The Asia Pacific Group for terror financing & Money Laundering (APG) has finally put Pakistan on its “Enhanced Expedited Follow up list” or in other words “Blacklist” for its non-compliance towards Terror Financing & Money Laundering.

Pakistan had been on the Grey list of this terror financing watchdog since June 2018 which gave a big blow to its economy.

On 1st April 2019 at Lahore, Pakistan Foreign Minister SM Qureshi told reporters that the country was losing almost 10Bn USD per year on account of being in the grey list of Organisation of Economic Co-operation & Development (OECD).

Currently, Pakistan is the third country to be placed in the Black List. The other two are North Korea & Iran. With the current scenario of being in the Black List, Pakistan’s future is in the doldrums.

APG noticed that Pakistan had not implemented 35 out of its 40 points agenda and shown extremely poor performance over the 27 Points Action plan given by APG.

They said that activities of the terror groups and their related non-profit organisations like ISIS, Al-Qaeda, Jamaat-ud-Dawah (JuD), Falah-i-Insaniat (FIF), Lashkar-e-Taiba (LeT), Jaish-e- Muhammad. Haqqani network and Taliban are intentionally left unchecked at the provincial, district and grassroots level where they can still raise funds and hold meetings and rallies.

There is very little or negligible progress over last year.

It has created a massive threat against our rogue neighbour. Pakistan’s economy is going to be affected in a big way.

1. Pulling out of international financial institutions – Pakistan’s economy is primarily controlled by multinational banks. After the 2017 fiasco with Habib Bank, the investors have moved to other multinational banks for their surety and payments. After being in the blacklist, these international financial institutions will pull out from Pakistan. The cascading effect will on the investors too who are dependent upon these banks. They may prematurely liquidate their investments to move on for better
international options.

2. Fall in foreign currency transactions and currency remittance – With blacklisting, all the transactions with Pakistan will involve more and more levels of scrutiny. As a result, the foreign remittance will decrease and the financial institutions will avoid transacting in highly transferable currency (USD, Euro, etc). As a result, foreign remittance will decrease.

3. Currency devaluation – With a decrease in foreign currency transactions, the entire economy will be dependent upon Pakistani Rupee which is fighting for its survival and has depreciated massively in last one year. It is expected that Pakistan Rupee may go below 200 per USD in the next few months on account of high demand and less flow of forex in Pakistan’s domestic market.

4. Fall in the stock market – As a result of investors pulling out, the Pakistan stock market will fall drastically which will affect the economy greatly.

5. High rates of inflation, civil unrest – Take the example of Syria who was on the Blacklist of FATF in 2011. It resulted in high inflation rates which triggered a civil war in the country which since stands devastated. With Pakistan being a nuclear state and its Army is predominantly driven by religious sentiments, a major catastrophe can be on the cards.

6. Economic sanctions from international institutions – Being on the Blacklist will result in serious economic sanctions from international institutions like IMF, World Bank, Asian Development Bank, and other similar organisations. This will result in the following – a. Immediate stopping of all the aid from ADB & other financial
institutions. Even humanitarian aids will stop. b. IMF shall review its bailout package to Pakistan as no country on a Blacklist can be given Bailout by the IMF. Any further tranches of money to Pakistan will be immediately stopped. c. Even after this, if any country tries to give money or bailout the blacklisted country, there may be serious repercussions against that country so in a nutshell, no country including China will try to support Pakistan financially. d. International financial institutions will also stop any kind of line of credit to companies operating from Pakistan now. This means whatever they buy has to be paid for in advance.

7. International boycotting- When we see the example of North Korea (DPRK) & Iran, we see that after getting blacklisted in 2016, these two countries have been totally boycotted by the international community. Even the best friend to North Korea- China is not able to help it. Pakistan is on the verge of an international boycott now. This will result in not only economic isolation but also weaken its position on other international matters.

8. Loss of credibility and goodwill: The international repute, credibility (both financial as well as diplomatic) and goodwill of Pakistan is now at stake. This will not only affect the country but also its citizen staying in different parts of the world.

9. Effect on trade – Traditionally, most of the organisations of the world put trade barriers on the countries blacklisted by FATF. See the example of Iran and North Korea again who are not able to export their products in international markets. As such Pakistan is facing serious trade deficit and its foreign reserve is on the verge of collapse. At this time such trade barriers will finish the existing export instead of increasing it.

10. Pakistan may resort to nuclear blackmailing – Another possible effect of this blacklisting could be that Pakistan may try to blackmail the international community using its nuclear arsenal (Same as North Korea). This will be a serious concern and UNSC as well as international watchdogs should take due cognigence of this matter.

With these points, Pakistan’s economy is going for a big drop. The Inflation will increase, GDP will decrease which are precursors of a civil war. Pakistan now has a full year to come out of Blacklist but the tasks to be performed in this one year are near impossible to execute.

Pakistan is in its own dilemma if it acts against Terror Financing & Money Laundering, then its own Army Officers & Religious groups get offended which may result in the civil war. And if it does not take any action, then it remains in the Blacklist which may also result in a civil war.

Now it’s in the hands of Mr. Imran Khan Niazi, the Selected Prime Minister of Pakistan and his mentor Gen Bajwa to think what is to be done. What actions does he deem appropriate for his country? A Kashmir rhetoric or actual cracking down on terrorist organisations. Ball is now in their court. This ball is no ordinary ball, it is an explosive ball. They must decide and act really fast or else it may explode.