Amid much public glare, Senate elections on half of the seats took place yesterday wherein the ruling PTI has emerged as the largest single party with 26 seats in the upper house.
That said, crucially for PTI, Minister for Finance & Revenue Dr Hafeez Sheikh has been unsuccessful in his bid to become a senator from Islamabad, losing to former Prime Minister Yousuf Raza Gillani. Dr Sheikh’s loss could potentially result in an ‘eventual’ change of guard at the Finance Ministry given the Supreme Court’s earlier ruling wherein unelected individuals could only be appointed for a period of six months under Article 91(9) of the Constitution.
That said, recall that Dr. Sheikh had been appointed as Federal Minister for Finance & Revenue on Dec 11, 2020 –meaning he can continue to be the FM for an additional 3 months before the expiration of the 6M grace period, as per our understanding. This can give the incumbent PTI government much time to potentially get him elected on a ‘safe seat.
In another development, the Govt. is reportedly filing a motion for a ‘Vote of confidence in the Parliament today. We believe with the motion not being a secret ballot and considering that PTI was announced successful on the female seat in the Capital, the Govt. should be able to turn the vote in its favour, providing much-needed clarity on the political front.
From the market’s vantage, a knee-jerk reaction to FM Hafeez Sheikh’s loss will likely weigh heavily, albeit in the near term due to a perception of possible implication on the IMF program. However, we believe the country would remain in the IMF program as long as performance targets are achieved, keeping Pakistan’s growth story intact. Hence, any possible correction should be taken as an opportunity to accumulate.
PTI largest party in Senate—loses a key vote in Federal capital
Amid much public glare, Senate elections on half of the seats took place yesterday wherein the ruling PTI emerged as the largest single party with 26 seats in the upper house. Crucially for PTI, Minister for Finance & Revenue Dr Hafeez Sheikh has been unsuccessful in his bid to become a senator from Islamabad, losing to former Prime Minister Yousuf Raza Gillani.
Dr Sheikh’s loss could potentially result in an ‘eventual’ change of guard at the Finance Ministry given the Supreme Court’s earlier ruling wherein unelected individuals could only be appointed for a period of six months under Article 91(9) of the Constitution. That being said, recall that Dr Sheikh had been appointed as Federal Minister for Finance & Revenue on Dec 11, 2020 – meaning he can continue to be the FM for an additional 3 months before the expiration of the 6M grace period, as per our understanding.
This can give the incumbent PTI government much time to potentially get him elected on a ‘safe-seat’. Overall, the ruling party along with its partners has bagged 43 seats in the senate whereas opposition under the banner of the Pakistan Democratic Movement (PDM) has gained 50 seats. That puts govt.’s ambition of gaining a majority in the senate at rest with Individuals and JI that cumulatively occupy 7 seats.
‘Vote of confidence’ could bring much needed political stability
In another twist, the Govt. is reportedly filing a motion for a vote of confidence in the National Assembly today. As per the regulations, the vote should be conducted after at least three days and within seven days from filing of such motion.
We believe with the motion not being a secret ballot and considering that PTI was announced successful on the female seat in Federal Capital, the Government should be able to turn the vote in its favour. This should bring much-needed clarity on the political front, restoring confidence that Govt. would complete its tenure.
Market likely to be jittery in the near term; long term fundamentals intact
From a macro perspective, there will likely be noise on Pakistan’s program with the IMF with a general perception of Hafeez Sheikh being the architect of Pakistan’s negotiation with the IMF.
We believe the said perception is misplaced where given Pakistan’s recent economic performance, the country will continue to remain in the program as long as performance targets are being met. However, with the upper house likely to be ‘hunged’, the reform process the Govt. aims including legislations that are to be passed in order to remain in compliance with the program could face delay, in our view.
On the market side, a knee-jerk reaction to FM Hafeez Sheikh’s loss will likely weigh heavily, albeit in the near term. In the long run, however, we believe any downward movement is likely an accumulation opportunity with Pakistan’s growth story remaining intact.
Looking at the broader picture, nothing much has changed in terms of Pakistan’s political set-up – PTI continues to be the largest party in the Lower House and has just become the largest single party in the Upper House. On the flip side, a key near term headwind to potentially watch will be the election of the Senate Chairman.
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