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FATF ‘Grey List’ invites trouble for Pakistan’s Economy

The Financial Action Task Force (FATF) has put Pakistan on its “Grey List”, leaving the country with 15 months to improve control on terror funding and money laundering. Failing to do so will place the country in the “Black List” of FATF.

The “Grey List” decision was taken at FATF’s plenary session in Paris. Finance Minister Shamshad Akhtar was present in the conference to represent Pakistan. The FATF is an international financial body that works towards curbing funds spent on financing terror activities. The “Grey List”  includes countries which have flaws in their financial regulation but are working towards improvement, while “Black List” includes countries that do not even try to improve or address such irregularities.

Pakistan had presented a 26-point action plan to FATF to curb terror funding.

Although FATF did not cite specific reasons for greylisting Pakistan, analysts feel US-backed allegations by India of Pakistan financially supporting Lashkar-E-Taiba to carry out terror attacks in the country is the reason behind FATF coming to this conclusion. Even strongest allies of Pakistan, Saudi Arabia and China showed no opposition to the decision.

On the day of the conference, Finance Minister Shamshad Akhtar had urged FATF to exclude Pakistan from the Grey List. The Pakistani delegation highlighted the steps they had taken against money laundering and terror funding. Pakistan had earlier remained in the Grey List from 2012 to 2015. Official sources in the Foreign Office said that the decision is political and has nothing to do with the country’s performance against terrorism.

What does the Grey List mean for Pakistan’s economy?

Besides checking money laundering and terror funding, Pakistan will now have to fix loopholes in its financial system. The country has to mandatorily prevent all internationally designated terrorist organizations from using its financial resources and ensure FATF that it has taken serious steps to remove itself from Grey List.

Not only this, the Grey List inclusion will make it tougher for Pakistan to borrow money from foreign countries. This is expected to take a negative toll on the already staggering economy of the country. The country’s trade deficit is $37 billion and foreign loans constitute 24% of its GDP.