The irony could not have been starker. Just as Pakistan’s Army Chief Gen Qamar Javed Bajwa was trumpeting success of his country in fighting terrorism at the Munich Security Conference, less than a thousand kilometers away in Paris at the annual meeting of the Financial Action Task Force (FATF), Pakistani officials were busy negotiating with other countries to avoid Islamabad being blacklisted for its failure to crackdown on terrorist financing. In the end, Pakistan was put in a ‘grey list’ of countries which have not taken adequate measures to stop terror financing and money laundering.

This is a major development as it shows that the international community’s patience with Pakistan’s double talk and its hypocritical approach in cracking down on terrorists, is now wearing thin. For a long time, Islamabad had mastered the trick of carrying out some perfunctory measures against the terrorist and extremist groups operating on its soil and escape the growing international pressure. But as this pressure dissipated, it used to be ‘business as normal’- both for the establishment and the groups being cracked down upon. This time too, in the run up to the FATF meeting, Pakistani government had amended the domestic anti-terror act to ban the UN Security Council (UNSC)-listed groups and individuals and taken over some of the facilities of the Jamaat-ud-Daawa (JuD) in Punjab province, ostensibly to show that it was cracking down on banned groups.     

Yet this time, Pakistan’s duplicity did not work. The United States which had been cracking the whip for some time on Pakistan for providing safe haven to terrorist groups – it has already suspended military aid worth USD 2 billion to Pakistan – along with some of its European allies had initiated a resolution to the FATF to place Pakistan on a global terrorist financing ‘watch list’. The US leaned on many countries including Pakistan’s ‘friends’ Russia, China and Saudi Arabia, to take a united position against Pakistan and ultimately the effort yielded dividends.


Pakistan now has to submit an Action Plan by May 2018 on how it intends to go about countering terrorist financing activities on its soil. The plan is subject to approval by the FATF, which upon doing so will make a formal announcement about placing Pakistan on the ‘grey list’. If Pakistan does not submit a plan or if the submitted action plan is not approved by the international agency, it can put Pakistan on its ‘black list’, where the country will find itself in the glorious company of North Korea and Iran.


So in reality for Pakistan, the challenge is to avoid getting blacklisted. The country has been there earlier when it was placed on the FATF’s ‘grey list’ in 2012 for a period of three years. And if developments at that time are anything to go by – the country had to go for an International Monetary Fund (IMF) bailout of USD 5.3 billion in 2013 - then the implications of the current FATF move are certainly damaging for Pakistan and its economy. The IMF may not have the powers to impose punitive measure on the erring countries such as Pakistan, but major lending institutions such as the World Bank (WB), IMF and Asian Development Bank (ADB) are under the FATF influence. Pakistan now risks a downgrade from these institutions and also a reduction in risk-rating by Moody’s, S&P and Fitch rating agencies. This would severely affect Pakistan’s capacity in accessing funds from international markets. There would be a greater scrutiny of any international or cross-border transactions involving Pakistan, which will increase the cost of doing business locally. This consequently has the potential to cause a decline in foreign transactions and foreign currency inflows which can lead to further widening of Pakistan’s already large current account deficit (CAD). Already there are speculations in the local media which have warned that Pakistan may face an import payment crisis by June 2018 as foreign exchange reserves are depleting fast due to the widening CAD.


As expected, Pakistani government has alleged malafide intensions on the part of the U.S. in initiating the current FATF resolution. But the very fact that it implemented a hasty job of amending the terror list and ‘cracking down’ on the charity network of the JuD. It only indicated that Islamabad had apprehended the FATF move. Terrorist mastermind Hafiz Saeed and his “charities” were top on the list of the groups that the FATF wanted Pakistan to act against so the question that needs to be asked as to why did Pakistan not implement its ‘crackdown’ earlier, especially when every effort has been made by the Pakistani establishment to bring Saeed and his network into the mainstream by releasing him from detention, allowing him to openly address rallies on various occasion and launch a political party, the Milli Muslim League (MML). And the MML, being so euphoric about its political journey, started contesting elections in Pakistan, till the Election Commission of Pakistan (ECP) refused to recognise the new avatar of JuD as a registered political party. 

With the latest FATF move, Pakistan should realise that the international community’s patience is wearing thin including its closest allies China and Saudi Arabia who in their effort to become responsible powers can no longer overlook the rogue behaviour of their allies, lest it causes loss of their own credibility. Especially the case of China has to be underscored as the FATF in its recently concluded meeting, elected her as the Co-Chair. Now to avoid international isolation, Pakistan must have to fundamentally change its behaviour and adopt a zero-tolerance policy towards all variants of militancy, terrorism and extremism, irrespective of their orientations and intended targets. Till the time it does not adopt such a policy, not only does Pakistan risk international isolation but also the legitimacy of the state itself. It also entails greater risk to lose a respectable, equal membership amongst the comity of the nations.