Ruling coalition partners Pakistan Peoples Party (PPP) and former Prime Minister Nawaz Sharif-led Pakistan Muslim League (Nawaz) are at loggerheads over the issue of reinstatement of judges.
"The two largest parties of the ruling coalition have failed to reach agreement on the issue. Market is likely to be affected negatively, particularly with the currency also under pressure," Citi Investment Research said in a report.
All the nine PML-N ministers today quit the six-week-old Pakistan government over the issue of restoration of deposed judges, pushing the country into a fresh phase of political uncertainty.
PPP, heading the coalition, decided to keep the ministerial portfolios, except for Finance, vacant hoping to bring around Nawaz Sharif's party, which pulled out its ministers after the deadline for reinstating the judges sacked by President Pervez Musharraf expired yesterday.
The report also mentions that if the finance minister resigns it would derail efforts to raise funding to meet the current account/fiscal deficits.
"The budget is expected sometime in June and its preparation, in our opinion, may be disrupted," the report added.
Further, the report noted that if PML-N withdraws from the coalition, it would initially weaken the PPP-led government.
However, the coalition led by PPP could reach a majority if it is joined by enough PML-Q members. "Response of lawyers and how PML-N reacts to it will set the future course of action," the report pointed out.
Meanwhile, Nawaz Sharif had said on Monday that PML-N would remain PPP-led coalition and extend issue-based support to the government.
"We are quitting the Cabinet because the promise to reinstate the judges was not fulfilled," Sharif had said.
