The election results reflect a profound disillusionment among Pakistanis, demonstrating their steadfast resistance to any form of meddling with their democratic mandate, whether overt or covert.

The fragmented mandate and the lack of decisive victory by any single party are poised to result in the formation of a coalition government. Such a scenario is expected to prolong the country’s government formation process.

The market and the business, often overshadowed by the intensity of political activity, are unlikely to find solace in the election outcome. A frail coalition government, particularly at this critical juncture when Pakistan grapples with deep economic challenges, spells potential trouble for the nation and its economy.

The immediate response of the capital market, observed a day after the general elections, unmistakably reflected the sentiments of the business community. The Pakistan Stock Exchange (PSX) index experienced a sharp decline initially before showing signs of partial recovery later in the day. Ultimately, on Friday last, the PSX index closed at 62,945, registering a decrease of 1,200 points or 1.8 per cent from its previous level.

‘The coalition government’s recent track record of economic management was not inspiring, as evidenced by the reversal of taxing the retail sector’

Despite the challenges, businesses are resilient and adept at finding opportunities even in adversity. Some influential leaders from underdeveloped provinces have adopted an optimistic outlook despite acknowledged shortcomings.

“We cannot afford the luxury of dwelling in despair, even in the most challenging circumstances. It is imperative that we look towards the future and place our trust in our elected representatives, regardless of party affiliation.

“We have to work together to address critical issues such as fostering industrial growth, restoring cross-border trading, generating employment opportunities to uplift the marginalised youth and mitigating the impact of inflation, which has eroded the hard-earned living standards of our people over the year,” remarked Badruddin Kakar, a leader of Quetta Chamber of Commerce and Industry.

Ehsan Malik, CEO, Pakistan Business Council (PBC), refrained from engaging in political commentary, instead focusing solely on articulating expectations from the incoming government. Emphasising the urgency, he reiterated the importance of swiftly securing a new deal with the International Monetary Fund (IMF) to maintain economic stability.

With the current IMF programme set to conclude next month, the PBC advocates against delaying action in favour of relying on domestically crafted solutions. Mr Malik implied that past experiences where such approaches backfired, exacerbating economic challenges and pushing the economy perilously close to collapse.

He emphasised: “Pakistan requires a stable government to continue stabilisation efforts of the caretaker government. Securing a substantial, extended and more reform-centric 24th Extended Fund Facility from the IMF is crucial. This must be coupled with debt restructuring to restore the lender’s confidence.

A frail coalition government, particularly at this critical juncture when Pakistan grapples with deep economic challenges, spells potential trouble for the nation and its economy

“There are no home-grown solutions, and procrastination, as seen in the past, will be costly. Engaging in adventurous exchange rate operations won’t yield positive results either. It’s imperative to prioritise enduring hardships for eventual gains, although historical precedent in this regard is lacking. The government, not the IMF, bears the onus of reforms; a reform-centric programme links tranche releases to progress.

“While external solvency is crucial, managing inflation is a key expectation from the new government. Additionally, bolstering direct cash transfers to ease burden on the needy necessitates careful fiscal management.

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“Priorities include reinstating fiscal discipline, curbing government debt, reducing inflation and lowering borrowing costs for both the public and private sectors. Addressing inefficiencies in state-owned enterprises and the energy sector will require strong political will, as will broadening the tax base. While restructuring the Federal Board of Revenue is essential, the process may take time to yield additional revenue.

“A party with a clear majority holds obvious advantages in making decisive economic decisions. However, the coalition government’s recent track record of economic management was not inspiring, as evidenced by the reversal of taxing the retail sector.

“Cross-party consensus on key economic challenges has remained elusive in Pakistan, despite notable cooperation on other fronts such as the war on terror, handling the Covid fallout, navigating out of Financial Action Task Force’s grey list. Conversely, a troubling consensus exists to maintain the status quo, characterised by a narrow tax base, questionable subsidies, bleeding state-owned enterprises, an inefficient energy sector and excessive regulatory controls.

“With indications pointing towards a coalition government between parties with divergent agendas, and uncertainty surrounding the future finance minister, the prudent course is to brace for uncertainty and hope for rational decision to guide the country forward.”

Majyd Aziz, a notable business leader from Karachi, anticipates forming a coalition government comprising previously collaborated parties, dubbing it the Pakistan Democratic Movement Two (PDM-2) government. He envisages a leader from the same party before assuming the leading role. Mr Aziz further predicts that whoever assumes power in the eventual formation of government will promptly negotiate a deal with the IMF.

A businessman-turned-politician holding a pivotal role in the caretaker administration expressed dissatisfaction with the criticism directed towards the Election Commission of Pakistan and the government responsible for conducting the elections.

He believes the nation should recognise and appreciate their efforts instead of succumbing to divisive rhetoric. He expressed hope that the Elections 2024 would pave the way for prosperity for the people of the country.

A member of the caretaker government in Sindh expressed concern over the election results, anticipating heightened uncertainty that could potentially disrupt the economic stability established during the caretaker administration.

Published in Dawn, The Business and Finance Weekly, February 12th, 2024