Pakistan Parties’ Coalition Talks Hit Snag Over PM Choice

(Bloomberg) -- Pakistan’s two main family-controlled political parties hit a snag in their talks to form a new government, as they haven’t yet been able to agree on who would become prime minister in a coalition designed to thwart jailed ex-leader Imran Khan.

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The Sharif and Bhutto clans both want their candidates to take the top job, local media reported Monday. Sherry Rehman, a senior leader of Bilawal Bhutto Zardari’s Pakistan Peoples Party, said it will form committees to “negotiate with other political parties.”

The development suggests it could take weeks for a government to be formed. The day before, Pakistan Muslim League-Nawaz President Shehbaz Sharif said on X that the clans had “agreed in principle to save the country from political instability.”

“All major parties are moving cautiously, slowly,” said Hasan Askari Rizvi, a Lahore-based analyst. “Each wants to bargain well with maximum gains. They are hard bargainers. PTI doesn’t look interested” because it doesn’t want to join with others, nor do they want to join with it, he said.

The Sharifs and Bhuttos have been negotiating to form a government after Imran Khan’s candidates, running as independents, defied the odds by taking the most seats in the election but fell short of an outright majority. Bhutto Zardari’s PPP had two meetings with three-time premier Nawaz Sharif’s PML-N over the weekend.

Details of the discussions weren’t made public, but local media reported that PML-N wants either Nawaz or his brother, Shehbaz, to lead the government. PPP, which came third in the vote, would like Bhutto Zardari, 35, the son of assassinated former premier Benazir Bhutto, to be prime minister, saying he would be a fresh face in a country where more than 60% of the population are under 30.

The parties are considering appointing a prime minister for two and a half years each, the Nikkei reported, citing multiple people familiar with the talks. None of Pakistan’s prime ministers has ever finished a full five-year term.

Any coalition between the parties would thwart Khan’s candidates, whose strong showing highlighted the former cricket star’s enduring popularity and voters’ disillusionment with the status quo in Pakistan’s politics, represented by the Sharif and Bhutto parties and the powerful military. Khan’s party has alleged vote-rigging in the election and there have been scattered protests across the country.

For investors, any delay in forming a government would lead to further uncertainty for an economy facing challenges on several fronts. Inflation is running at 28%, the fastest pace in Asia, making it difficult for people to make ends meet. A nine-month bailout program with the International Monetary Fund, Pakistan’s 23rd since independence in 1947, expires in March, suggesting any new leader will have to negotiate a new deal.

“Beyond risks to political stability, negotiating a new IMF program and implementing austerity policies will be more challenging in a more politically divided environment with a stronger opposition,” Johanna Chua, Hong Kong-based head of emerging-markets economics with Citigroup Inc., wrote in a note.

The base case for a multiparty coalition backed by the military hasn’t changed, but the coalition government may now be less stable and this could undermine the pursuit of the reforms needed to stabilize the economy, Citigroup said.

Investors are already dumping the nation’s stocks, with the benchmark index slumping more than 5% over the past three days. The rupee has been stable after the elections, while most dollar bonds have slowly recovered after Friday’s selloff.

Parties are trying to cobble together a coalition of at least 133 of the 265 seats that were up for grabs last week.

Khan’s Pakistan Tehreek-e-Insaf candidates have filed lawsuits to force recounts in seats its so-called independents lost. The party is targeting 50 seats that it claims were lost due to vote-rigging, according to PTI spokesman Raoof Hassan. Khan loyalists have won 95 to 97 seats, PTI has said, though one independent candidate has switched sides to PML-N and there’s a possibility more could follow.

PTI has ruled out forming an alliance with either PML-N or the PPP. The party is also filing a petition seeking a declaration from the Election Commission that the independents are party members, according to Ali Zafar, a party senator. There’s also the option of getting them to join a smaller party. Either way, the objective is the same: to access the 70 seats reserved for religious minorities and women, which will boost their numbers and give them some sway in nominating a prime minister.

--With assistance from Karl Lester M. Yap.

(Updates with details)

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