The Financial Action Task Force (FATF) has finally removed Pakistan from its grey list following its most recent conference, which took place in October. Does the question arise what will Pakistan gain from being taken off the FATF “grey list”?
Since 2008, Pakistan was listed on the FATF’s “grey list,” which indicated that the body has increased its scrutiny of the nation’s money laundering and terrorism financing practices. The economic situation in Pakistan, notably the financial services sector, has been significantly impacted by this grey list. Concerns about FATF had an effect on the country’s IMF programme as well; one of the terms of the most recent $6 billion bailout was Pakistan’s obligation to adhere to FATF regulations.
Starting in 2008 and continuing through 2019, FATF greylisting caused real GDP losses to the state estimating about $38 billion. Additionally, estimations show that a significant percentage of this response (58%) was caused by a decrease in consumption expenditures (both household and government). This fall in GDP was also partly attributable to exports and inward foreign direct investments, which caused collective losses of $4.5 billion and $3.6 billion, respectively. These findings demonstrate the serious drawbacks that Pakistan had to face being in greylisting by the FATF.
However, Pakistan’s levels of exports and foreign direct investment will most likely increase as it is finally off the “grey list.”
The international world would effectively give Pakistan a clean bill of health regarding terrorism financing and bolster its reputation.
According to studies, grey-listing harms the relationships of the concerned nations with foreign funders, such as banks and financial institutions that pay attention to the FATF rankings, as well as with current and potential foreign investors in those nations.
Pakistan’s economy is in critical need of assistance and investment. Being out of the grey list simply means that Pakistan will be able to attract more FDI which is essential for boosting economic growth. Moreover, the country will now have access to financial assistance. As a result of Pakistan’s removal from the “grey list,” Pakistan may now be able to get financial assistance from the International Monetary Fund (IMF), the World Bank, the Asian Development Bank (ADB), and the European Union (EU) to help the country’s cash-strapped economy.
In the same way, Pakistan’s reputation will improve in the eyes of the world as a result of the FATF judgment. The end result of a four-year reform process that demanded significant adjustments to Pakistan’s financial system, particularly to rules governing money laundering and terrorism financing has led to Pakistan’s removal from the list. It will ultimately boost the repute of the country and will pave the way for investors to invest in the state without doubts.
Above all, exiting the grey list will prove as to be a major relief for the country. It is also expected that being removed from the grey list will ultimately reap benefits both in the longer and shorter run. This is the major accomplishment of the state which will prove to be fruitful in upcoming future.
