Pakistan Parliament to Meet After Second Day of Violence

Photographer: Aamir Qureshi/AFP via Getty Images

Demonstrators shout anti-government slogans as they gather outside the prime minister's residence in Islamabad on Sept. 1. Close

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Photographer: Aamir Qureshi/AFP via Getty Images

Demonstrators shout anti-government slogans as they gather outside the prime minister's residence in Islamabad on Sept. 1.

Pakistan’s parliament will hold an emergency meeting today to try and defuse two weeks of protests that have turned deadly as demonstrators step up efforts to force the resignation of Prime Minister Nawaz Sharif.

The joint session will begin in Islamabad at 11 a.m. and was called by the government yesterday as demonstrators clashed with police, forcing their way into government buildings and briefly taking the state television network off the air. Three people were killed on Aug. 31 and about 500 injured in an increasingly violent standoff over the legitimacy of elections held last year.

“Your leaders have asked you to be peaceful,” TV channels showed a military officer telling protesters at the Pakistan TV building yesterday. “If you enter such places you’ll not only embarrass your leaders but those who are securing these buildings, so if you have respect for your leaders, please vacate the building.”

The violence has raised the stakes for army chief General Raheel Sharif, who agreed on Aug. 28 to try to resolve the crisis sparked by opposition politician Imran Khan and cleric Tahir-ul-Qadri accusing the prime minister of voter fraud. The two Sharifs are not related. The army is not backing Khan or Qadri and supports democracy, its press office said yesterday in a text message.

The crisis threatens to distract the military from its fight against Taliban insurgents in the north and comes at a time of border skirmishes with India. It risks jeopardizing an already-tepid economic recovery and potentially complicates Pakistan’s ability to meet the terms of a $6.7 billion International Monetary Fund loan program.

IMF Loan

In its July review, the IMF said the economy was showing signs of improvement and raised its growth forecast to 4 percent for the 2014-2015 fiscal year, some 0.3 percentage point higher than its initial estimate. Under the terms of the loan, Pakistan has agreed to reduce its budget deficit to 4 percent of gross domestic product in 2016, half the 2013 level.

To achieve those goals, the government is cutting spending while counting on growing revenue, which may be harder to achieve with the political standoff sapping economic activity.

The turmoil fueled a 6 percent fall in the KSE 100 stock index in August, the biggest monthly drop in three years. The gauge fell 0.3 percent percent yesterday and the rupee tumbled 0.7 percent.

Rating Outlook

“If the situation remains tense, there is the possibility that the IMF’s loan tranche will be delayed,” Saad Khan, an economist at Karachi-based brokerage Arif Habib Ltd., said by phone. “Major development projects can be suspended and capital may flow out of the country. The entire system will need to be overhauled if a new government is in place.”

The political developments will have “implications” for the country’s creditworthiness if they prevent the government from fulfilling the IMF’s policy conditions, according to Moody’s Investors Service. Loan disbursements are crucial to maintain Pakistan’s external liquidity buffer, analyst Anushka Shah said in an e-mail.

The army has ruled the nation for more than half its history and previously ousted Nawaz Sharif in a coup in 1999. Should it successfully mediate a resolution it may gain a greater voice in foreign policy decision-making, according to T.V. Paul, a professor of international relations at McGill University in Montreal and the author of “The Warrior State: Pakistan in the Contemporary World.”

‘More Control’

“The Pakistani military doesn’t want to rule directly at this point, but they wouldn’t mind having more control over Sharif, in particular on India, Afghanistan and the Taliban,” Paul said by phone on Aug. 29. “Veto power is what they want.”

Sharif’s relations with the military have been strained as he seeks to improve ties with India and backs treason charges against former military ruler Pervez Musharraf, who overthrew him in 1999. Last year’s election marked the first-ever democratic transfer of power in the nuclear-armed country of 196 million people.

In a bid to defuse the situation, Prime Minister Sharif agreed to accept an investigation into allegations of voter fraud. Should the probe determine that he or his brother Shahbaz, the chief minister of Punjab province, was involved in vote rigging, they will resign, Finance Minister Ishaq Dar, who is involved in talks with the opposition, said on Aug. 29. Sharif won’t step down before such a finding, he said.

Immediate Resignation

Opposition leader Khan rejected the offer, saying that Sharif needed to recuse himself while that investigation was underway.

“I will not leave until I have Nawaz Sharif’s resignation and his government removed,” Khan said while addressing supporters on Aug. 31. “We will not negotiate anymore. We only want our demands met.”

To contact the reporters on this story: Faseeh Mangi in Karachi at fmangi@bloomberg.net; Khurrum Anis in Karachi at kkhan14@bloomberg.net

To contact the editors responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net Jeanette Rodrigues, Andrew Davis

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