Sign up for our daily briefing
Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.
Stay on top of the latest market trends
Subscribe to Axios Markets for the latest market trends and economic insights. Sign up for free.
Sports news worthy of your time
Binge on the stats and stories that drive the sports world with Axios Sports. Sign up for free.
Tech news worthy of your time
Get our smart take on technology from the Valley and D.C. with Axios Login. Sign up for free.
Get the inside stories
Get an insider's guide to the new White House with Axios Sneak Peek. Sign up for free.
Catch up on coronavirus stories and special reports, curated by Mike Allen everyday
Catch up on coronavirus stories and special reports, curated by Mike Allen everyday
Want a daily digest of the top Denver news?
Get a daily digest of the most important stories affecting your hometown with Axios Denver
Want a daily digest of the top Des Moines news?
Get a daily digest of the most important stories affecting your hometown with Axios Des Moines
Want a daily digest of the top Twin Cities news?
Get a daily digest of the most important stories affecting your hometown with Axios Twin Cities
Want a daily digest of the top Tampa Bay news?
Get a daily digest of the most important stories affecting your hometown with Axios Tampa Bay
Want a daily digest of the top Charlotte news?
Get a daily digest of the most important stories affecting your hometown with Axios Charlotte
Hafiz Saeed, co-founder of the Pakistani terror group Lashker-e-Taiba. Photo: Arif Ali / AFP / Getty Images
The Financial Action Task Force (FATF) passed a motion last week to return Pakistan to its watchlist for nations that have not done enough to tackle terrorist financing. Pakistan will formally be added to this “grey list” in June.
Why it matters: FATF’s decision is not a purely symbolic move. It has real and problematic consequences for Pakistan's economy and foreign relations.
First, getting grey-listed poses economic risks for Pakistan. Nervous foreign banks and investors may scale back their engagement with an economy singled out for not cracking down on terrorist financing. This could reduce foreign transactions and foreign direct investment in Pakistan, exacerbating its growing fiscal deficit and falling foreign reserves.
Second, FATF’s decision, which was arrived at by consensus, could mark a new and troubling precedent for Pakistan. The motion was cosponsored by the U.S. and several European powers. It was not opposed by key Pakistani partners Saudi Arabia and China. For all the talk of coercive, unilateral moves by Washington to pressure Pakistan into targeting terrorists, Islamabad is also confronting multilateral efforts by like-minded nations.
What's next: Pakistan will prepare an action plan to be reviewed at the next FATF meeting in June. If the plan is approved, Pakistan will be formally grey-listed but able to begin proceedings for removal from the list. If it's rejected, Pakistan risks being placed on a more serious black list — a devastating outcome that could drive investors out of Pakistan in droves.
Michael Kugelman is deputy director and senior associate for South Asia at the Wilson Center.