Political shocks from the poll fiasco in Daska, upcoming Senate elections and the recent events on IMF and FATF fronts are severe blows to the economic health of Pakistan that is already grappling with slow growth coupled with a crippled currency.
Political shocks from the poll fiasco in Daska, upcoming Senate elections and the recent events on IMF and FATF fronts are severe blows to the economic health of Pakistan that is already grappling with slow growth coupled with a crippled currency.
A revival of IMF's stalled $6 billion bail-out program is a good omen for the government but this time it has to introduce unpopular measures, including a price increase in electricity and petroleum products, to keep the Fund program afloat.
In return, it would get dollar inflows in near future to balance revenue and expenditures sides in next fiscal budget for 2021-22 in June this year.
The Financial Action Task Force has kept Pakistan on the grey list for another extended period of four months till June 2021. It clearly demonstrates that the (FATF) the anti-money laundering and anti-terrorist financing watchdog wants to keep Pakistan on its toes.
Now, first of all, let’s discuss the revival of the IMF program that had stalled after the eruption of the COVID-19 pandemic in Feb/March 2020. It got revived exactly after one year in February this year and now Fund’s Executive Board is expected to grant approval for a combination of second to fifth reviews and release of a $500 million tranche under Extended Fund Facility (EFF) by the end of March 2021.
The size of the IMF program under EFF has not been reduced from the original size of over $6 billion, however, options are under discussion either to jack up the size of the remaining three tranches or extend the period of EFF program beyond the 39 months period.
The IMF and Pakistani side would have to undertake number crunching on a macroeconomic and fiscal framework for the remaining period of the program because the COVID-19 pandemic had altered the macroeconomic and fiscal framework realities. It had made pre COVID-19 pandemic related projections irrelevant, and therefore both sides would have to evolve a consensus on macroeconomic and fiscal framework for the remaining period of the IMF program.
Pakistan has been asked by the FATF to comply with the remaining three outstanding points out of a total of 27 action plans.
The Plenary meetings of FATF were held virtually from 22-25 February 2021, where its members discussed a range of issues relating to Pakistan’s progress.
The FATF told Islamabad to address three remaining deficiencies related to terror financing and effective implementation of United Nations Security Council (UNSC) Resolutions 1267 and 1373 against all designated terrorists.
“Pakistan will remain on the grey list as some deficiencies still exist as out of 27 action plans, three still need to be addressed. I urge Pakistan to fully implement the action plan. When Pakistan will complete the whole action then our onsite visit will verify sustainability and then FATF members will decide about Pakistan’s fate in their next plenary meeting expected to be held in June 2021” the FATF’s President Marcus Pleyer said at a news briefing.
The FATF, after the plenary meeting, stated that Pakistan made a high-level political commitment to work with the FATF and APG to strengthen its AML/CFT regime and to address its strategic counter-terrorist financing-related deficiencies in June 2018 and since then the country's continued political commitment has led to significant progress across a comprehensive CFT action plan.
Pakistan demonstrated that the law enforcement agencies are identifying and investigating the widest range of TF activity and the country also showed enforcement measures against TFS violations.
While Pakistan is working out to prevent raising and moving of funds including by controlling facilities and services owned or controlled by designated persons and entities.
“Pakistan should continue to work on implementing the three remaining items in its action plan to address it's strategically important deficiencies, namely by: (1) demonstrating that TF investigations and prosecutions target persons and entities acting on behalf or at the direction of the designated persons or entities; (2) demonstrating that TF prosecutions result in effective, proportionate, and dissuasive sanctions; and (3) demonstrating effective implementation of targeted financial sanctions against all 1267 and 1373 designated terrorists, specifically those acting for or on their behalf” the FATF said.
The FATF takes note of the significant progress made on the entire action plan. To date, Pakistan has made progress across all action plan items and has now largely addressed 24 of the 27 action items.
“As all action plan deadlines have expired, the FATF strongly urges Pakistan to swiftly complete its full action plan before June 2021."
The government, particularly the finance ministry on FATF’s decision took a stance by arguing that the FATF appreciated Pakistan for the significant progress made on the entire action plan.
Pakistan has undertaken enormous work to strengthen its AML/CFT regime and address the strategic counter-terrorist financing related deficiencies. In addition to the acknowledgment by FATF in its plenary statement that Pakistan has made significant progress on the entire action plan by addressing 24 out of the 27 items in the action plan, Pakistan has also made notable progress in the remaining 3 action items which also stand partially addressed. As of now, all the 10 action items pertaining to the financial sector and border controls have been addressed. In relation to Terrorism Financing (TF) investigations and prosecutions, 6 of the 8 action items have been addressed, whereas, for targeted financial sanctions, 8 of the 9 action items also stand addressed. The progress on the remaining 3 action items is well underway with significant progress made so far.
Now Pakistan will have to demonstrate its willingness on implementing key issues, like it would have to prosecute and convict all those terrorist outfits and their affiliates who were involved in any unwarranted activities. Such actions would be verified through onsite visits for gauging sustainability by the FATF teams then the decision of excluding Pakistan would be taken at the plenary expected to be held in June 2021.
So, the time has come for crucial decisions on both IMF and FATF fronts to avoid any impacts on the economy of Pakistan.
The writer is a staff member
