India plans to seek the Financial Action Task Force (FATF) to put Pakistan back on its grey list. This move aims to increase pressure on Pakistan on matters pertaining to the financing of terrorism. When Pakistan was removed from the grey list in 2022, its reputation with lenders improved.
However, this issue has returned to the forefront due to growing tensions between the two nuclear-armed neighbors and ongoing discussions regarding Pakistan’s foreign financial support.
The Effects of Pakistan’s Grey List Status
The countries on the FATF grey list are under close scrutiny for not doing enough to stop money laundering and terrorism financing. Pakistan’s 2022 exclusion from the list improved its reputation internationally and aided in obtaining vital financial assistance during a financial crisis.
There are currently 25 nations that are still under FATF’s “jurisdictions under increased monitoring.” In order to draw attention to Pakistan’s continued strategic shortcomings, India is now attempting to have the country relisted at the next FATF meeting.
India Opposes World Bank Funding for Pakistan
India intends to oppose additional World Bank funding for Pakistan in addition to the FATF push. According to Indian officials, this kind of financial assistance obliquely encourages terrorism. IMF aid to Pakistan has been referred to as a “form of indirect funding to terror” by Defense Minister Rajnath Singh.
On the basis of these arguments, India has also urged the International Monetary Fund (IMF) to reevaluate its bailout package for Pakistan.
IMF’s Conditional Support to Pakistan
The IMF recently defended a $1 billion bailout for Pakistan by claiming that Islamabad had fulfilled the requirements for loan disbursement. Since its approval in September 2024, the Extended Fund Facility program has given Pakistan over $2.1 billion.
However, the IMF added eleven new conditions for future payments. These include obtaining parliamentary permission for reforms, increasing levies on power debt servicing, and lifting import restrictions. India raises concerns about financial mismanagement by arguing that Pakistan’s arms purchases increase every time it receives foreign loans.
PM Modi’s Strong Warning to Pakistan
Pakistan was cautioned by PM Narendra Modi not to export terrorism. If Pakistan keeps doing this, he said, it “will have to beg for every penny.” PM Modi emphasized that Pakistan uses terrorism as a weapon because it cannot win a fair battle.
He continued by saying that Pakistan’s army and economy would suffer greatly from each terrorist strike. This warning conveys India’s firm position against terrorism and its financial consequences.
Economic Pressure as a Strategy Against Terrorism
India plans to exert pressure on FATF to relist Pakistan on the grey list as part of a broader strategy. The goal is to stop the funding of terrorists by applying economic pressure to Pakistan. India rejects foreign loans and issues dire warnings, making a strong statement on the global stage.
The FATF meeting and financial decisions made by institutions such as the World Bank and IMF will be significant events. These will be closely monitored since they will impact future interactions between India and Pakistan.
