Can a coalition get Pakistan out of its economic troubles?

The two political groups - Pakistan Muslim League-Nawaz (PML-N) and Pakistan Peoples Party (PPP) - in talks to form a government in Islamabad after February 8 elections are likely to have significant disagreements and conflicts due to their differing interests, ideologies, or agendas, analysts say.

PML-N led by former Prime Minister Nawaz Sharif holds 75 seats, and Bilawal Bhutto Zardari's Pakistan People’s party, 54 seats, along with various smaller parties, in the 265-seat member National Assembly.

“PPP and PML-N are natural rivals, not allies, and so we can expect them not to see eye to eye if they head up the next coalition government,” Michael Kugelman, director of the South Asia Institute at the Wilson Center, told TRT World.

Independent candidates supported by imprisoned former Prime Minister Imran Khan emerged with the highest number of seats, totaling 93.

No single party secured enough seats in the National Assembly to independently establish a government.

“There would likely be a honeymoon period off the bat, as they would both come in with the same goals of focusing on economic recovery and curbing Pakistan Tehreek-e-Insaaf, among others. But the honeymoon may not last, given all the historical baggage between the two sides, despite their having partnered on multiple occasions over the last few decades,” Kugelman said.

The PPP is generally considered slightly left-leaning, focusing on protecting the rights of farmers and claiming to be pro-worker, which means it opposes the privatisation plan, Amir Zia, Editor-in-Chief of Bol Media Group, said.

In contrast, the PML-N is perceived as pro-business and pro-privatisation, and represents interests of big businesses, traders, and merchants.

“Both parties, led by the country's wealthy elite, advocate for democracy, free-market, and privatisation, albeit with different emphasis. While the PPP's policies tend to benefit agriculturists, the PML-N supports businesses and traders,” Zia added.

Urgent economic challenges

Pakistan is grappling with a confluence of pressing challenges: an economic downturn impacting even the affluent, increased terrorist attacks, escalating border tensions, and heightened political divisions. Pessimism among Pakistanis regarding the economy, electoral process, and security has reached unprecedented levels.

With its population of over 241.5 million, the country has witnessed stagnant growth and a surge in inflation in recent years.

The country’s economic crisis is marked by declining foreign currency reserves, which will face additional pressure with an upcoming $1 billion bond payment due in two months. Compounding this, the country's $3 billion funding arrangement with the International Monetary Fund (IMF) is set to expire on April 12.

Securing funding remains a top priority for Pakistan, as the country has yet to fully address its external financing needs for 2024, while its substantial external debt of nearly $100 billion limits government’s ability to spend on the poor.

A new government is anticipated to promptly undertake necessary measures, such as enhancing the governance of state-owned enterprises, and to finalise the last outstanding review of the existing $3 billion IMF loan programme.

This arrangement, akin to a bridge loan, played a crucial role in averting a default crisis previously.

Completing this review would enable Pakistan to receive the final $1.1 billion installment before the current IMF programme concludes in mid-April, necessitating immediate efforts to secure a follow-up programme thereafter.

The rapid depreciation of the Pakistani rupee and diminishing foreign currency reserves have also hindered the country's ability to import vital commodities.

“The 16-month coalition government led by Shehbaz Sharif compounded Pakistan’s economic woes mainly because of the lingering political instability and wrong economic decision-making, including artificially boosting the Pakistani currency against the dollar,” said Bold Media’s Zia.

“Despite this, the rupee remained under pressure and inflation hit record-high in that period.”

Both the PPP and PML-N have pledged ambitious subsidies on electricity, despite concerns over their feasibility given IMF’s austerity conditions.

“The PPP leadership in its election manifesto promised up-to 300 units free electricity to the deserving, while the PML-N promised slashing power prices by 15 to 20 percent. These promises are impractical and if the country goes for the IMF’s extended fund facility, which it must because of the precarious economic situation, there is no chance of giving this kind of subsidies,” Zia said.

“In their manifesto, both parties made big promises but failed to give any concrete economic plan on how they would revive the country’s ailing economy or launch mega-projects and give subsidies when they do not have any fiscal space to do so.”

In recent decades, both the military and civilian leadership have remained detached from the everyday challenges faced by ordinary Pakistanis, leading to neglect of their needs and security concerns, analysts said.

Failure to promptly address these issues will deepen the sense of alienation and disenfranchisement among significant portions of Pakistani society, closing off avenues for recovery in the foreseeable future, they added.

After Imran Khan’s controversial removal in 2022, PML-N and PPP had formed a coalition government called PDM.

“The PDM government, despite all its leaders with past experience and savvy, never managed to implement a meaningful economic response. Instead, the economy came close to collapse, deepening the hardships of the public and making the government unpopular,” Kugelman said.

“That public sentiment will not have dissipated if we have another PML-N and PPP-led government--and that's especially the case with the large PTI support base, which believes its party should be leading the next government.”