Pakistan's majority parties struggle to form coalition government

Islamabad: Pakistan's two major parties are set to meet on Monday to try and bridge differences over forming a minority coalition government after an inconclusive election, a top party official said, underscoring political and economic instability.

Analysts say the nuclear-armed nation of 241 million, which has been grappling with an economic crisis amid slow growth and record inflation, along with rising militant violence, needs a stable government with the authority to take tough decisions.

Monday's talks will be the fifth such round after former Prime Minister Shehbaz Sharif was named by his Pakistan Muslim League-Nawaz (PML-N) party to lead the country again.

"Both the parties haven't yet agreed on final points," said Ishaq Dar, a senator of Sharif's party, who is leading it in the talks.

"Negotiations are underway on various proposals" for power sharing, he added in a statement on Sunday posted on social media platform X.

The Pakistan Peoples Party (PPP) party of former foreign minister Bilawal Bhutto Zardari has announced conditional support for the PML-N, saying it will vote for Sharif to form the government, but would not take positions in cabinet.

"I can confirm that it has been decided in principle that the political parties will form a coalition government," Dar told domestic broadcaster Geo TV.

Sharif, 72, who was prime minister of the South Asian nation for 16 months until August, has been named the coalition's candidate to be the next premier by his elder brother, Nawaz Sharif, who is the PML-N chief.

Khan-backed independents join Sunni party

Jailed former Prime Minister Imran Khan's party members that won seats in the elections will join the minority Sunni Ittehad Political Party to form a government, the party's interim chief, Barrister Gohar Khan said at a news briefing on Monday.

Khan's party, the Pakistan Tehreek-e-Insaf (PTI) won the most number of seats in the elections as independents after the party was barred from contesting.

The interim chief said that the decision to have the PTI-backed independent candidates join another party was made so that the party could have access to the reserved seats allocated for women and minorities.

Pakistan narrowly averted a sovereign default last summer with a $3-billion bailout from the International Monetary Fund, but the lender's support ends in March, after which a new, extended programme will be needed.

Negotiating a new programme, and at speed, will be critical for the new government.

Pakistan's sovereign dollar bonds fell as much as 1.2 cents on Monday, with the 2024 bond standing at 95.89 cents in the aftermath of the contentious election, Tradeweb data showed.

"Lack of clarity has always been a killer for the market as it leaves existing and prospective investors indecisive on outlook," said Amreen Soorani, head of research at JS Capital, adding that this was reflected by the choppy market.

Pakistan's vulnerable external position means that securing financing from multilateral and bilateral partners will be one of the most urgent issues facing the next government, ratings agency Fitch said.

"A new deal is key to the country’s credit profile, and we assume one will be achieved within a few months, but an extended negotiation or failure to secure it would increase external liquidity stress and raise the probability of default," it said.

The new government could also face further political tension, with independent members of parliament, backed by jailed former premier Imran Khan, forming the largest group in the legislature.

This group is at loggerheads with the powerful military and alleges that the vote was rigged.

The caretaker government and election commission have rejected those accusations.