Pakistan Strategy_Pakistan finally crawls off the grey list!, (AKD Daily, Oct 24, 2022)
Pakistan finally crawls off the grey list!
The FATF Asia Pacific Group (APG) finally took Pakistan out of the “increased monitoring”
or “grey list” at the plenary held on Friday in Paris. The development comes after more
than four years of the country languishing in the grey list.
The implications of the FATF grey list on Pakistan included the reputational loss that the
country incurred, which was also capitalized on by rival states. Furthermore, the grey list
substantially affected FDI flows for Pakistan, with FDI falling from US$2,782mn in FY18 to
US$1,362mn the very next year (i.e. FY19).
To recall, Pakistan was placed in the grey list in Feb’12 for a period of 3 years. Drawing a
comparison with the last time, Pakistan received a total of US$4,197mn in FDI during the
three-year period, which rocketed to US$7,062mn in the three years after Pakistan was
taken off the grey list. In the event that history repeats itself, greater FDI in the country
could lend a helping hand to Pakistan’s external front.
The whitelisting comes at a time when the external financing needs of the country are estimated to top US$32bn mark with SBP claiming commitments of ~US$37bn already in the
bag. We opine that Pakistan will be able to negotiate better terms from funding sources
following the white-listing.
Pakistan getting off the grey list will likely be celebrated by the capital markets and provide
the equity market with a much-needed trigger. Furthermore, the market would be closely
monitoring any improvements on the external front following the FATF decision, which
could strengthen the sentiment in the market. The market currently trades at a forward
PER of 4.2x
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