US$ while the country’s US$ bond, maturing in December, has already tumbled 5% this year, as per Bloomberg.

The government said last month talks with the IMF are continuing and it remains committed to completing the program successfully in September. After yesterday’s events, how the country will approach the IMF program is quite uncertain, given IMF’s historical reluctance to deal with caretaker setups. A potential change in government may put IMF funding at some risk and create further pressure on the currency.