Political Turmoil Increases Pakistan’s Default Risk

The election outcome points to increased political instability, casting a darker shadow over growth and prospects for securing International Monetary Fund (IMF) aid the country needs to avoid default, said Bloomberg.

With no party winning a majority, and a strong performance by independents backed by Imran Khan (who is in jail and whose party was banned from running), the formation of a coalition government is likely to be challenging and chaotic, it added.

This could lead companies to put investments on hold.

Continued political instability could put a new aid package from the IMF in jeopardy, raising default risk. 

The results of the February 08 elections were a surprise. Independent candidates, most of them backed by Khan, won more seats than any major political party, taking 101 of the 265 contested National Assembly seats.