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Pakistan’s Path: Making the IMF Programme Its Last

The End of Easy Money

Greetings from Karachi. In recent discussions, Eric Robertsen, Global Head of Research and Chief Strategist at Standard Chartered Bank, addressed the ever-changing global economic landscape. He suggests that Pakistan should strive to make its current IMF programme the last, as the age of abundant liquidity is drawing to an end.

A Looming Challenge

With tightening financial conditions, more nations may seek IMF support. However, the IMF’s resources are not unlimited. Robertsen advised, “The liquidity phase is waning. As it does, more countries will approach the IMF, but its capacity is finite.”

Fiscal Strength and Sovereign Advice

Robertsen urged countries to bolster their fiscal positions while conditions are favourable. In his words, “Secure your fiscal health now because when liquidity tightens, there will be a queue, and the IMF cannot support everyone.”

Pakistan’s Ownership of Economic Reforms

Rehan Shaikh, CEO of Standard Chartered Bank (Pakistan), echoed the need for Pakistan to own its reform agenda. He stated, “It should be a Pakistan programme, not an IMF one. Over-reliance on external prescriptions leads to unsustainable cycles.”

Signs of Confidence

Shaikh was optimistic about Pakistan’s renewed fiscal discipline. He observed, “The market is opening. Middle Eastern banks and institutions like the ADB and World Bank are returning, boosting confidence.”

The Rewiring of Globalisation

Robertsen described a shift in global trade, moving from East-West to emerging market routes. He highlighted, “Trade now connects Asia, the Middle East, and Africa, indicating a rewiring rather than a deglobalisation.”

China’s Slowdown and Global Effects

China’s economic deceleration impacts global prices, exporting deflation. Robertsen noted, “China’s overcapacity is reducing prices for goods like EVs. This benefits importers like Pakistan but pressures local manufacturers.”

Economic Forecasts for Pakistan

Looking ahead, Robertsen forecasted potential growth for Pakistan. “GDP could rise 3.5-4% by FY2025-26, with inflation easing to single digits if policies remain consistent.”

The Role of External Liquidity

Despite positive forecasts, Robertsen cautioned that much of Pakistan’s stability stems from external liquidity. He questioned, “How much improvement is from Pakistan’s strategies and how much from global liquidity?”

The Resilience Required

“Liquidity abundance won’t last,” he warned. “Pakistan must fortify its fundamentals to withstand future economic storms.”

The Greenback’s Endurance

Robertsen dismissed the idea of “de-dollarisation.” He remarked, “The US dollar remains central. Although diversification occurs, actual dollar holdings continue to grow.”

Oil Prices and Economic Growth

Discussing oil prices, he described $65 per barrel as “neutral.” Yet, he warned that geopolitical tensions could create volatility. As for global growth, Standard Chartered projects 3% by 2026, spearheaded by the US and ASEAN regions.

“Now is a moment of calm,” Robertsen concluded. “Act now to build resilience. When tides shift, only those with robust foundations will endure.”

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