FATF grey listing to take its toll on Pakistan economy

NEW DELHI: Pakistan’s economic system might be adversely impacted following Friday’s resolution by means of the Financial Action Task Force (FATF) to place the country in the ‘gray listing’ for failing to fulfil responsibilities to prevent terror financing.
The country would possibly endure a risk downgrade by means of multilateral lenders reminiscent of IMF, World Bank, ADB and in addition a reduction in risk-rating by means of Moody’s, S&P and Fitch, consistent with a professional on Pakistan economic system. As a outcome, the Pakistani inventory marketplace is expected to fall significantly and China is more likely to make the most of the industrial state of affairs by means of expanding its funding footrprint.

Being in the “gray listing” signifies that accessing funds from global markets, as an example, would transform tougher for Islamabad, consistent with a central authority insider here who did not wish to be identified. But Miftah Ismail, monetary adviser to Pakistani Prime Minister, claimed on Friday that Pakistan will see no really extensive impact on its economic system.

The FATF resolution would be a “main setback for Islamabad’s efforts to strengthen its symbol”, leading Pakistani English day-to-day Dawn had reported ahead of Friday’s tendencies. FATF, which maintains gray and black lists for identifying nations that experience susceptible measures to counter and fight money laundering and terror financing, does not have the authority or energy to impose sanctions on a country discovered non-compliant with the required standards. But a country’s record will have an affect on its global transactions, as it would come beneath greater scrutiny.

Friday’s resolution may just make it more difficult for overseas traders and corporations to do industry in Pakistan. Islamabad would be made to move through the entire (further) scrutiny which is able to harm the economic system very badly, said the professional.

Downgrading by means of rankings agencies would make it more difficult or more expensive for Pakistan to raise debt from global markets, and in addition reduces Pakistan’s credibility on the planet, consistent with the above mentioned knowledgeable on Pakistan economic system.

Pakistan used to be removed from FATF in 2015 after 3 years however its state of no activity put it again in the gray listing with fear of being put in the black listing in June. Some global monetary establishments would be wary of transacting with Pakistani banks and some may possibly want to even avoid Pakistan altogether, viewing the criminal risks related to doing industry there far outweigh economic advantages, if any.

A decline in overseas transactions and foreign currency inflows may just result in further widening of Pakistan’s already large present account deficit (CAD). Pakistani economic system needed to be bailed out by means of the IMF in 2013. The monetary sector may possibly take a success as Standard Chartered, the largest global bank in Pakistan with 116 branches -- as well as Citibank and Deutsche Bank, which mostly care for corporate shoppers --might decide to tug out.

Amid intense power from global regulators to protect towards money laundering and terrorist financing, banks had been backing out from highrisk nations in recent years. The degree of due diligence by means of banks is already high in nations reminiscent of Pakistan, however after the record, banks will have to reassess the risk-reward scenario.

FATF is an inter-governmental body established in 1989 by means of the ministers of its member jurisdictions. Its goals are to set standards and promote efficient implementation of criminal, regulatory and operational measures for fighting money laundering, terror financing and other comparable threats to the integrity of the global monetary device.
FATF grey listing to take its toll on Pakistan economy FATF grey listing to take its toll on Pakistan economy Reviewed by kailash soni on February 27, 2018 Rating: 5
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