Currently, there are 37 members of the FATF, the majority of which falls into the category "Washington and its European allies". Further, baring China and Russia, the rest might qualify as non-European allies of Washington, and then there is India; yes, India is a member of the FATF and guess how they will vote!
By the time, this article is published, the FATF may probably have decided on the motion, and while I generally avoid making predictions and won't this time around as well, the chips definitely don't seem to be stacked in our favour; and most likely, our best friend, China, might not be able to deflect this storm. From a layman's perspective, it is quite strange that whilst our GDP is growing, in fact rather amazingly flirting with a 6% growth, time and again, we just can't seem to avoid moving into the eye of a perfect economic storm; first, there was the trade deficit, then external borrowing and now the Grey List. All of which is mostly Greek to us laymen!
When the news broke that Pakistan might be placed on FATF watch list, broadly the layman reaction was "Duh"! And we, the laymen, shouldn't find this comment upsetting, since the probability that most all celebrity journalists and anchors were as clueless as us laymen, and scampered to Google to figure out what exactly was this watch list when the news broke, is in the high 90 percent. Why do I think that? Well because of the muted celebrations when we got off the list back in 2015!
Notwithstanding that a vast majority of Pakistanis are clueless about who the FATF is and what do they do, and by the way most of us probably don't even care enough to want to know, the knowledge that we were already on the list for three years and got removed as recently as 2015, takes the steam out of the news altogether.
And why is that? Well because of the anomalies. During that period when Pakistan was previously on the watch list, net liquid foreign exchange reserves with State Bank of Pakistan (SBP) doubled from US$ 6 billion in 2012-13 to US$ 13.5 billion in 2014-15; courtesy data on SBP website. Also, during this period, the KSE Index doubled, and thereafter conti3nued with its record-breaking spree. This was also the period when we were with IMF, who was giving thumbs up to the country's economic management, in review after review.
"We don't think the consequences are going to be drastic but it's definitely not good," said one senior finance ministry official," Reuters, from same news quoted above. On a lighter note, based on past experience, discussed in the previous paragraph, the layman conclusion, that it is good to be on the grey list, perhaps appears more logical compared with what the Finance Ministry said.
Except that there is a risk that the logical conclusions above, while curiously amusing, might not hold "good" this time around. The experts believe that there can be negative fallouts from being once again put on the grey list, including on the stock exchange, country ratings and operations of the remaining foreign banks in Pakistan. Further, this is expected to adversely impact Foreign Direct Investment and the cost of foreign borrowing.
Here we can go with the layman view, who believes that China, because of CPEC, and being our best friend, will help us grow our economy and provide the necessary financing to manage our debt problem and in any case we don't really have to pay our external debt, or we can start worrying! For that record, we laymen also believe that it is our right to spend wherever we want to without saving a penny, after all it is our money, and that consumer choice is a far more important issue than a trade deficit.
While almost all of us have become quite opinionated and believe ourselves wiser than the rest, but in this case, I for one would not go with the argument that the economy is too serious a matter to be left to economists. I believe economic security is the foundation of national security and when push comes to shove, it is definitely all about the economy; the correct way forward, hence, is to completely ignore populist views and do as the doctor prescribes. Critically, we need to stop getting on and off the grey list, before it adopts a darker shade!
(The writer is a chartered accountant based in Islamabad. Email: [email protected])