PAKISTAN COULD FACE ECONOMIC PAIN IF PUT ON FATF ‘GREY LIST’

ISLAMABAD : The prospect of Pakistan being placed back on a global terrorist financing watchlist could endanger its handful of remaining banking links to the outside world, causing real financial pain to the economy just as a general election looms.

Islamabad has sought to head off the likely inclusion on the ‘grey list’ of the Financial Action TaskForce(FATF) byamending anti-terrorism laws and taking over organisations controlled by Mumbai terror attack mastermind Hafiz Saeed.

But there are concerns Pakistan’s nearly $300 billion economy could lose steam if it ends up on the watchlist, from which it was removed in 2015 after three years. Officials are aiming for economic expansion to hit 6% this fiscal year (July-June) and Prime Minister Shahid Khaqan Abbasi’s ruling PML-N party will want to avert a slowdown in the lead up to a general election.

Being placed on the FATF watchlist brings extra scrutiny from regulators and financial institutions that can chill trade and investment, experts say.

Mike Casey, a partner at law firm Kirkland & Ellis in London, said being put back on the grey list would heighten Pakistan’s risk profile and some financial institutions would be wary of transacting with Pakistani banks and counterparties.

“Others might elect to avoid Pakistan altogether, viewing the legal risks associated with doing business there to outweigh any economic benefits,” he said.

A decline in foreign transactions and a drop in foreign currency inflows could further widen Pakistan’s large current account deficit.