Newly appointed Finance Minister Asad Umar on Friday told the Senate that addressing the deficiencies identified by the Financial Action Task Force (FATF) is in Pakistan's own best interest, and that he views the issue as "more an opportunity than a challenge".
In June 2018, the FATF — an international terrorism financing watchdog — had demoted Pakistan to its grey list, putting the country just one step away from its dreaded blacklist, which brings with it international sanctions and economic repercussions among other things.
The finance minister, while briefing the Senate over the issue today, alleviated the house's concerns, saying: "We have even been on the grey list twice. It is not like this would suddenly result in trade or banking sanctions for us. But it clearly also is a negative signal, especially for a country that has such a severe current account deficit. So you obviously want to avoid this.
"But I go beyond that. If you look closely, FATF or no FATF, the deficiencies need to be addressed in any case. All those things are in Pakistan's own best interest."
The FM said that he views the FATF issue as "more an opportunity" to improve the country's financial system, adding that there is no reason the government should not be able to address the watchdog's concerns within the 15-month deadline, which will end in September 2019.
Umar further said that "the next FATF quarterly review will take place in Jakarta on September 11 and 12. They have identified 27 deficiencies in three broad categories, the first of which is currency smuggling. The second is the Havala/Hundi businesses and the third is related with potential terror financing of proscribed organisations.
"To deal with this, a National Executive Committee has been formed. It is chaired by the finance minister (Umar himself) and it has several national institutions such as the FIA, NAB, SECP, etc. Our own review will take place on September 8 and be completed before the next FATF review. We have already identified the action steps needed [to remove] the 27 deficiencies, and also assigned responsibilities.
"If we fulfill their requirements and remove those 27 deficiencies by then, we will be back on the white list," Umar explained.
The finance minister, however, described the FATF's demotion of Pakistan from its white list to grey as "exceptional treatment" and expressed reservations against the procedure used by the watchdog.
Umar clarified that the Financial Action Task Force (FATF) delegation that visited the country earlier this month was there for a routine evaluation and that their visit was not related to Pakistan's placement on the watchdog's grey list.
"It was an FATF delegation but it was here for a separate exercise of mutual evaluation, which is conducted after every four or five years," Umar said."Even if we were not on the FATF grey list, this delegation would still have come."
Regarding the depleted state of the government's coffers, the finance minister informed the Senate that the federal government requires $9 billion to run the country.
"The number that we need to borrow, according to the budget, is $9 billion," said the finance minister. "But we are trying to address the root cause that compels us to borrow these $9bn. Of course, we know any measures [we take] will take time — maybe even two or three years — to bear fruit.
"In the meantime, whatever gap there is, we are calculating. As soon as our plan gets finalised, which it should within one to two weeks, we will present it before the parliament, and then we will also seek suggestions from the National Assembly and Senate to improve it further."
Umar said that the decision to approach the International Monetary Fund (IMF) for loans will be taken after consultations and taking the parliament into confidence.