The economic woes of Pakistan are hardly cryptic today. The depreciating currency, a crippling current account deficit, and dwindling Forex reserves accurately depict the financial misery. And despite the leverage offered by IMF packages, loans from allied nations, and profuse Chinese investments, the country faces a severe reputational crisis that has all but hampered its ability to host diverse Foreign Direct Investment (FDI) and invite multinationals to produce domestically.
As the pandemic is ebbing away, so are the inflated export orders and soaring remittances. Yet, due to the massive devaluation of the Rupee and 7-year high international oil prices, the import bill is likely to surge exponentially by the end of this fiscal year. Coincidently, Pakistan would be presenting its performance to the Financial Action Task Force (FATF) in Paris on the plenary session scheduled from 21st February to 4th March 2022. A breakthrough could serve as a lifeline to the limping economy – a vindication it desperately needs. However, the prospects seem bleaker as Pakistan faces review on multiple fronts that could plunge it further down in the abyss.
Pakistan was placed on the ‘Grey-list’ by the FATF in June 2018
Barely months before Prime Minister Imran Khan took office. Since then, the struggle against restrictions and objectives has continued. The FATF has intermittently urged the regime to enact anti-money laundering (AML) and counter-terror financing (CTF) measures in the country’s legislative framework to ensure an airtight regulatory system in compliance with international financial standards. Over the past few years, the FATF has quantified the AML/CTF measures into 27 action plans – complemented by an auxiliary six-point action plan designed to counter the deficiencies identified in the 2019 Asia Pacific Group on Money Laundering (APG) Mutual Evaluation Report (MER). In response, Pakistan has implemented 17 laws pertaining to money laundering and terror financing through several legislative amendments – either through bipartisan parliamentary support or through presidential ordinances.
However, the global financial watchdog retained Pakistan on its grey list last October despite looming optimistic expectations in the political echelons of Pakistan. “Pakistan remains under increased monitoring (grey list). The Pakistan government has two concurrent action plans with a total of 34 action plan items,” said Dr. Marcus Pleyer, the FATF President. Naturally, criticism followed in spades as many public office holders in Pakistan condemned the decision as unfair and politically motivated. The highlighted statement came from Pakistan’s Foreign Minister Shah Mahmood Qureshi – calling out for a global assessment into “whether FATF is a technical forum or a political one and if the forum was being used to serve political motives.”
Clearly, the intended jibe was towards the Western bloc – and presumably India – exacting revenge for brokering away Afghanistan to the notorious Taliban regime. Nonetheless, the government now realizes that the action plan is in its own interest – the PTI regime already being a vocal critic of the money laundering escapades of the preceding governments of Pakistan. Thus, extensively working on the action plans could pivot the national adulation towards Imran Khan as he heads towards general elections in 2023.
What is Pakistan’s way forward?
According to a research paper published by Tabadlab – an independent think-tank – Pakistan’s greylisting, ranging from 2008 to 2019, has resulted in cumulative GDP losses worth an estimated $38 billion. Analysts believe that the adverse effect is a blend of plummeting FDI, disparaging media coverage, and roadblocks placed by hostile states to use Pakistan’s status as political leverage. Now, as Pakistan prepares to convince the plenary apropos of delivering on global financial compliance, domestic regulatory frameworks, and independent investigations, experts believe that Pakistan may be barrelling towards the darker territory.
According to senior political analysts, Pakistan has consistently failed to prosecute the senior commanders of UN-designated terror groups. On the contrary, the PTI regime has time and again capitulated to extremist groups like Tehreek-e-Taliban Pakistan (TTP) and Tehreek-e-Labbaik Pakistan (TLP). Moreover, the inconspicuous military and intelligence intervention in political decision-making have hardly evaded the watchdog. Further, Imran Khan’s efforts to rally foreign aid to Afghanistan Relief Fund have been domestically criticized.
His rhetoric to recognize the Taliban government (sooner or later) hasn’t been well received either. And a spike in terror attacks in Balochistan and Northern Waziristan has evoked a renewed suspicion of terror financing in the global community. Hence, contrary to the buoyant foresight shared last year, the arching belief is that Pakistan could delve into the ‘Black-list’: subsequently, driving a barrage of economic penalties and restrictions that could decimate the fragile economy – paradoxically debilitating its ability to enact countermeasures in the future.
The writer is currently working as a writer for South Asia Magazine and a columnist for Modern Diplomacy – a European Think Tank. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.