India to push for Pakistan's return to FATF grey list
New Delhi: India will push for Pakistan's inclusion in the grey list of the
Financial Action Task Force
(FATF), flagging the country's failure to comply with the organisation's prescribed anti-money laundering and terror-financing framework, a government source said.
New Delhi will also highlight fund diversion concerns to the
World Bank
when its board discusses assistance to Pakistan, the person said.
Tensions between India and Pakistan rose after the terror attack in Pahalgam on April 22 that killed 26 civilians, leading to military action earlier this month
. FATF is a global financial crime watchdog that monitors countries for their efforts to counter
money laundering
and terrorist funding. It meets thrice a year—February, June, and October. The countries that have committed to resolving identified strategic deficiencies within agreed timeframes and are already under increased monitoring are put on the grey list if deficiencies are detected.
In 2018, Pakistan was placed on the grey list, following which it committed to an action plan to curb money laundering and terror financing. In 2022, FATF removed Pakistan from the list.
Inclusion on the grey list makes it difficult for a country to get external financing and international financial aid. Private investors are also not too keen on participating in such economies.
World Bank Funding
India will also raise objections when the World Bank considers assistance to Pakistan next month.
The person cited said that India is not against any developmental assistance to Pakistan, but the latter's record shows that its arms purchases increased after securing multilateral funding over the years.
The World Bank is expected to review its $20 billion lending to Pakistan under the Country Partnership Framework agreed in January this year.
'We will oppose the upcoming World Bank funding to Pakistan,' the source said.
Earlier this month, India opposed the International Monetary Fund's $2.3 billion assistance to Pakistan. Sources said finance minister Nirmala Sitharaman had spoken to IMF chief Kristalina Georgieva and some other European finance ministers about the proposal that had already been included in the lender's board meeting agenda circulated earlier.
The IMF board approved the assistance; India abstained from the vote.
India pointed to the presence of senior Pakistani military officials at the funeral of designated terrorists and provided other data that showed that Islamabad had misused funds in the last two decades. It showed Pakistan's arm procurements rose exponentially over this period, even as it sought multilateral assistance.
To be sure, the IMF was persuaded to impose 11 strict conditions on Pakistan.
These relate to fiscal management, governance, social, monetary and financial parameters, along with metrics to be met in the energy sector and trade, investment policy, and deregulation.
'India is not averse to any country receiving money for development purposes,' said the person cited. 'But the IMF funding was not the right thing to do at a time when there were border tensions between India and Pakistan and a situation of war. Also, Pakistan has a history of spending not for people, but for buying arms.'
According to the public data, Pakistan spends on average around 18% of its general budget on 'defence affairs and services,' while even conflict-affected countries spend less (10-14%).
Pakistan's arms imports increased by over 20% on average in the years it received IMF disbursements during the period between 1980 and 2023.
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