Sept. 3 (Bloomberg) -- Pakistani political parties stood behind Prime Minister Nawaz Sharif in a joint session of parliament and a leader of the two-week-old demonstrations against the government quit, indicating the movement to oust Sharif may be waning.
Opposition party leaders criticized Sharif’s style, policies and the conduct of the nation’s elections in 2013 in speeches to parliament in Islamabad yesterday, while saying it was more important that democracy and the constitution be upheld amid the street protests led by politician Imran Khan and cleric Tahir-ul-Qadri.
“The situation is tilting more toward the government,” said Vahaj Ahmed, head of research at Topline Securities in Karachi. “I don’t think Khan will be able to force Sharif to resign. It seems like his drive is losing momentum.”
The crisis risks jeopardizing an already-tepid economic recovery in the nuclear-armed nation of 196 million and potentially complicates Pakistan’s ability to meet the terms of a $6.7 billion International Monetary Fund loan program. It also threatens to distract the military from its fight against Taliban insurgents near the Afghan border.
The KSE 100 stock index rose 2.7 percent yesterday on signs the standoff may be drawing closer to a conclusion, and without prompting a coup. The turmoil fueled an almost 6 percent fall in the index in August, the biggest monthly drop in three years. The Pakistan rupee has dropped about 3 percent against the dollar during the protests, which began in mid-August.
Supremacy of Parliament
The most dramatic moment in yesterday’s parliamentary session occurred when the president of Khan’s Pakistan Tehrik-e-Insaf party, Javed Hashmi, broke with Khan’s approach of seeking to oust Sharif through street protests over the legitimacy of the 2013 elections.
“The parliament is the supreme body for democracy in this country,” Hashmi said. “There are conflicts, always, but it is here in this house those conflicts are resolved.”
At the end of his remarks, Hashmi announced his resignation from parliament. He and Sharif later shook hands.
Hashmi had previously criticized Khan over the way he has led the protests. In a news conference Sept. 1, Hashmi accused Khan of “collaborating” with “some elements in the army” to overthrow the government, an allegation army leaders and Khan’s party have denied.
Aitzaz Ahsan, a leader of the opposition Pakistan People’s Party, said in parliament yesterday he regarded Khan’s complaints about the elections as valid. “Rigging took place and at a massive level,” Ahsan said.
Still, Ahsan said, addressing Sharif, “Parliament is with you. Nothing will happen to your government, but after passing through this turmoil, you must discuss with your advisers why this happened to you.” Agreeing to the demands of the street protesters now would encourage more such actions in the future, threatening Pakistan’s democracy, Ahsan said.
The army isn’t backing Khan or Qadri and supports democracy, its press office said Sept. 1 in a text message. The military has ruled the nation for more than half its history and previously ousted Sharif in a coup in 1999.
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, the general who overthrew him. Last year’s election marked the first-ever democratic transfer of power in the country’s history.
Khan and other PTI members of parliament will attend today’s session of parliament and reply to the speeches made today, Khan said late yesterday. “We will go for the last time and leave with a bang,” he told supporters in Islamabad.
A government-backed team will now hold talks with Khan and Qadri. That meeting will occur at the residence of Rehman Malik, a member of the opposition-led negotiating team that has the backing of Sharif, PTI Vice Chairman Shah Mahmood Qureshi told reporters in remarks carried by state-run television.
While the U.S. is not involved in any of the discussions between parties in Pakistan it urges them to work together to solve the crisis, U.S. State Department spokeswoman Jen Psaki said at a briefing in Washington.
A possible resolution to the standoff is that Khan may agree to a judicial probe of the 2013 elections without Sharif resigning first -- until now his central demand -- said Topline’s Ahmed. “Our perception is that Khan can no longer force the prime minister to go away,” Ahmed said.
If Sharif does survive the protests, he probably won’t be able to pursue some of his planned economic policies as vigorously as he would have been able to before, Ahmed said, in particular reducing fuel subsidies and raising power prices. “He will have to think harder about how the common man will react to such things,” Ahmed said.
The State Bank of Pakistan, which probably would have cut its 10 percent benchmark discount rate by 0.5 percentage points at its meeting this month, may not be able to do so now because of the rupee’s decline during the crisis, Ahmed said.
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.
The government estimates the economy grew 4.1 percent in the fiscal year that ended June 30 and forecasts growth of 4.5 percent in the current fiscal year.
Under the terms of the IMF 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 higher revenue.
The government has hired Citigroup Inc, Deutsche Bank AG, Standard Chartered Plc and Dubai Islamic Bank PJSC to manage the sale of a dollar-denominated sukuk this month, Finance Secretary Waqar Masood said yesterday by phone in Islamabad.
“If the government continues to show a good economic performance, most foreign investors may be able to look beyond the unrest of the last few weeks,” Topline’s Ahmed said.
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