IT may not be a coincidence that we had guests from the International Monetary Fund (IMF) and the Asia-Pacific Group (APG), the regional affiliate of the Paris-based Financial Action Task Force (FATF), last week. It provided us with a 360-degree view of our debt repayment capacity and performance in anti-money laundering and countering financing of terrorism (AML/CFT).

The IMF’s Mission Chief for Pakistan Ernesto Ramirez Rigo was on a two-day visit to touch base with authorities on their preparedness to enter into a 3-year bailout programme within 4-6 weeks.

Take a look: IMF endgame?

The APG delegation, on a three-day visit, also landed the same day as the IMF’s and concluded a day later. There was a rather aggressive probing of Pakistan’s compliance with FATF targets and its performance in terms of actions against eight entities proscribed by the UN.

Although there was no official statement issued, sources privy to the discussions said, on the conclusion of the visit, that the APG expressed dissatisfaction over Pakistan’s inadequate compliance with global commitments. They highlighted contradictory situations and poor coordination among stakeholders.

The APG also identified a lack of cooperation among law enforcement agencies at different tiers of the government and expressed serious reservations over insufficient physical action against proscribed organisations to block the flow of funds.

It is not surprising that many believe America’s geo-political objectives had more to do with Pakistan’s difficulties in terms of IMF assistance and the FATF’s grey list than its macroeconomic fundamentals and AML/CFT credentials

They were appreciative of very good paper work though, including legislation, regulation, data collection and notifications mostly at the federal level.

On the sidelines the government and the military authorities kept abreast of the mood and the consequences of the delegation’s visit. They explained at the appropriate level how important it was for Pakistan to address deficiencies to comply with global requirements.

The entire leadership showed commitment that all institutions would need to get their act together to put the house in order and counter challenges.

Finance Minister Asad Umar and Secretary Finance Younas Dagha were entrusted with giving top priority to ‘problem areas’ of various agencies and plug deficiencies so that a robust report could be submitted to the FATF by the third week of April.

On the technical level, members of the economic team believed Pakistan had met IMF requirements halfway by increasing electricity and gas rates, depreciating the rupee by almost 33pc since December 2017 and increasing the central bank’s policy rate by 450 basis points.

A second round of similar adjustments as part of the budget 2019-20, along with additional revenue effort, could satisfy the IMF.

Both the IMF and the FATF have divergent roles and are highly professional multilateral forums. Both operate independently. Both take decisions based on voting rights of the big powers, often influenced by geo-political considerations.

Yet, they have cross-cutting and interconnected tasks and objectives. With its seat of power in Washington and its current chief Christine Lagarde from France, the IMF extends technical and advisory support and financial assistance to member states in times of macroeconomic challenges.

The United States has the largest voting rights (16.5pc) in the IMF board of governors, followed by Japan (6.15pc) and China (6.09). Germany has 5.32pc voting rights followed by 4.03pc each of France and the UK — the three having a policy tilt towards the US.

Conversely and coincidentally, the Paris-based watchdog against global financial crimes is currently led by Marshall Billingslea of the United States as FATF president.

Mr Billingslea also serves as the US Department of the Treasury’s Assistant Secretary heading the Office of Terrorist Financing and Financial Crimes. In this role, he is responsible for policy development and international engagement pertaining to AML/CFT.

He assumed the FATF presidency by end of June 2018 when Pakistan was downgraded to the grey list or the list of jurisdictions with strategic deficiencies. Some of the major IMF shareholders mentioned above played a critical role.

It is not surprising then that many believe the US’s geo-political objectives had more to do with Pakistan’s difficulties in terms of IMF assistance and the FATF’s grey list than its macroeconomic fundamentals and AML/CFT credentials.

Interestingly, the spring meetings of the World Bank and the IMF are taking place on April 12-14 in Washington. On the sidelines of these meetings, Finance Minister Asad Umar will engage with directors of the IMF and the World Bank to set a schedule for fielding an IMF mission soon after. He aims to secure a bailout by mid-May to form the basis of the next budget.

Almost simultaneously, Pakistan will submit a compliance report to the FATF. Based on Islamabad’s report and findings of the APG’s recent onsite mutual evaluation, the FATF will review in May (almost soon after a decision on the IMF deal) Pakistan’s compliance with its action plan to combat AML/CFT.

By end June this year, the one-year term of FATF president comes to an end. Incidentally, it will also be finally decided in June whether Pakistan should stay or exit the grey list or be further downgraded to the black list by September 2019.

Published in Dawn, The Business and Finance Weekly, April 1st, 2019