LAHORE: The political crisis engulfing Pakistan is eroding hopes that the South Asian country can get its much needed programme with the International Monetary Fund back on track soon and escape a full-blown debt crunch, analysts said.
Violent clashes between supporters of Imran Khan and police broke out across the country after Pakistan’s anti-corruption agency arrested the former prime minister on Tuesday.
The latest rupture in Pakistan’s febrile politics comes as the 230-million-population nation prepares to hold tightly fought elections in the autumn while facing its worst economic crisis in decades, with dwindling reserves and a stalled USD 6.5 billion IMF programme that is expiring in June and scarce other financing sources in sight.
“With protesters on the streets, the IMF will be even more wary about restarting the deal,” said Gareth Leather, senior economist for Emerging Asia at Capital Economics.
The turmoil since Khan was ousted just over a year ago has scarred the country’s economy and markets. Pakistan’s rupee has lost nearly 50 per cent over the past 12 months. The main stock index has suffered a double-digit decline over the same period.
On Wednesday, the rupee tumbled to a fresh record low of 289.5 to the dollar. The country’s international bonds, already in deeply distressed territory of as little as 32 cents, dropped more than 1 cent in the dollar on the day.
JP Morgan analyst Milo Gunasinghe said little relief from political uncertainty was in sight while the IMF programme remained stalled.
“The latest developments likely dampen any prospect of a political breakthrough across both sides,” Milo said.