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FATF to place Pakistan on grey list for terror financing in 90 days. How will it impact Islamabad | 10 points



The plenary meet of the Financial Action Task Force (FATF), which concluded last night in Paris, France deferred placing Pakistan on the grey list till June. This has come with a warning: Act or face action in 90 days.

The latest FATF list of countries on grey list of FATF includes Ethiopia, Iraq, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, Vanuatu and Yemen. But reports suggest that in three months’ time, Pakistan will be put on the grey list because the challenge before Islamabad is too humongous to meet in the given time frame.

Pakistan’s ‘friends’ China and Saudi Arabia too have withdrawn their objection to the move for punitive action against it. FATF’s International Cooperation Review Group last year had resolved at its meeting in Argentina to scrutinise Pakistan’s continued support to terror groups. At the Paris meet, only Turkey opposed the move by the US to place Pakistan on the grey list by the FATF.

This is not the first time that FATF has put Pakistan on its watch list for supporting proscribed terrorist groups operating form its soil. Pakistan has already spent three years on FATF’s watch list from 2012 to 2015. It was taken off the list only after the FATF observed improvement in Pakistan’s compliance with international standards.


1.The FATF is an inter-governmental body that works as a watchdog in the matters of terror financing. It has stated that Pakistan has failed to address global concerns over its support to terrorism. Once put on the grey list, Pakistan will be put to intense scrutiny under a “Compliance Document” by FATF. Some of the commentators have described the implications of FATF action on Pakistan as “near lethal”.

2.Pakistan is facing multiple financial crises. Its current account deficit is really bad on the account very adverse balance of payment situation. Financial stability of Pakistan is dependent on the foreign aids, grants and loans that it has been receiving for years.

3.Placing of Pakistan on FATF grey list would affect its banking links with the world that ensures money supply to the nation. Banks will face greater strain in their transaction escalating the cost of operations to great disadvantage of the customers. This is happening merely five months ahead of the general elections in the country.

4.Pakistan’s economy has been doing well of late by its own standard. It has been growing at five per cent in the past few years and the government expected the GDP growth rate to reach six per cent in 2018 fiscal. With FATF sanction coming in, this dream may not be realised.

5.On account of FATF’s punitive action, Pakistan will suffer losses on account of less trade, foreign transactions and investment by European countries. Pakistan’s export of rice, cotton, marble, clothes, onions etc will suffer a lot causing huge loss to producers.

6.Share markets in Pakistan betrayed nervousness in anticipation of FATF action yesterday plunging by over 600 points before recovering later in the day. The sanction would translate into low investors’ confidence in Pakistan. Some may even pull out their investments. However, a large part of foreign investment in Pakistan is sourced from friendly nations including China and Saudi Arabia.

7.Agencies like International Monetary Fund are likely to put a temporary curb on sanctioning or releasing loans to Pakistan. Other lenders from the international markets will charge higher interest rates for their loans worsening the financial crisis in Pakistan.

8.Pakistan needs loan to repay its debt burden plus interests on these borrowings. FATF listing puts Pakistan at the risk of defaulting on payment of installments and would fail to honour its commitments. This would cripple Pakistan’s economy.

9.Interestingly, the FATF action has a nod from Pakistan’s all-weather friend China, which has extended hefty loans to the country. The China Pakistan Economic Corridor (CPEC) worth USD 60 billion forms an important segment in Chinese Belt and Road Initiative.

10.Most of the Chinese money invested in Pakistan comes in the form of debt.

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