FATF and IMF Working in Unison Against Pakistan? By M Ziauddin

ON the face of it, there is seemingly no overlapping of objectives between the Financial Action Task Force (FATF) and the International Monetary Fund (IMF).

And that the two, FATF and IMF were talking to Pakistan almost at the same time, the former in Paris and the latter in Washington could not have been anything other than a coincidental happening.

Truth be told, in Paris Pakistan was trying to get the FATF to remove its name from the grey list and in Washington Islamabad was seeking the release of the next tranche worth a billion dollar from the IMF.

But strangely enough, both the negotiations concluded on the same day (Thursday last) with Pakistan failing to get what it was seeking from either of the two—FATF and IMF.

The fact that the two events had concluded inconclusively on the same day did make one wonder.

Could it be that the Fund was awaiting the outcome of Paris talks before it made up its mind on whether or not to release the next tranche? And since the talks in Paris did not produce the desired results, the Fund expressed its inability to oblige Islamabad? Could it be that the Fund was stringing Pakistan along creating the impression that the conditions being put forward for the release of next tranche were negotiable and could even be set aside if Islamabad could technically satisfy the IMF board, while in actual fact it was awaiting the results of the Paris negotiations?

The Fund knew that Pakistan was in no position to accept the conditions being put forward for the release of next tranche: a mini-budget for hiking upward adjustments in Personal Income Tax (PIT), especially in higher income brackets of salaried and non-salaried class; removing GST exemptions; raising Regulatory Duty (RD) on luxury items; hiking baseline electricity tariff by Rs1.40 per unit; increasing discount rates by 50 to 75 basis points; devaluation of the exchange rate to bring it in line with the real effective exchange rate and; further hiking of gas tariff; jacking up the FBR’s tax collection target to Rs6.3 trillion against an envisaged target of Rs5.829 trillion; an additional collection of Rs500 billion; this increase in FBR’s collection to compensate for the shortfall on account of the petroleum levy that was envisaged to fetch Rs610 billion on the eve of the budget 2021-22.

Although it would appear too far- fetched a notion but given the obtaining circumstances it is difficult to rule out the possibility of IMF withdrawing its conditionalities for releasing the next tranche had Pakistan satisfied FATF in Paris and got its name removed from the grey list.

In fact, sources at the Fund argued that releasing the next tranche — of $1bn — was not the real issue as the IMF had recently released $2.7bn to help Pakistan deal with the Covid-19 crisis.

According to these sources, concluding an IMF programme with a country sends a positive signal because the programme involves economic management.

“When the market learns the IMF is monitoring Pakistan, it enhances the country’s market standing,” said one of the sources.

Till Wednesday evening, the Pakistan delegation in Washington had expected a positive outcome and scheduled a news briefing on Thursday morning to share the good news with the media. However, they sent another alert to the media late at night, cancelling the briefing.

Shaukat Tarin, Advisor to the Prime Minister on Finance and Revenue, met IMF Managing Director Kristalina Georgieva and other officials twice, and after both meetings each side expressed the hope that the consultations would soon lead to a positive conclusion.

They did not. And they did not because in Paris announcing the FATF decision not to remove Pakistan from the grey list, President of the Task Force Dr. Marcus Pleyer said Islamabad had not pursued the investigations and prosecutions against the senior leadership of UN designated terror groups.

To a question regarding an Indian minister’s claims that the Modi government had ensured that Pakistan remained on the ‘grey list’, Dr Pleyer said that the FATF is a technical body and “we take our decisions by consensus […] so it’s not only one country that makes decisions.”

Pakistan Foreign Office (FO) said that the Indian foreign minister’s statement that the Narendra Modi government had ensured Pakistan remained on the Financial Action Task Force (FATF) grey list had vindicated Pakistan’s longstanding stance on “India’s negative role” in the global financial watchdog.

The FO said Indian foreign minister’s statement had exposed India’s “true colours” and “duplicitous” role.

“Pakistan has always been highlighting to the international community the politicisation of FATF and undermining of its processes by India.

The recent Indian statement is just further corroboration of its continued efforts to use an important technical forum for its narrow political designs against Pakistan.

“While Pakistan has been sincerely and constructively engaged with FATF during the implementation of the action plan, India has left no stone unturned in casting doubts on Pakistan’s progress through disgraceful means,” said the FO statement.

It said Pakistan would continue exposing India’s role to the international community by bringing the recent “confession” to the FATF’s and international community’s notice.

It added that Pakistan was also considering approaching the financial watchdog for “appropriate action” in the matter.

“Following the recent confession by [the] Indian government, India’s credentials for assessing Pakistan in FATF as co-chair of the Joint Group or for that matter any other country are subject to questions, which we urge FATF to look into,” the statement said.

Last month, Foreign Minister Shah Mahmood Qureshi had reiterated that India wanted to use the FATF forum for “political purposes” but should not be allowed to do so.

Earlier this year, the Foreign Office had criticised India for linking a conviction of banned Lashkar-e-Tayyaba (LeT) leader Zakiur Rehman Lakhvi with the FATF, terming it “yet another Indian attempt to politicise FATF and use its processes against Pakistan”.

Meanwhile, after the blast in Lahore’s Johar Town, Foreign Minister Qureshi had on June 28 said that Pakistan had shared “concrete proofs” of India’s terror financing in the country and demanded that the FATF bring India in the dock and question its wrongdoings.

“The FATF member countries’ action [after witnessing India’s terror financing proofs] will determine whether it’s a technical or a political forum,” Qureshi had said.

Masood Azhar was designated a global terrorist by the UN Security Council Sanctions Committee after four attempts were thwarted by China that blocked the move at the behest of Pakistan. Finally, China pulled the block in May 2019.

Soon after the attack on Indian Parliament, on December 29, 2001, Masood Azhar was detained for a year by Pakistan, after diplomatic pressure by India and the international community, in connection with the attack but was never formally charged.

The Lahore High Court ordered an end to the house arrest on December 14, 2002. Masood Azhar was never arrested after that.

Hafiz Saeed, an UN-designated terrorist on whom the US has placed a USD 10 million bounty, was arrested only on July 17 last year in the terror financing cases, as a gesture for Pakistan to be seen as taking action.

A Pakistani court sentenced the banned Jamat-ud-Dawa (JuD) chief Hafiz Saeed to 15.5 years in jail in one of the several terror financing cases against him.

Since Pakistan seems allegedly to have failed so far to conduct proper investigation and prosecution in the cases of these three UN sanctioned persons—Masood Azhar, Hafiz Saeed and Zakiur Rehman Lakhvi— the country is being made to suffer economically with FATF refusing to remove its name from the grey list and the IMF refusing to release the much needed next tranche on one pretext or the other.

— The writer is veteran journalist and a former editor based in Islamabad.​

Source: Published in Pak Observer

October 25, 2021

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