Is Pakistan facing a moment of reckoning? The country has reportedly managed to secure three months to beef up its AML/CFT credentials at the latest meeting of the Paris-based Financial Action Task Force (FATF). But all is not well with how the country’s diplomacy is being viewed abroad, especially in the context of prosecuting UN-designated terror groups and individuals.
The FATF didn’t even mention Pakistan’s name in its plenary outcomes dated February 23, 2018. After considerable information vacuum, the country’s finance czar tried to clear in a TV show what had happened in Paris. Come June, Pakistan, due to “strategic deficiencies” in its AML/CFT protocols, will be included in the FATF watch-list of jurisdictions that pose a risk to global financial system.
While that inclusion in the “grey list” looks certain, there is also a possibility that the country will be graded down to the “black list” – which has Iran and North Korea on it – if a joint action plan is not agreed with the global body until June. Will Pakistan comply? The minister insisted that Pakistan had recently done a lot to sanction UN-proscribed groups and individuals, while lamenting that those technical measures went unacknowledged as the US turned FATF into a political platform to humiliate Pakistan.
Pakistan has been trying to buy some time to tackle the increasingly precarious balance of payment situation. Does the so-called “reprieve” allow it to take immediate steps to counter the slide in its forex reserves? Sources of substantial potential dollar inflows are, well, all foreign – mostly the IFIs and the commercial lenders. The sound of the FATF clock ticking will not go unnoticed abroad. Foreign commercial financiers may demand more premium and multilateral lenders may become more cautious.
It will be difficult for Pakistan to turn back the clock and expect a treatment from IFIs and other lenders similar to what it had got the last time it was placed on the grey-list (2012-15). Though being on the grey-list doesn’t trigger international sanctions, the country’s risk profile would increase with the kind of global scrutiny it has been put under, following months of Trump administration playing hardball.
It is hard to dispel the impression that Pakistan has been cornered globally to a point where even its traditional allies find limited room to offer their support. The pressure from the Indo-US combine has been intense lately, as both countries have their own political axe to grind. The US is pinning its failure in Afghanistan on Pakistan’s shoulders. India has been busy labeling Pakistan a terror exporter to rationalize its crackdown in Kashmir.
Though details are scant, some folks are shocked at China’s apparent volte-face at FATF. But if China has indeed caved to Western pressure, it won’t be the first time the Middle Kingdom has gone with the dominant sentiment – recall Chinese reaction after Mumbai attacks (2008) and Kargil conflict (1999). The Saudi silence has also dismayed people here, but that, too, isn’t surprising. The Kingdom under an ambitious prince has become too demanding of Pakistan lately, perhaps realizing its financial leverage.
Under a transactional US president, major countries’ bilateral and multilateral dealings with America have become all about give-and-take on issues like trade imbalances, currency adjustments, nuclear non-proliferation, international sanctions and immigration. Being a nuclear power that stands on economic crutches, Pakistan has little clout globally. And now it is reduced to a bargaining chip at global forums.
Foreign clout is a function of domestic strength. But Pakistan is a highly-polarized entity today, with recurring economic woes. Too many symptoms masquerade as root-cause beneath the country’s internal decline and global isolation. It’s hard to find a responsible way forward when nobody is clearly in charge. Politicians are too busy either saving their skin or playing Squealer, even as unelected forces continue to avoid public scrutiny for their decisions. It is time to stop digging, for the hole is getting a bit deeper. The country needs to decide what is more paramount: collective prosperity of 200 million+ ordinary Pakistanis or safety for a bunch of hardliners who won’t let Pakistan remains at peace with itself and the outer world.
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