Pakistan, a country on the verge of economic recovery, has gotten a harsh warning from Fitch Group's Business Monitor International (BMI). According to the BMI's national risk analysis, prolonged political volatility might jeopardise the country's fragile economic progress. This warning emphasises Pakistan's fragile economic balance as well as the crucial role political stability plays in preserving economic momentum.

The BMI research recognises that Pakistan's economic activity in the past fiscal year exceeded many analysts' estimates. This good momentum is a result of the present coalition administration's efforts, which have included several fiscal reforms and macroeconomic changes, frequently under the strict constraints imposed by the International Monetary Fund (IMF).

Despite these achievements, the BMI research identifies several internal and external risk factors that might derail the fragile recovery. The most visible of these is the country's tumultuous political climate. The creation of a new coalition administration following the February elections was viewed as a good development. However, the high electoral performance of independent candidates supported by imprisoned opposition leader Imran Khan reveals widespread dissatisfaction with the incumbent political establishment. This resentment might spark another round of urban protests, hurting economic activity and weakening investor confidence.

Role of political actors

The current political crisis in Pakistan is the result of a series of conflicts among important political figures. The incumbent Pakistan Muslim League-Nawaz (PML-N), led by Prime Minister Shehbaz Sharif, is locked in a power battle with the opposition Pakistan Tehreek-e-Insaf (PTI), led by Imran Khan. The latter's detention has not only energised his fans but has also stoked widespread popular dissatisfaction with the political establishment.

The federal government's anxiety about the quick processes of electoral tribunals, which threaten to topple numerous sitting legislators, highlights the current administration's shaky legitimacy. This defensive posture is obvious in their opposition to Supreme Court judgements, which might lead to a constitutional crisis. The BMI research emphasises this political risk, implying that the present administration may not last beyond the next 18 months.
 
Implications of political instability

The economic consequences of this political uncertainty are significant. Fitch predicts that Pakistan's GDP will grow by 3.2% in 2024/25, however, this is predicated on the continuance of IMF-mandated reforms. The policy rate is likely to stay high, hitting 16% this fiscal year before falling slightly to 14% next year. The currency rate, while stabilising above forecasts, is under substantial pressure, with the USD expected to hit Rs 290 by the end of this year and Rs 310 next year.

Meeting budget objectives under the IMF programme would be difficult, since the fiscal deficit is forecast to fall only a little, from 7.4% to 6.7%. Furthermore, the country's great reliance on agriculture, with 40% of Pakistanis working in the industry, makes it especially vulnerable to natural calamities. Another flood or drought might have a significant impact on the economy, exacerbating the problems caused by political instability.

Dialogue and collaboration

Given these serious warnings, Pakistan's political leaders must take a more collaborative and productive approach. The suggestion for an All Parties Conference (APC) gives some optimism. Such a conference might serve as a venue for conversation, allowing political players to address the nation's concerns jointly.

The core of democracy is to resolve conflicts via communication and compromise. Pakistan's political leadership must prioritise national interests before party politics. This means participating in meaningful debate, upholding court judgements, and creating an atmosphere that promotes economic stability and prosperity. The ruling coalition and opposition must recognise that their actions will have far-reaching effects on the country's economic health and residents' well-being.

Prioritising economic stability 

Fitch's research serves as an important reminder of the link between political stability and economic development. Pakistan's continuous political turbulence, characterised by infighting and power rivalries, poses a serious threat to the country's economic development. Key political actors must put aside their differences and cooperate towards a common approach to government. This involves adhering to democratic standards, participating in constructive discourse, and prioritising the country's economic stability.

The route forward demands a collaborative effort from all political players to guide Pakistan through these tumultuous times. Only by teamwork, optimistic thinking, and a common commitment to the future can Pakistan hope to achieve long-term political stability and economic development. The stakes are enormous, and now is the moment to take decisive, collective action.

(The author is a postgraduate student of Strategic Studies at the Centre for International Peace and Stability (CIPS), a school of the National University of Science and Technology (NUST), Islamabad. Views are personal. He can be reached at waleedsami56@gmail.com )