Pakistan can afford to run a deficit due to simpler external account, says Citibank EMEA head.

KARACHI -- Pakistan can afford to run a deficit as it has a 'simple' external account when compared to other emerging market countries, and is not reliant on inflows, according to Atiq Rehman, the head of EMEA (Europe, Middle East, and Africa) Emerging markets at Citibank.

The comments were made by Rehman during a webinar titled 'Emerging Markets Outlook: Challenge and Opportunity', as part of Citibank's Virtual Media Summit 2020, to be held on July 2 and 3.

Joining Rehman in the webinar was Grant Carson, head of TRUK (Turkey, Russia, Ukraine and Kazakhstan) and Non-presence countries, as well as Akin Dawodu, head of Sub-Saharan Africa.

In response to a question about whether Pakistan could afford to run a deficit, Rehman said that Pakistan has a 'simple' external account when one looks at foreign investors whether in the capital markets or as FDI.

Unlike other countries which have substantial inflows coming in, the outflow of funds has a 'limited impact' on Pakistan. This makes it very different from other countries in its peer groups. Pakistan therefore has a lot of flexibility, because the inflows coming in were not that substantial.

As for what foriegn investor appetite for Pakistan might look like in a post-Covid world, Rehman said that foriegn investment could be divided in two: FDI, and portfolio investments. While FDI is much more medium and long-term and based on a lot of factors, portfolio demand for emerging markets is still intact.

'We have started to see an improvement in what is happening in the Covid...