Pakistan tries to mitigate risk of FATF financial restrictions

Pakistani politician and political economist Miftah Ismail. (Photo courtesy: social media)

ISLAMABAD: Islamabad dispatched an adviser to the prime minister to attend the Financial Action Task Force (FATF) plenary session, as fears grow that Pakistan will be placed back on the watchdog’s international terror-financing watch list. 
Dr. Miftah Ismail toured Europe last week, briefing FATF member countries on steps Pakistan has taken to stay compliant. 
He was not originally scheduled to attend the FATF session in Paris on the safety and security of the global financial system, but the situation required his presence to plead Islamabad’s case.
A draft resolution to place Pakistan on the FATF’s list is spearheaded by the US, with the support of Britain, France and Germany.
The US is reportedly concerned about Islamabad’s commitment to tackling money laundering and terror financing.
“The measure to blacklist Pakistan is part of a propaganda (campaign) to economically destabilize our country,” said Interior Minister Ahsan Iqbal, adding that Pakistan has borne the brunt of the war on terror.
US-Pakistani relations hit a new low last year when Washington, unveiling its new strategy for Afghanistan, accused Islamabad of harboring and supporting terrorists.
Pakistani Foreign Minister Khawaja Mohammed Asif is currently visiting Moscow at the invitation of his Russian counterpart Sergey Lavrov.
Asif will likely raise Islamabad’s concerns about the FATF in an attempt to muster Russian support against Pakistan’s inclusion on the watch list.
Last year, the FATF’s International Cooperation Review Group resolved to scrutinize Pakistan’s apparent support of proscribed groups operating on its soil, and requested a report on the country’s efforts to combat terror financing.
Should it be put back on the watch list, this time the effects “would be even greater because there are other pressures on Pakistan,” political commentator and retired Lt. Gen. Talat Masood told Arab News. 
Pakistan spent five years on the watch list from 2010, before its compliance with international standards saw it removed.
“It’s a pressure tactic to force Pakistan to do more than it’s already doing,” former diplomat Javed Hafiz told Arab News.
“It’s already in our national action plan not to allow banned organizations (or individuals) to operate, even under a new name, and to freeze their assets.”
Senior economist Dr. Syed Nazre Hyder described the potential impact of Pakistan’s inclusion on the watch list as “near lethal.” 
The cost to banks’ customers will rise, investors in the international capital market will request a much higher rate of return from Pakistan, and multilateral financing organizations will add risk premiums on any money borrowed, he said.
Furthermore, financial experts fear that the International Monetary Fund (IMF) 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 EU.
“Pakistan will need a loan to pay off its debt burden,” Hyder told Arab News. “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.”
But Dr. Ashfaq Hasan Khan, a former adviser to the Finance Ministry, believes that Pakistan’s inclusion on the FATF’s list may not have the expected impact.
“Pakistan has done a lot as far as anti-money laundering is concerned. It took additional steps last week to further strengthen (that section of the law),” he said, referring to Islamabad’s operation against Jamat- ud -Dawa (JuD) and its charity wing, the Falah-e-Insaniat Foundation (FIF).
Both the JuD and FIF are linked to Hafiz Saeed, whom India accuses of masterminding the November 2008 attacks in Mumbai. Saeed has a $10 million bounty on his head.
The impact on Pakistan’s relations with the international financial market would be insignificant, Khan said. 
The FATF “deals with terror financing and money laundering, against which we’ve taken action,” he added.
The present government would not allow the US “to pull Pakistan’s strings financially,” Khan said.
India has lobbied for Pakistan’s inclusion on the FATF list, but Islamabad is banking heavily on support from China, Russia, Turkey, and members of the Gulf Cooperation Council (GCC).
“We’re relying far too heavily on China. I don’t think even China likes that,” said Masood. Pakistan needs to focus on internal stability before it can successfully resist international pressure, and it should use its relationship with China to gain tangible benefits, rather than “frittering it away to counter negative pressure from the US, India and others,” he added.