The leaking of the so-called “Panama Papers” in early April 2016 quickly became a political and legal headache for Prime Minister Nawaz Sharif, whose family was revealed in the private documents of a Panamanian law firm to own several very expensive London properties purchased with funds of unclear origin. Sharif, his daughter, Maryam, and two sons managed to keep the legal authorities at bay for more than a year, but were caught out when forensic examination of potentially exonerating documents produced by Maryam and her husband proved to be forgeries.

Sharif was forced to step down as leader of the governing PML-N and prime minister in late July, following a unanimous Supreme Court verdict barring him from holding public office for a period of 10 years. However, Sharif was re-elected as leader of the PML-N in early October, following enactment of a controversial electoral law permitting individuals barred from public office to serve as party leaders. Sharif clearly retains the loyalty of the PML-N, and there is limited risk of defections from the party in the absence of evidence that the scandal is hurting its chances of winning another term at next year’s election.

According to the most recent poll data, from late August, the PML-N is leading the PTI by 38%–27%. In Punjab, where the PML-N won the majority of its 126 elected seats in the National Assembly, the party leads the PTI by more than 30 percentage points. Significantly, the opposition PPP has effectively conceded that it has no chance of winning, and is pursuing an electoral strategy aimed at reclaiming its status as leader of the opposition. That game plan rules out an electoral alliance with the PTI, and all but guarantees a split of the opposition vote that will benefit the PML-N.

Of course, much could change over the next several months that contributes to shifts in public opinion. Corruption investigations of Sharif and Finance Minister Ishaq Dar, who thus far has refused to appear in court to answer to corruption charges, might turn up evidence of far-reaching networks of corruption that test the tolerance of voters. Alternatively, a recent flaring of tensions along the border with Afghanistan, or deteriorating relations with the administration of US President Donald Trump, who recently accused Pakistan of being a state sponsor of terrorism, could result in worsening security or economic conditions, to the advantage of the opposition parties.

Even if those risks are held in check, the government will need to take care to avoid taking any action that might provoke intervention by the military. Given PTI leader Khan’s proven ability to channel popular outrage against the government into mass protests that threaten domestic stability, it will not be entirely in the government’s power to avoid such a scenario.

Since 1979, The PRS Group Inc., has been a global leader in quant-based political and country risk ratings and forecasts. For more information on The PRS Group and its wide range of risk products, go to: www.prsgroup.com, or contact us at (315) 431-0511 and sales@prsgroup.com