Event

After a long period of exile and opposition, Nawaz Sharif - Pakistan’s former PM in the 90’s before being overthrown by a military coup in 1999 - is spectacularly back to power. His opposition Pakistan Muslim League (PML-N) won the 11 May Parliamentary elections by a comfortable margin (124 out of 272) in a violent electoral climate. The incumbent Pakistan People Party was heavily sanctioned as it only came second after securing barely 31 seats, whereas ex-cricket champion Khan’s Party ended in the third position. However, the PML-N failed to secure a majority at the National Assembly which means that a minor alliance is necessary to form a coalition. The voter turnout, about 60%, is the highest in decades and highlights the population strong desire for change.

Impact on country risk

Given the very poor state of security and economic situation, Mr Sharif’s victory that follows a first full term under a civilian government looks like rare good news for Pakistan. He was the only credible candidate able to give a new impetus to a country ruled by a PPP-led government whose mandate will be remembered for its corruption and complete inefficiency at tackling the country’s numerous problems. Mr Sharif’s priorities are expected to focus on improving Pakistan’s business environment and economic performances by probably launching a privatisation programme, developing infrastructure, addressing the deep energy crisis that severely hampers economic activity and reaching a crucial agreement with the IMF on a new financial programme to avoid the risk of a balance of payment crisis. Raising one of Asia’s lowest tax base and lowering heavy subsidies are also required but will be hard to implement due to their unpopularity. The improvement of the security climate which has kept worsening over the years through frequent communal violence and Taliban attacks is also essential if Pakistan wants to have a brighter future and attract rare investors. Challenges are nevertheless huge and will keep political risk at high levels. Moreover, government policy could be further hindered by divisive electoral outcomes at a provincial level whereas it will have to cope with the powerful army’s objectives and interests.

Analyst: Raphaël Cecchi, r.cecchi@credendogroup.com