Despite deafening ballyhoo over a sizable narrowing of twin deficits (current and account) in the first three months of the current fiscal year, Pakistan will have to beat the global terror financing watchdog’s bite and bar the international shylock’s blade.
Despite deafening ballyhoo over a sizable narrowing of twin deficits (current and account) in the first three months of the current fiscal year, Pakistan will have to beat the global terror financing watchdog’s bite and bar the international shylock’s blade.
The Financial Action Task Force (FATF) is scheduled to hold its meeting from October 14 to 18 in Paris in which the 39-member body, working against money laundering and terrorism funding, will decide the fate of Islamabad in terms of three possible scenarios. These are: exclusion from grey and inclusion into green list, staying in the grey list for an extended period ranging from 6 to 12 months, and in a worst case scenario blacklisting. A decision would be taken after analysing Pakistan’s performance on 27-point action plan.
The FATF had placed Pakistan on its grey list in June 2018 and sought implementation on its action plan from June 2018 to September 2019.
Ahead of upcoming review meeting of the FATF, the findings of Joint Working Group (JWG) were shared with Pakistani authorities as they found Pakistan to be largely compliant on 10 points, partially compliant on another 10 points, and noncompliant on seven, mainly related to proscribed organisations on account of investigation, prosecutions and conviction from court of law. Pakistan’s five member delegation led by Minister for Economic Affairs Hammad Azhar will participate into FATF review meeting in Paris along with top military officials, Director General Financial Monitoring Unit, and one Foreign Office representative.
Adviser to Prime Minister on Finance and Revenues Dr Abdul Hafeez Shaikh had publicly praised different departments for all their joint efforts for getting Pakistan out of the grey list. Shaikh said all institutions were united on taking actions against money laundering and terror financing as it was in the best interest of the country to get rid of the problems on which the FATF wanted to see progress.
Pakistan’s stance is that the country’s top military brass and civilian side should work hard to comply with all 27 points within the envisaged deadline and made good progress. Authorities are confident that the FATF will not give a new action plan. There are no chances they will further downgrade Pakistan to the blacklist. It could be the wish of Israel or India but on merit it should not be done because Islamabad have taken a number of steps in the last four to 12 months period to improve its standing.
If the US backed any such move then a short-term blacklisting cannot be ruled out in totality.
On merit, official told The News that Pakistan should be excluded from grey list and put into green or white list as Islamabad have made impressive progress on at least 20 out of 27 FATC action plan points.
However, the official sources said the FATF might maintain Pakistan’s grey-list status for an extended period of 6 to 12 months but in such scenario there will be no new action plan.
Islamabad might be asked to continue to ensure compliance on 17 points, on which the country made partial or little progress, for the next one year.
Pakistan requires mustering up diplomatic support as vote of Malaysia, China, and Turkey could save us from falling into the blacklist. Indian lobby might opt tabling a resolution into review of 39-member FATF meeting but with diplomatic and political support it could be defeated. But Pakistani side will have to ensure the representative of its supporting countries should remain present at the time of voting on any resolution in case of Pakistan.
Out of total 27-point action plan, the JWG of the FATF has found Pakistan fully compliant on these ten points.
1. Activation of NACTA website to place proscribed persons; real time access to all and continuous updation.
2. Precautions in SBP regarding Know Your Customers KYC; biometric verification of accounts etc.
3. Dissemination of Suspicious Transaction Reports (STRs) by FMU to all Law Enforcement agencies.
4. Dissemination of reverse feedback and intelligence reports by Law Enforcement agencies to SBP and FMU.
5. Risk assessment of cash smugglers particularly with special reference to Terrorist Financing.
6. Integration of customs controls at all entry and exit points of land, air and sea.
7. Effective utilisation of domestic agencies against terrorist financing.
8. Regulation of private banking system by the regulatory framework of SBP.
9. Investigation mechanism on risk-based approach against Terrorist Financing.
10. Awareness campaign to all stakeholders regarding terrorist financing.
On International Monetary Fund (IMF) front, Pakistan’s delegation led by Dr Abdul Hafeez Shaikh is scheduled to participate in the annual meeting of Bretton Woods institutions in Washington DC this week and on sidelines both sides would decide the exact schedule and venue for the upcoming review expected to take place by end of the ongoing month.
Owing to Azadi march, announced by Jamiat Ulema-e-Islam (F) leader Maulana Fazal-Ur-Rehman at the end of October, has cast doubts on IMF review meeting in Islamabad as the IMF staff would have to get security clearance prior to visiting the federal capital because there is a likelihood of roadblocks, logjams, and unrest in different parts of the city.
Although, Pakistani authorities are upbeat on achieving all structural benchmarks and indicative targets envisaged for first quarter (July-Sept) period of the current fiscal year, but we might have to seek two waivers to qualify for the second tranche under $6 billion Extended Fund Facility (EFF).
On short-term basis, Pakistan’s economic managers will have to devise a strategy to win on FATF and IMF fronts because any adverse development may derail the struggling economy that just managed to somewhat reduce its trade as well as its budget deficits. However, it’s too early to celebrate gains on economic front. We have no choice but to put our economy on a sustained growth path and it’s not going to happen without sound macroeconomic fundamentals.
It is yet to be seen as how much of this reduction in twin deficits will be preserved by the current economic managers in days ahead as we don’t have many lifelines left.
The writer is a staff member
