As an outcome of a lasting battle between the judiciary and government, PM Gilani eventually had to step down for not complying with a Supreme Court demand to ask a Swiss court to reopen a corruption case involving incumbent President Zardari. The ruling PPP party accepted the decision and the Parliament chose former water and power Minister Raja Ashraf – a PPP loyalist- as the new PM. Now, he is facing the same legal demand and threat from the Supreme Court. Moreover, all government decisions taken after 26 April have been invalidated, which should require a new budget.
Impact on country risk
Disqualification of new PM Ashraf is looming as the judiciary has adopted a confrontational stance vis-à-vis the government. PPP loyalists are expected to continue to spare their President. Whatever happens in the coming weeks, based on the latest events, general elections, which are scheduled in February 2013, are likely to be held earlier given the political uncertainty created by Pakistan’s powerful judiciary. The ruling PPP might again be the favourite to win the election, in the absence of a real strong alternative throughout the whole country. These events come at a bad time for Pakistan, which is affected by the global economic slowdown and still copes with deep energy shortages while a poor budget situation would notably require cuts in energy subsidies. Hence, the authorities might request a new IMF programme after the elections in order to launch unpopular structural reforms and implement fiscal consolidation.
Analyst: Raphaël Cecchi, email@example.com