PAK CORNERED

Source: The Hitavada      Date: 25 Feb 2018 10:37:36

TIME is fast running out for Pakistan to get its act together and firmly take a stand against terror organisations operating from its soil. After a heavy cut in financial aid by the United States and unrelenting pressure from other countries, a big jolt has come from the Financial Action Task Force (FATF) that has put Pakistan under scrutiny till June before including the country in its ‘grey list’. In its plenary session held in Paris the FATF, a watchdog in the matters of terror financing, did not name Pakistan in the dreaded list but put it under a stringent scrutiny. Islamabad has just four months to convince the world body that it has acted against terror groups having established proofs of support from Pakistan military as well as political class.

Pakistan had been on the watch-list between 2012 and 2015 but that was only for money laundering. The latest resolution, moved by Mr. Donald Trump’s United States and a solid backing from the United Kingdom has accused Pakistan of not complying with anti-terrorist financing and anti-money laundering regulations. Though Pakistan has claimed a victory of sorts by escaping the ‘grey list’, the FATF plenary session has thrown enough signals for Islamabad to not overtly depend upon its ‘all-weather friends’. A big rattle for Pakistan has come from the silence China maintained on the resolution. Even the Saudi Arabia-led Gulf Cooperation Council (GCC) that had earlier supported Pakistan decided to go with the US.

The ramifications of FATF ‘grey list’ are humongous for the struggling economy of Pakistan. If it fails to act against the terror outfits and does not stop financing the ultras then the country stands a risk downgrade by multilateral lenders like International Monetary Fund (IMF), World Bank and Asian Development Bank (ADB). This action would result in further reduction of Pakistan’s risk-rating by agencies affecting its foreign reserves as the sanctions would make borrowing of funds difficult. Banks will face greater constraints in their transactions with escalation in cost of operations which will be a big disadvantage for the customers.

Pakistan is already facing multiple financial crises. Their trade deficit is really bad and exports, including premium products like textiles, have faced a major setback. Further punitive action would be detrimental for the producers and would largely impact the national economy that is dreaming of a growth in GDP. Pakistan is heavily dependent on foreign aids, grants and loans which would be reduced to a trickle once the multilateral lenders act against Islamabad.

The development is another massive victory for India’s suave diplomacy. Though India was not an active part of the resolution, New Delhi had kept the back-channels working to make the FATF act against Pakistan. As China opposed the action against its close ally, India acted swiftly to engage interlocutors in Beijing in ‘detailed discussions’ for a change in stance. The Chinese silence on the resolution was another feather in the cap of Indian diplomacy. India also did well not to jump the gun by commenting on the grey-listing process while Pakistan shot itself in the foot with a tweet before the plenary ended. Islamabad has tightened the noose around its own neck.