KARACHI: Last moment silence by Pakistan’s closest strategic partners China and Saudi Arabia during the second motion moved by the United States on Friday to place it on Financial Action Task Force’s (FATF) terror financing watch list turned out to be a huge diplomatic setback for Pakistan.
According to media reports, experts believe Islamabad foreign policy would need a rethink to streamline its relations with countries across the world.
But the inside story is more complicated as it seems, as during the second motion moved by the U.S saw objection being raised over placing Pakistan on FATF’s grey list by Turkey amidst silence by both China and Saudi Arabia.
The government went overdrive in its diplomatic efforts to outmanoeuvre the U.S move to get Pakistan placed on FATF’s grey list of terror financing and money laundering.
The Prime Ministers Advisor on Finance Dr. Miftah Ismail paid visit to several western capitals to woo and gather their support in response to the U.S motion to place Pakistan on FATF list. Other ministers also went to FATF countries to garner their support.
With all these diplomatic efforts, Pakistan ended getting support from only Turkey, Saudi Arabia and China.
During the initial meeting, efforts to place Pakistan on FATF list were opposed by Turkey, Saudi Arabia and China which caused Foreign Minister Khawaja Asif to tweet that Pakistan had earned a reprieve from being placed on the grey list.
But all that changed during the second review motion called by the U.S, where it convinced Saudi Arabia to withdraw its support for Pakistan and China’s miffed silence allowed it sail through despite stiff opposition by Turkey.
This begs the question over China, one of Pakistan’s closest friend and trading partner not oppose the move to place it on FATF’s grey list during the second review motion.
The Advisor on Finance and Economic Affairs, Miftah Ismail has said that placing Pakistan on the terror financing watch-list by the Financial Action Task Force (FATF) will not affect the economy.
An inter-governmental body with an objective to set standards and promote effective implementation of legal, regulatory, and operational measures to combat money laundering, terrorist financing, and other related threats to international finance, the FATF aims to generate the required political will to bring about changes in national public policies.
While talking to a private news channel, Miftah said that some countries, including the United States had been pushing to put Pakistan into the watch-list of terror financing countries in the FATF. However, he added that Pakistan would have to focus on long-term planning and implement an “action plan” to thwart such activities by other countries in the future.
Pakistan has been provided three months to carry out action against terror financing and money-laundering.
Also, experts were off the view the country’s financial and trade ties with its counterparts could stutter in the wake of being placed on FATF list. From 2011-2015, Pakistan had been on FATF’s watchlist and was able to secure a $6.6 billion IMF loan without any problems.
But NUST Islamabad School of Sciences and Humanities and Dean, Dr. Ashfaque Hasan Khan believes this time the situation Pakistan would face is very different from what it was during 2012-15, as Europe wasn’t affront with any major terrorist activities.
He added, Pakistan being placed back on FATF list could cause global financial institutions to downgrade its credit rating and would require paying a higher premium on floatation of Eurobonds.
Dr. Khan said foreign direct investment (FDI) could also be dented due to rise in investment-risk factor and stock exchange may experience a fall in foreign portfolio investment. He said opening letters of credit could become costlier, which would raise the country’s cost of doing business, which was already on the higher side.
In a press briefing last week, National Bank of Pakistan President Saeed Ahmed expressed fears Pakistani banks would encounter difficulties in carrying out financial transactions, if it was placed on FATF’s grey list.
According to EMG Hermes CEO, Muzammil Aslam the country’s foreign policy needs to be fixed and concentrate more on mending its relationship with the world instead of doing more on FATF front, whose decisions were driven by international political motives.
Mr. Aslam advised Pakistan should float Eurobonds within the next two to three months to enhance its foreign exchange reserves before upcoming elections in July 2018.
There are fears abound Pakistan could face import payment crisis by June 2018 as foreign exchange reserves are declining quickly due to increasing current account deficit.
