Experts upbeat after Pakistan’s removal from FATF’s grey-list

Following the much-anticipated removal of Pakistan from the Financial Action Task Force’s (FATF) grey-list on Friday, the market remains upbeat that it will drive positive impacts and revival of confidence in Pakistan’s economy.

After four years, the global anti-money laundering watchdog decided to pull Pakistan out of the “increased monitoring list” after the country completed a 34-point agenda.

“FATF recognises this progress. A FATF team has verified that reforms are in place, and there is high-level commitment and capacity to sustain these reforms," said FATF President T. Raja Kumar in a press conference on Friday.

After over 4 years, Pakistan removed from FATF's 'grey-list'

Reacting to the development, Umair Naseer, Head of Research at Topline Securities, told Business Recorder that FATF’s decision is in line with market expectations.

“The on-site visit of FATF team to Pakistan was reported to be satisfactory,” he said. “However, coming off the grey-list will not have much of an impact on foreign direct investment (FDI) and foreign inflows, but would drastically improve the country’s image.”

Over the last few years, international agencies such as International Monetary Fund (IMF) and World Bank have emphasised on curbing anti-terror financing.

“The removal will reflect Pakistan’s positive actions,” he said.

Analysts hopeful of removal from FATF's grey-list, but caution long way still to go

Arif Habib Limited Head of Research Tahir Abbas told Business Recorder that removal from the grey-list would have a “huge positive impact” for the country.

“Pakistan carried out a very strict agenda with respect to anti-money laundering and terror financing reforms,” he said. “The development is good for medium to long term with respect to the perception of Pakistan, which is considered a risky investment. It would help in building the country’s positive image.”

“Down the road, when things begin to normalise on the global front, this would aid in raising international capital and FDI,” he said.

In a note, Arif Habib Limited had stated that having already suffered direct consequences and economic difficulties from its time on the grey list, the climactic graduation of Pakistan from the grey list will be no less than a breath of fresh air.

It will be a major relief and accomplishment for Pakistan, and is expected to reap benefits in both short and long run.

The brokerage house was of the view that removal from the grey list will strengthen Pakistan’s position with regards to the soundness of its financial systems and help regain their confidence.

“Markets are expected to react positively to this news and overall sentiment is likely to remain upbeat for a while,” it said. “Moreover, going forward, this should also help strengthen Pakistan’s case of re-rating and upgrading by the international credit rating agencies.”

Being on the grey list has had direct ramification on the economic front with different challenges arising for Pakistan, said the brokerage house.

“In terms of crippling trading opportunities to external debt rising, the graduation of the country from the grey list will help overcome these challenges, in the longer run,” it said.

FATF's announcement comes just hours after Fitch Ratings downgraded Pakistan's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'CCC+' from 'B-'.