Why Pakistan PM Shehbaz Sharif may find it hard to complete 5-year term

Report by Washington-based Institute of International Finance has a grim prognosis concerning Pakistan's economic and political future

In a worrying development for Pakistani Prime Minister Shehbaz Sharif, a recent report by the Washington-based Institute of International Finance (IIF) has reportedly said that historical precedence did not bode well for either his chances of finishing a five-year term or his country's prospects of breaking free from the need of a fresh International Monetary Fund (IMF) programme in the future. 

"To date, no (Pakistani) prime minister has ever finished their five-year term, while Pakistan is currently in its 23rd IMF programme since 1958," said the IIF, a global association of financial institutions comprising the world’s largest commercial and investment banks, investment management firms, and insurance companies. According to a report by a Pakistani daily, Dawn, the IIF added that this was a "horrible track record that shows no signs of being broken any time soon".   

On March 4, Shehbaz Sharif took oath as Prime Minister of Pakistan, taking over the country's reins for the second time. The 72-year-old had earlier served as Prime Minister of a coalition government from April 2022 to August 2023. 

Sharif was elected as PM for the first time after ousting Imran Khan through a vote of no confidence. 

The brother of former prime minister and Pakistan Muslim League-Nawaz (PML-N) leader Nawaz Sharif, Shehbaz took over as PM days after the PML-N and the Pakistan People's Party (PPP) agreed on a power-sharing deal to form a coalition government. 

The IIF also warned that "turbulent, unstable politics" would add to the risks Pakistan is facing.   

The February 8 polls in Pakistan were marred by allegations of vote rigging. Shehbaz Sharif faces a challenge from jailed former prime minister Imran Khan's Pakistan Tehreek-e-Insaf (PTI) party, which has promised to keep protesting the alleged manipulation of the election results. 

The elections also witnessed the suspension of cellular service, delay in the releasing of results, mass protests, and the failure to allocate reserved seats to PTI-backed independents. 

"It is clear that Imran Khan is the most popular politician in Pakistan," said the IIF report, adding, "This puts him at odds with the powerful military."  The IIF anticipates that tensions between the two sides will continue escalating -- a situation that is likely to lead to additional military crackdown on politicians backed by the PTI and the party's supporters.   

The coalition government's weak nature is another cause for concern. The IIF highlighted that the PPP appears "reluctant to sign on to politically costly reforms". It added that without the PPP's support, it was "hard to see a way forward for the PML-N". The IIF warned that this "could hinder or prolong negotiations with the IMF".

   

Stating that Pakistan was on its way to missing targets in the current financial year, the IIF report warned that Islamabad's biggest current challenge would be achieving fiscal consolidation and bringing in reforms despite ongoing political instability and a weak coalition government.   

On a more encouraging note for Pakistan, the report said that monetary policy, exchange rate, energy subsidies, and reform of state-owned enterprises were unlikely to become a hindrance for the new IMF programme.

“The biggest challenge will come from fiscal consolidation,” the IIF warned, highlighting that large fiscal deficits have led to public debt ballooning from 55 per cent of GDP in financial year (FY) 2009-10 to 79 per cent in FY 2022-23.   

"Close to $90 billion in public debt is set to mature in FY24, a large part of which is expected to be rolled over," the IIF report said, making a new IMF programme all the more crucial.