The potential blacklisting of Pakistan by the Paris-based Financial Action Task Force (FATF) could have implications for capital inflows to the country, according to a report released by the IMF.

The FATF, a global watchdog for terror financing, that kept Pakistan on the Grey List for an extended period till February 2020, had warned in October that Islamabad would be put on the ‘Black List’ if it did not comply with the remaining 22 points in a list of 27 questions.

Pakistan submitted a report comprising answers to 22 questions to the FATF on December 6.

“A potential blacklisting by FATF could result in a freeze of capital flows and lower investment to Pakistan,” said the IMF in its staff-level report that was finalised during the visit of the International Monetary Fund (IMF) team to Pakistan.

The IMF programme continues to face significant risks, both from domestic and external factors, the report added.

Potential external risks include blacklisting by the FATF that could result in a freeze of capital flows to Pakistan, slow progress in refinancing/re-profiling loans from major bilateral creditors, and increasing headwinds from a weaker global economic backdrop, the report said.

The IMF report said that Pakistan continues to be included in the FATF’s list of jurisdictions with serious AML/CFT deficiencies.

The Asia-Pacific Group on money laundering also discussed Pakistan’s Mutual Evaluation Report, noting that existing efforts were inconsistent with the level of risks and greater effectiveness needs to be demonstrated.