The recently concluded that the Financial Action Task Force (FATF) meeting in Paris had come out with the expected results. It continues to put Pakistan on top List of Gray, demanding further compliance with at least three of the remaining 27 action plan points presented to the state in June 2018 when it was placed on the list a second time.
The country’s ‘elected’ Prime Minister, Imran Khan, along with a number of intellectuals and media professionals, accuse India of the role behind the decision. Imran Khan went on to suggest that the FATF acted on political cues and goals and that it would not help developing countries.
The 39-member FATF is an influential intergovernmental body that formulates and monitors the role of financial mechanisms in the growth and promotion of money laundering and terror financing activities around the world. It has black list which leads to direct economic sanctions and creates severe economic hardship for the country. Currently only two countries, Iran and North Korea, are on the list and that is causing massive financial stress for both of them.
Since Pakistan has been globally recognized as the center of terrorism and a large number of terror activities around the world, have their origins or are related to it, one cannot forget Osama Bin Laden’s relationship and the subsequent eliminations there, that is doubtful. the differences are on List of Gray, three times. It was on this list for three years 2012-2015 and again since June 2018.
Now the most basic aim behind the gray list by the FATF is to change the behavior of some countries, which are engaged in using terrorism as a tool to promote foreign policy goals. It aims to strengthen money laundering and funding mechanisms to reduce sources of funding for terrorists, who operate in any part of the world. Based on Pakistan’s activities over a long period of time, it has been on the list twice.
When it was added to the list for the second time in 2018, the country negotiated a 26-point plan with the FATF to work on and showed significant improvement at the earliest. One thing that is interesting is that since Imran Khan became PM, this country has remained on the list. Despite tremendous financial difficulties, Pakistan has been ‘deliberately’ slow to undertake these steps.
While there is talk of Pakistan’s economy and diplomacy being badly affected by being on the list for a long time, previous experiences in 2012 were not that difficult. It is able to obtain loans from the IMF and other multilateral financial institutions. It can also bank for its Arab allies Saudi Arabia and the UAE and get their financial support on a bilateral basis. Hence, there were not many problems encountered during this period.
However, the situation has changed now. His political relations with the two major Arab powers were poor and that led to an increase in bonhomie with Turkey’s Erdogan. While Erdogan pursued his personal agenda and used Pakistan as a tool in his plans, Imran Khan suddenly created a difficult situation for his country. By getting too close to Erdogan, he has almost alienated Arabs and as a result, his base of financial support has been eroded.
This is evident in both countries, stopping their lines of credit to Pakistan and asking for loan repayments, ahead of schedule. Turkey is not a financial powerhouse and President Erdogan has his own personal and diplomatic agendas, very few of which have anything in common with Pakistan’s geo-political interests. China, the only other country that can be trusted, is more interested in promoting its own brand of debt diplomacy for which Pakistan, currently the top candidate.
An Islamabad-based think tank recently issued a research paper showing that the country has lost an estimated US $ 38 Billion from being listed three times in FATF Gray List since the period 2008-2021. Tabadlab, a think tank, calculates losses based on decreases in national domestic consumption, foreign investment (FDI), and exports. Most of the losses were due to significant reductions in household and government consumption and spending.
While accurate economic analysis on this basis would be difficult and perhaps hypothetical. Politically and diplomatically, Pakistan has had to bear heavy losses. The continuing list at the FATF hinders better diplomatic relations with most countries. In addition, potential investors and financial institutions would feel uncomfortable doing business with such a country. Furthermore, while the country has acquired a notorious reputation as the home of terrorists from Al Qaeda, ISIS, Lasker-eTaiba, Jaish-e-Mohammed and their leaders, banks and financial institutions will not find sufficiently attractive places to do business.
To make matters worse, Pakistan is in a very vulnerable financial condition. Inflation is very high, unemployment is rampant, GDP figures are falling, while foreign exchange reserves are very low, namely US $ 12 billion. Gross Public Debt has increased from 72% of GDP at US $ 95 Billion (2018) to 87% at US $ 112.8 Billion today. Pakistan’s Debt to GDP Ratio currently stands at 107% of GDP which is very poor. Total foreign debt and liabilities have increased from 33% of GDP (2018) to 45% of GDP (2020). And political instability is worrying while the Army’s role in economic and foreign policy-making remains, as it has for decades.
Although PM Imran Khan continues to accuse the FATF of playing politics, they cannot escape the fact that terrorists, recognized globally, continue to have freedom of walking in the country. To create problems for neighboring India, its army and the ISI provide protection, weapons and financial support to terror kingpins such as Salahuddin, Masood Azhar, Hafiz Saeed and Zaki-ur-Rehamn and many others.
Broadly politically motivated support for the anti-French protests (perhaps to please Erdogan), the slow trial proceedings for Daniel Pearl’s killers and the protracted protracted fight against the Indian government, have made the situation even more difficult for Pakistan. While most Pakistani analysts expect the country to be off the list in June this year and put their hopes in a phone call by Biden to Imran Khan that could change Pakistan’s fate, it is clear that Pakistan really needs to change. attitudes, behavior and actions to use terrorism as a foreign policy tool.
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