KARACHI: Analysts predicted that the country’s reputation would improve and it would receive a credit rating improvement from international agencies if Pakistan was taken off the Financial Action Task Force (FATF) list of nations under “enhanced monitoring.”
The removal would enable Pakistan to successfully complete the upcoming review of the IMF’s Extended Fund Facility because the International Monetary Fund (IMF) used the execution of FATF action plans as a structural benchmark.
Pakistan has been removed off the FATF’s “grey list,” as was to be expected, but the nation will continue to cooperate with the organisation and the Asia Pacific Group to strengthen its anti-money laundering (AML) and counter-terrorist financing (CFT) framework. FATF made this announcement following the conclusion of its two-day meeting in Paris on Friday.
Fitch, a global ratings organisation, recently decided to downgrade Pakistan’s sovereign credit rating by one notch, from “B-” to “CCC+,” citing a worsening of the nation’s external liquidity and funding constraints as well as a loss in foreign exchange reserves.
The decline occurs three months after Fitch reduced the country’s ranking to a B- and changed the outlook from “stable” to “negative.” Typically, sovereigns with ratings of “CCC+” or lower are not given outlooks by Fitch.
The immediate consequences of leaving the grey list include reputational repercussions for Pakistan, whose standing has lately taken a further hit as a result of the lowering of its rating by global credit rating organisations like Moody’s.The removal from the grey list “is likely to boost Pakistan’s position, especially with regard to the stability of our financial systems, and help recover their confidence,” the statement read.
Markets are expected to react well to this news, and the overall atmosphere is expected to be positive for some time.. Additionally, this should bolster Pakistan’s argument moving ahead for a re-rating and upgrade by the international credit rating agencies, it was said.
Another structural criterion established by the IMF in March and met by Pakistan in June with a delay included the implementation of FATF action plans.