KARACHI: Citibank CEO for Europe, Middle East and Africa (EMEA) James C. Cowles has said he expects economic growth to continue in Pakistan on the back of the multi-billion-dollar China-Pakistan Economic Corridor (CPEC).

Speaking at Citibank’s EMEA Media Summit held in London earlier this month, Mr Cowles said the global bank has got a “robust business” in Pakistan in terms of both international and local clients.

Refraining from making a direct comment, he skirted around the issue of growing political instability in Pakistan. “Many countries have got political challenges. I am encouraged by what I see from an economic perspective,” he said in response to a question about Citibank’s assessment of the political risk factor.

Citibank in 2012 shut down its consumer banking operation in the country. But it retains presence as a corporate and investment banking institution. It is involved in big merger-and-acquisition transactions in the capital market, including the in-progress $1.7 billion sale of K-Electric to Chinese investors.

“You’ll continue to see development in terms of infrastructure. And as you develop infrastructure, there will continue to be other commercial opportunities for our clients,” he said.

The federal government is a major client of Citibank. It is part of a consortium that advised the government in the recent issue of sukuk and eurobond, which raised $2.5 billion from global institutional investors. It also helped the government raise $500 million in 2015 through the eurobond.

The federal government has borrowed $167 million from Citibank for budgetary support so far in 2017-18. Citibank’s profit for the first six months of 2017 was a little over Rs1bn, down 42 per cent year-on-year.

According to Zain Zaidi, Citibank’s head of bonds and syndicated loans for the Middle East and North Africa, there is still significant global appetite for Pakistani bonds. “We were finalising some funding on the day the Supreme Court made the final Panama Leaks decision. Although it was negative news, investors went ahead and funded the transaction,” he said, noting that investors are “certainly buying into the Pakistan story”.

Although Mr Cowles shied away from making a negative comment about the economy of Pakistan, Citibank’s economists believe the risk of social unrest and political instability has risen and fiscal slippages have become “more likely”.

In a recent note on economic outlook, they said the removal of Finance Minister Ishaq Dar from the Ministry of Finance raises uncertainty about the continuity in fiscal policy. “This is compounded by the likelihood that the electoral battle ahead has just become more difficult, raising the risk of even greater fiscal slippage than we had already been anticipating,” they wrote.

Although Citibank views the CPEC as a “positive driver” that should help de-bottleneck the inadequate energy sector, it believes medium-term challenges have increased for Pakistan.

Factors that may erode fiscal and external balances of the country include a partial recovery in oil prices and a slowdown in remittances, it said.

Published in Dawn, December 1st, 2017