The prospects of Pakistan being placed on global terrorist financing watchlist could endanger its handful of remaining banking links to the outside world, causing a real financial pain to the economy. The United States had already suspended its economic and security assistance to Pakistan worth 2 billion dollars. Inclusion on the Financial Action Task Force (FATF) watchlist for the second time just in five years could inflict real damage. Earlier Pakistan remained on this list for three years from 2012-15. Lifting of its name may have been inspired by decisive military operation Zarb-e-Azb in FATA in mid 2014.
Washington and its European allies including the UK, Germany and France cosponsored a motion calling for the nuclear armed nation on a ‘grey’ list indicate that they are not satisfied with Pakistan’s amending its antiterrorism laws and recent crackdown on Jamat-u-Dawa by taking over the offices and organizations of Hafiz Saeed who is being alleged to have masterminded the 2008 Mumbay attacks. Surprisingly, the move for placement on ‘grey list’ came four days after the formal meeting of Interior Ministerior Ahsan Iqbal with US Deputy Secretary of State Jhon Sullivan and breakfast meeting with a number of US lawmakers including Senators and members of the House of Representatives.
Talking to reporters during a press briefing on Saturday, US State Department Spokesperson Heather Nauret expressed concern over, what she called, Pakistan’s deficiencies in the implementation of anti money laundering and counterterrorism laws. She told reporters that US had been concerned for a longtime about actions of Pakistani authorities. “We have therefore decided to place Pakistan on international watchlist” However she did not disclose the likely more actions that will follow and said further details about the matter are confidential and can not be revealed at the moment.
Being put back on the grey list would tighten Pakistan’s risk profile and some financial institutions will be wary of transacting with its banks and other counterparts. Others might elect to avoid it altogether, viewing the legal risks associated with doing business there to outweigh any economic benefits. A decline in foreign transactions and drop in foreign currency inflows could further widen the already large current account deficit. International Monetary Fund (IMF) most often gives bail out package for balance of payment obligations and budgetary support which may not available next time if the United States opposes it. Likewise, it may affect the disbursement of World Ban k and Asian Development Bank project loans that are in the pipeline.
Another worry is that foreign banks like Standard Chartered Bank, Citibank and Dutche Bank, who mostly deal with corporate clients, may pull out. State Minster for finance Rana Muhammad Afzal has admitted that putting Pakistan on the watchlist will dent its credibility in theworld which is unfair. It is pertinent to mention that in September last year, Habib Bank was fined $ 222 million and effectively forced to shut its US operations by New York regulator due to compliance failure over money laundering and terror financing. The external debt liability of the country has reached $ 89 billion at the end of December, reported by the State Bank of Pakistan. On January 15, $ 500 million loans have been obtained at the interest rate of 4.5 percent from the Industrial and Commercial Bank of China and the total amount of foreign debt liability may go up to$100 billion by June 2018 as the government had acquired $ 6.6 billion loans during the first half of the current fiscal year. The foreign exchange reserves have dropped from $ 18.6 billion to 12.8 billion.
The main increase in the external debt came by issuing sovereign bonds and taking expensive commercial loans. Foreign debt obtained through Suluk and Eurobonds has increased by 52 percent to $ 7.3 billion. It will be naïve to think that this time the US punitive action will remain confined to mere putting Pakistan on a ‘grey list’ because more tough actions may follow for which the Spokesperson of State Department has dropped a hint of being confidential details. It is time that PML-N government should come out of its cocoon of denial and defiance in the realm of international relegations and skillfully embark upon a proactive diplomacy to convince the United States and its allies about Pakistan’s sincerity and seriousness to curb terrorism and money laundering. Time and energy should not be wasted any more in diatribe against the state institutions at home and abroad.