The recently concluded Financial Action Task Force (FATF) meeting in Paris has come out with an expected outcome. It has continued to put Pakistan on the Grey List, demanding compliance again on at least three of the remaining 27-point action plan that was given to the country in June 2018 when it was placed on the list for the second time.
The country’s ‘selected’ Prime Minister Imran Khan, along with a host of intellectuals and media professionals, alleged Indian role behind the decision. Imran Khan went on to suggest that the FATF is acting on political cues and purpose and that will not be helpful for developing countries.
The 39-member FATF is an influential inter-governmental body that formulates and monitors the role of financial mechanisms in the growth and promotion of money-laundering and terror-financing activities worldwide. It has the Black List that leads to direct economic sanctions and creates severe economic difficulties for the nation. Currently only two countries, Iran and North Korea are on the list and that has resulted in a massive financial stress for both of them.
Since Pakistan has been globally acknowledged as a hub of terrorism and a good number of terror activities across the world, have had their genesis or linked someway to it, one cannot forget the Osama Bin Laden’s link and his subsequent elimination there, it has the dubious distinction of being on the Grey List, thrice. It was on this list for three-years 2012-2015 and again has been there since June, 2018.
Now the very basic objective behind grey listing by the FATF is to change the behaviour of some of the nations, involved in using terrorism as a means of promoting foreign policy goals. It aims to strengthen money-laundering and financing mechanisms so as to alleviate sources of financing to the terrorists, operating in any part of the world. Based on Pakistan’s activities for a long period of time, it has been put on the list twice.
When it was put on the list for second time in 2018, the country negotiated a 26-point plan with the FATF to work on and show meaningful improvement at the earliest. One interesting point is that since Imran Khan has become the PM, the country has remained on the list. In spite of tremendous financial complications, Pakistan has been ‘deliberately’ slow to work on these measures.
While there have been talks of Pakistani economy and diplomacy being hugely affected on account of being in the list for such a long time, the previous experience in 2012 however, had not been that difficult. It was able to secure loans from the IMF and other multilateral financial institutions. It was also able to bank upon its Arabian allies, Saudi Arabia and the UAE and secured their financial backing on a bilateral basis. Hence, it did not face much problems during that period.
However, situation has changed now. Its political relations with both major Arabian powerhouses is abysmal and that has reasons for its increasing bonhomie with the Turkish Erdogan. While Erdogan is pursuing his personal agenda and using Pakistan as a tool in his scheme of things, Imran Khan has suddenly created a catch-22 situation for his country. By getting too close to Erdogan, he has virtually alienated the Arabs and consequently, his financial support base has eroded.
It has been evident in the two countries, stopping their line of credit to Pakistan and asking for return of loans, before the schedule. Turkey is no financial powerhouse and its President Erdogan has his own personal and diplomatic agendas, very little of them are in common with Pakistan’s geo-political interests. China, the only other country it can bank upon, is more interested in promoting its own brand of debt-diplomacy for which Pakistan, currently is a prime candidate.
An Islamabad-based think-tank has recently come up with a research paper that suggested the country has lost about US$ 38 Billion on account of its listing thrice in the FATF Grey List since 2008-2021 period. Tabadlab, the think-tank worked out the losses on the basis of a decrease in the national domestic consumption, foreign direct investment (FDI) and exports. A large part of the losses has been attributed to a significant reduction in household and government consumption and expenditure.
While an accurate economic analysis on this basis will be difficult and might well be hypothetical. Politically and diplomatically, Pakistan has had to endure a big loss. A continued listing in the FATF, discourages better diplomatic relations with most countries. Also, potential investors and financial institutions will find it uncomfortable to do business with such a country. Further, when the country has acquired a notorious reputation of being home to terrorists from Al Qaeda, ISIS, Lasker-eTaiba, Jaish-e-Mohammed and their leaders, banks and financial institutions will not find the place attractive enough to do business.
To make the situation worse, Pakistan is in a very delicate financial state. Inflation is very high, unemployment is rampant, GDP figures are down while forex reserves are at a very low of US$ 12Billion. The Gross Public Debt has risen from 72% of GDP at US$95 Billion (2018) to 87% at US$112.8 Billion currently. Pakistan’s Debt to GDP ratio currently stands at an abysmal 107% of GDP. Total external debts and liabilities have risen from 33% of GDP (2018) to 45% of GDP (2020). And the political instability is worrisome while the role of Army in making of economic and foreign policy remains, as it had been for decades.
Though PM Imran Khan continues to accuse the FATF of playing politics, it cannot shy away from the fact that globally-acknowledged terrorists, continue to have a free run in the country. To create troubles for neighbouring India, its army and the ISI provide sanctuary, arms and financial support to terror kingpins like Salahuddin, Masood Azhar, Hafiz Saeed and Zaki-ur-Rehamn and many others.
The politically-motivated widespread support to anti-France protests (probably to please Erdogan), the dilly-dallying of the judicial process for Daniel Pearl killers and a continued brinkmanship against the Indian government, have made situation further difficult for Pakistan. While most of the Pakistani analysts are expecting the country’s likely exit from the list in June this year and are putting their hopes on a phone call by Biden to Imran Khan that could change the fate of Pakistan, it is clear that Pakistan really needs to change its attitude, behaviour and actions to use terrorism as a tool of foreign policy.
