NEW YORK - Credit rating agency Moody’s on Tuesday reported that Nawaz Sharif’s disqualification by the Supreme Court (SC) in Panama Papers case poses risks to policy continuity.

If heightened political uncertainty and strife among the various branches of government disrupt the administration’s economic and fiscal agenda, macroeconomic stability and the government s access to external finance could be impaired, weighing on Pakistan s credit profile.

Our assessment that Pakistan’s susceptibility to domestic political event risk is “High” incorporates our view that the probability of political events occurring that could affect the sovereign credit profile is high; and that such events would have a large impact on policymaking and thereby the economy and the government s access to finance.

Nawaz Sharif’s ouster now could trigger another period of political instability, undermining Pakistan’s ability to address pressing domestic economic challenges, bolster investor confidence and attract external financial support from official creditors and donors.

With Pakistan’s next general election due only by August 2018, the change in PML-N leadership and ongoing investigations into the Sharif family could disrupt the policymaking process and economic reforms.

Credit implications depend on impact on government reforms, access to external finance. We expect domestic political risk to continue to constrain Pakistan’s credit profile in the near and medium term, due to both recent events and the country’s long-standing history of domestic security challenges, disruptive politics and military coups. The extent to which these events detract from economic and fiscal policymaking, and reduce government effectiveness in general, will ultimately determine their impact on Pakistan s credit profile.

Under Nawaz Sharif’s leadership, in September 2016, Pakistan completed a three-year International Monetary Fund (IMF) Extended Fund Facility program that helped to stabilize the economy. Through its reforms, the government reduced the fiscal deficit, introduced more rigorous inflation management, and rebuilt foreign exchange reserves.

More recently, fiscal consolidation has slowed, reserves have declined anew, and external pressures have started to build. Continued government commitment to policies that preserve macroeconomic stability gains and advance fiscal consolidation would limit future widening of the twin deficits, supporting Pakistan s creditworthiness. Conversely, slippage from such commitments would exert negative pressure on the credit profile. In addition to the IMF program, Nawaz Sharif oversaw a major expansion of Pakistan’s economic relationship with China (A1 stable) through the launch of the China-Pakistan Economic Corridor (CPEC) 2 project in 2015.

The CPEC is a large package of Chinese investment projects with the potential to transform Pakistan s economy by relieving supply-side constraints to growth through investment in power generation and transport infrastructure. If implemented as planned, CPEC would lift Pakistan s potential Gross Domestic Product (GDP) growth significantly and catalyze higher private-sector investments and exports.

However, security-related issues and Pakistan s weak track record of public project implementation suggest that the pace of execution will be relatively slow. Moving forward, continued support for the CPEC project across all branches of government will be critical to its success and full implementation.