by Chris Kay
February 23, 2018, 4:04 AM MST
Photographer: Banaras Khan/Bloomberg
Pakistan will be placed back onto an international terrorism-financing watch list from June, according to a person with direct knowledge of the matter, a move that may hinder the country’s access to financial markets.
The move follows a push from the U.S., U.K., France and Germany to get Pakistan placed on the Financial Action Task Force’s “grey” monitoring list during a review meeting in Paris this week. China, which is financing more than $50 billion of infrastructure projects across Pakistan, removed its earlier objections to the move, said the person, who asked not to be identified as the discussions are private. Pakistan’s benchmark stock index reversed earlier gains and fell 0.6 percent at the close in Karachi.
A statement from FATF after the Paris meeting on Friday made no mention of Pakistan. Technically the South Asian nation has three months to convince the body that it has acted against terror organizations, though it will be difficult for them in practice, the person said. Earlier this week, Foreign Minister Khawaja Muhammad Asif said no consensus had been reached to put Pakistan on the list and that the nation had been given a three-month “pause.” Officials at Pakistan’s finance ministry couldn’t immediately comment.
The move is the latest attempt to get Islamabad to take more action against terror groups that allegedly have support and sanctuary within Pakistan. Relations with the U.S. have deteriorated drastically in the past year and in his first tweet of 2018, President Donald Trump said Pakistan gave “lies and deceit” in return for American funding. FATF removed the nuclear-armed nation after three years in 2015 from a list of countries which are subjected to regular monitoring.
Being placed on the list may impede Pakistan’s access to global markets at a time when its foreign reserves are dwindling and external deficits are widening ahead of national elections in July. Yet during the previous period under FATF monitoring Pakistan managed to negotiate an International Monetary Fund bailout and continued to tap the international bond market.
“Gradually the U.S. is coming up with more pressure,” Shamoon Tariq, the Stockholm-based vice chief investment officer at Tundra Fonder AB, said before the decision. If the U.S. “puts more pressure on the World Bank and IMF on future funding, that would be a real challenge.”
Last week Pakistan vigorously tried to avoid inclusion to the list and said the U.S. had voiced concerns about the freedom with which the suspected planner of the 2008 Mumbai attacks, Hafiz Saeed, and his organizations operated in the country.
Last week, Pakistan announced that it changed a law and now allowed its security forces to take action against groups on the UN Security Council list — such as Saeed’s charities which are alleged fronts for militant group Lashkar-e-Taiba. It also seized dozens of offices, buildings, seminaries and ambulances belonging to Saeed’s Jamaat-ud-Dawa and Falah-e-Insaniat Foundation.
Pakistan’s Prime Minister Shahid Khaqan Abbasi also said in an interview this month that in the last two to three months Pakistan has “more or less complied” with sanctions against Saeed’s organizations. However, Abbasi said more action against Saeed himself was unlikely as “we have no charges against him.” India says it has provided evidence against Saeed to Pakistan.
On Thursday, White House spokesman Raj Shah said Trump was not yet satisfied with Pakistan’s progress in fighting terrorism. However, Pakistan’s government has said any financial squeeze will ultimately aid extremism.
“If Pakistan faces any economic hardship because of this, it’s going to affect our budget and capacity to fight the anti-terrorism war,” Pakistan’s Interior Minister Ahsan Iqbal told reporters in Islamabad on Monday. “The question is whether these nations want to help terrorists or the war against terrorism?”
— With assistance by Ismail Dilawar