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Pakistan’s Economy may become worse under FATF’s grey list


News Analysis |

The Foreign Office (FO), on Thursday, said that Pakistan can be removed from the Financial Action Task Force (FATF’s) so-called grey-list of countries if it manages to take adequate steps in the future. Pakistan must adhere by the FATF plan to get removed from the grey list, FO spokesperson Dr. Mohammad Faisal said during a press briefing in Islamabad. The FO also ruled out chances of Pakistan being blacklisted by the FATF but acknowledged that unless Pakistan does not take the adequate measures to avert the crisis, the country could face  economic trouble.

Furthermore, it must continue its diplomatic engagements with member countries to dismantle Indian lobbies that plan to hurt Pakistan economically.

On Wednesday, FATF had decided to formally put Pakistan on the grey-list.

Pakistan’s interim Finance Minister Dr. Shamshad Akhtar appraised the FATF members of the steps the country has taken to stem money laundering and terror financing and put up a robust case for not placing its name on the grey-list.

Read more: Can an increase in remittances boost Pakistan’s economy?

Pakistan pleaded to remove its name from the grey list during the six-day meeting in the French capital that runs from June 24 through 29.

She led Pakistan’s delegation and shed light on its efforts to comply with the watchdog’s demands. FATF was informed that the country has shown determination and   banned  terror outfits and blocked  networks providing financial assistance to the terrorist organizations.

In February this year, Pakistan was given three-month reprieve to delink terrorist financing to avoid ‘grey list’, when Dr. Miftah Ismail led team made efforts to avoid the disaster.

Earlier, US and UK had joined hands to put forward the motion against Pakistan and also persuaded Germany and France which co-sponsored the move. Though, initially, China, Saudi Arabia, and Turkey opposed the motion against Pakistan after relentless diplomatic efforts from Pakistan. But, later Saudi Arabia bowed under pressure and decided to withdraw its support.

Pakistan’s booming banking industry could may also get a hit as the decision could worsen the risk profile of the country, affecting financial transactions with Pakistani banks.

Apparently, to avoid embarrassment, China also withdrew its support, knowing that two members cannot veto the decision of FATF.

Nevertheless, Pakistan managed to delay  being put on the terrorist financing list at least for three months until June. Eventhough, it has made immense efforts in last few months to convince America and UK to avoid the unfortunate situation.

Read more: Pakistan economy set to record fastest growth in 13 years

Pakistan also amended the anti-terrorism laws, blacklisted the charities linked to Jamaat-ud-Dawa (JuD) leader Hafiz Saeed.A section of the Anti-Terrorism Act (ATA) 1997 to enable the authorities to move against individuals and organizations prescribed by the United Nations Security Council (UNSC) was ammended.   Punjab government swiftly seized assets and funds belonging to Hafiz Saeed’s Jamat ud Dawa (JuD) and its welfare wing the Falah-i-Insaniat Foundation (FIF).

But its apparent lackluster effort to regain the trust of the international community did not succeed.

After inclusion in the grey list, Pakistan’s economy which is already in financial crisis could further enter into choppy waters as it could augment the problem. It could discourage  investors and FDI may plunge and Pakistan may struggle to generate access to international markets.

Legal risk may convince the potential investors to opt out of the investment.

FATF was informed that the country has shown determination and   banned  terror outfits and blocked  networks providing financial assistance to the terroristorganizations.

It may restrict the financial aid to the country. Moreover, Pakistan will face trade restrictions.

Pakistan’s booming banking industry could may also get a hit as the decision could worsen the risk profile of the country, affecting financial transactions with Pakistani banks.

Read more: Pakistan Economy’s Progress Card

Going forward Pakistan must safeguard its interests, if it’s to protect its economy from free fall, especially given its dependence on external institutions for financing needs after Dar’s huge blunder. It should satisfy the concerns of the stakeholders involved. Furthermore, it must continue its diplomatic engagements with member countries to dismantle Indian lobbies that plan to hurt Pakistan economically.

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