Cause for worry

Sad as it is whereas until a few months ago international rating agencies listed Pakistan among the 'emerging economies', the country's outlook has gradually been downgraded. The Lal Masjid episode changed its outlook from 'positive' to 'stable' and, as a Recorder Report now points out, following President Pervez Musharraf's proclamation of emergency on November 3 both Standard and Poor's and Moody's revised the rating further downward.
The government has been trying to convince the agencies otherwise, arguing that the economic fundamentals are not only the same, they have improved. Those on the other side of the argument do agree that the economic fundamentals are strong enough to withstand a period of uncertainty without a materiel decline in credit equity. Yet the situation could change for the worse if the political uncertainty is not resolved soon.
The prognosis in the event of continuing political turmoil is dark indeed. Considering that S&P analysts tend to offer cautious formulations, what the agency's credit analyst has to say on our situation should worry us all. Fiscal slippages, he says, may arise, adversely affecting the country's current favourable credit trajectory.
And foreign currency inflows could be affected, hurting Pakistan's external liquidity position; consequently, the country's economic growth could also suffer. The negative impact of the recent political developments has already been manifesting itself in extremely unpleasant ways.
The first three weeks following the imposition of emergency saw the flight of portfolio investments at a staggering $224.5 million mark. The stock market went into its deepest dive ever before recovering to find its balance again. Needless to say, if the political situation remains unstable the credit ratings and investor confidence will erode further, causing serious harm to the economy.
It goes without saying, therefore, that all players in the political field must act with a sense of responsibly to end the present political uncertainty. We are where we are, and all concerned must focus their attention on putting the system back on its rails.
So far as the opposition parties are concerned, they have made it known loud and clear that they do not approve of a number of steps that the Musharraf regime took under the cover of emergency. They have also been talking of boycotting the January 8 elections, yet they are also pulling along.
Candidates from almost all of them, except the Tehrik-e-Insaaf and some nationalist parties in Balochistan, have filed their nomination appears, albeit under protest. While those in the PML-N led APDM have made their participation in the elections conditional on the demand that November 3 status quo ante be restored, the PPP has adopted a more pragmatic approach, its main demand being that the elections must be held in a fair and transparent manner.
Benazir Bhutto has been wavering between boycott and participation. But there are strong signs that she will go for the elections. If she does, the PML-N and its allies would follow suit despite their tough pro-boycott rhetoric. If it stays away while the PPP and the PML-Q go ahead, the PML-N would harm itself.
With participation it can hope to cause substantial desertions in the King's Party, weakening the latter and making gains for itself. Beside, such a move can provide Nawaz Sharif with the opportunity to use his party's parliamentary strengthen, no matter how small, to agitate for change from within the parliament rather than to become marginalised while others pursue the political game in their chosen direction.
But a lot will depend on what the government does to assure the opposition that the elections would indeed be free and fair. The PPP has said that it is still willing to talk to the government on the issue.
The government must respond positively and do whatever needs to be done to make the exercise credible in the eyes of independent observers. When that happens everything else will fall in place, including the country's claim to be counted among the world's emerging markets and fast developing economies.