Standard Chartered CEO optimistic about new IMF programme

KARACHI: Standard Chartered PLC Group Chief Executive Officer Bill Winters expressed optimism regarding Pakistan’s potential to secure a new funding programme from the International Monetary Fund (IMF), citing the achievability of tough lending requirements set by the IMF, as evidenced by the country’s latest budget.

Speaking at a recent media roundtable, Winters acknowledged that “the terms that the IMF would typically impose as a condition for releasing funds are achievable by Pakistan, for sure,” adding that the recently passed budget had that type of programme in mind.

“That said, I imagine that there will be more requirements or at least more detailed assessments of the requirements for the IMF to finally release these funds,” he said.Pakistan is currently in talks with the IMF for a new loan ranging from $6-8 billion to help prevent a debt default and ensure economic stability. Islamabad is seeking to clinch a staff-level agreement with the IMF for a bailout, having successfully met several targets and conditions set by the global lender.

Last month, Pakistan’s parliament approved the government’s tax-heavy budget for the fiscal year 2025, which began on July 1. In April, Pakistan completed a short-term $3 billion programme.

CEO of Standard Chartered (SC) Bank Pakistan Rehan Shaikh, who was also present at the discussion, stated that while these [IMF bailouts] are short-term tools for managing imbalances, medium- to long-term structural decisions must be made.

“I think the government’s resolve to take steps for the medium to long term is encouraging, and we are quite encouraged by some of the steps that are being taken. But they will have to be taken in steps,” Shaikh added.

In honour of Standard Chartered’s 160th anniversary in Pakistan, Winters visited the country. The London-based bank operates in various markets across Asia, the Middle East, Africa, America, Europe, and Latin America. It also maintains a significant retail presence in Pakistan.

According to Shaikh, the SC, being the only and largest international bank in Pakistan, has made investments in the country through acquisitions and organic expansion over the past 160 years. This is the leading bank for the government’s LNG and other energy trade financing needs. Whenever the government has borrowed money in thecapital markets, whether through conventional means or Islamic Sukuk, SC Pakistan has always been there as one of the arrangers.

Winters stated that the currency devaluation, higher interest rates, and monetary crisis made the last couple of years extremely challenging.“Of course, this is not unique to Pakistan. Many of the markets we operate experience the same stresses and strains,” he added.

“I think the [Pakistan’s] central bank did an exceptional job of painfully but successfully managing currency inflows and outflows,” he noted.“The government put appropriate stabilizing measures in place and made the right changes to elicit the first round of IMF support, and we all recognize they are working on a second IMF round now. That has all contributed to Pakistan’s improving trend.”

He thinks Pakistan’s debt burden is manageable. The gap between imports and exports has been a problem. However, currency imbalances eventually result in debt issues. Limiting borrowing is the best approach to handle the debt problem. However, the nation has structural issues that need to be addressed before it can borrow money to support export-oriented businesses and discourage imports.

“I think what we saw from the government was a budget that addresses the debt challenge, the fiscal imbalance, to some degree. But that fight has to keep on being fought,” Winters said.

He believes that confidence is a key component of the path ahead. Investments start to flow in when local and foreign businesspeople feel more confident about the country and realize that things are already lot better than they were.

He reckons Pakistan can achieve 6-9 per cent economic growth given its natural resources, talent, rule of law, and technical foundations.Shaikh mentioned that despite difficult circumstances, Pakistan has not defaulted. This demonstrates the resilience of the economy and effective financial management.

Globally, the banking sector is doing well, asserts Winters. This can be attributed partly to the return to normal growth rates following the Covid-19 pandemic, the supply chain disruption caused by Russia’s invasion of Ukraine, the ensuing inflation, etc.

Banks today are much better capitalized and much more liquid than was the case prior to the financial crisis, Winters said.“Higher interest rates, all else equal, are good for banks. It allows us to earn more margins between deposits and loans. That has contributed to the profitability of banks in Pakistan as well. But for us, it’s been, in all of our major markets, we've benefited from higher interest rates,” he added.

“And as interest rates normalize over the next two, three years, big debate is exactly what the timing of that will be. We’d expect bank profits to normalize.”As Pakistan’s financial markets mature, it is hoped that more corporations, both domestic and international, will have access to the banking market, he said.