THE PDM faces a fresh crisis as the PPP takes a conspicuously soft position on the long march. While the PDM talks of mass resignations and a ‘decisive’ march, Bilawal Bhutto-Zardari last week said his party hopes to remove Prime Minister Imran Khan’s government through a no-confidence move in the National Assembly. Mr Bhutto-Zardari also vowed to persuade members of the opposition alliance to adopt this view, which he said is a “democratic, constitutional and lawful procedure”. It is unclear how the PPP chairman will achieve this goal, as not only does the opposition not have the numbers in the National Assembly to pull off such a stunt, but street agitation is still very much part of the PDM’s plans. When the PDM was formed, the opposition parties at the multiparty conference pledged to topple the government with a three-pronged strategy — the ultimate component was a long march. The PPP, too, has publicly endorsed this position. While toppling a government through democratic means such as no-confidence motions or street agitation is within the rights of the opposition parties, the PPP’s volte-face on this key step in the alliance’s strategy puts a question mark on the self-proclaimed democratic character of the movement.
Mr Bhutto-Zardari must explain what has brought about this change of tack. Is there pressure on his party to amend its position? After the early days of hitting out at the government and targeting ‘selectors’, the PPP first buckled with a lukewarm response to the resignation issue and is now abandoning the long march idea. Even if the PPP manages to persuade the PML-N on this issue — the chances of which are slim — together the two opposition parties do not have the numbers in the Assembly to successfully pass such a motion without external engineering. An unsuccessful motion would further strengthen the government’s position and undermine if not decimate the PDM. Ironically, in 2018 when the PPP with its strength in the Senate brought about a no-trust motion against then chairman Sadiq Sanjrani, it fell flat on its face. How then, with a strength of 50-odd MNAs does it plan to pass a motion that requires 170 or so votes? The PPP has some explaining to do, and must make clear what its motivations are one way or the other. For it to adopt a strategy of running with the hare and hunting with the hounds is politically damaging.
THE State Bank has taken the unusual step of issuing a forward guidance in its latest monetary policy statement to tell markets that no raise in interest rates is likely in the near term, but it remains to be seen whether this will mollify sceptical buyers of government debt. The most likely explanation for why the regulator felt it necessary to take this step is the lacklustre participation that recent debt auctions have seen. Most bids are now congregating around shorter three-month tenors in Treasury bills, which is usually an indication that banks are expecting a rate hike. In the last auction conducted on Jan 13, 96pc of the realised value was in three-month paper. With its forward guidance, the State Bank seems to be telling the banks that their anticipation of a rate hike is futile and they should modify their bidding behaviour.
The next debt auction is scheduled for Jan 27 and it will provide an interesting opportunity to test the impact of the forward guidance. If the banks refuse to heed the State Bank’s words and continue crowding around the shortest tenor on offer, it will be a sign of the futility of the exercise. At that point, the central bank will have some decisions to make. Most market analysts were not expecting a rate hike at this point in any case, but the unusual meeting between the State Bank governor and the prime minister only days before the monetary policy decision has given rise to the impression that the central bank might have been prodded to not raise rates at this time. A rate hike would have adverse consequences for the nascent recovery underway in the economy, and that is something the government is understandably reluctant to see happen. But if markets are not assuaged, and pressure from the IMF is strong, the central bank might have limited options because continuing with low rates could have implications for the exchange rate, as well as the profile of the stock of government debt.