The inter-governmental organisation responsible for combating money laundering and financing of terrorism has added Pakistan to its terror-financing watch list that could cripple the country’s economy, media reports said.
The decision to include Pakistan on the “grey list” of countries that are not doing enough to combat terrorism financing was taken at a meeting of the Financial Action Task Force (FATF) here after China and Saudi Arabia dropped their opposition to the US-led move on Thursday night.
An official statement is expected later on Friday, said FATF spokesperson Alexandra Wijmenga-Daniel. The move is part of a broader US strategy to pressure Pakistan to cut its links to Islamist militants unleashing terror attacks in Afghanistan and India. On Thursday, White House spokesman Raj Shah said President Trump was not yet satisfied with Pakistan’s progress in fighting terrorism.
Pakistan Foreign Office spokesperson voiced concern over the move to place Pakistan in the grey-list. “Pakistan has serious concerns over the motion moved by US and UK at the Financial Action Task Force to put the country on the grey list.”
Experts say that being placed on the FATF watch list would put Pakistan under extra scrutiny by regulators and financial institutions which could hamper trade and hurt foreign investment, that too when a general election is due in about six months.
International financial institutions and banks would find it difficult to do business in Pakistan and so would Pakistani businesses to raise money overseas.
Economist Syed Nazre Hyder said the impact of Pakistan’s inclusion on the watch list could be “near lethal.” He said that the cost to banks’ customers will rise, investors in the international capital market would request a much higher rate of return from Pakistan, and multilateral financing organizations would add risk premiums on any money borrowed.
Furthermore, financial experts fear the International Monetary Fund may reject any loan extension Pakistan might request as a bailout to curb its widening trade deficit or offer a new deal with stricter guidelines dictated by the US and the European Union.
“Pakistan will need a loan to pay off its debt burden,” Hyder said. “If it’s included on the list, the country will face a serious challenge sourcing funds for repayment leading to the possibility of default. This would cripple Pakistan economically.”