India to demand FATF grey listing for Pak, oppose World Bank’s $20 bn aid

India will approach the World Bank in June to demand a reconsideration of its proposed $20 billion package for Pakistan while also pushing for international financial measures against its western neighbour.

During the upcoming Financial Action Task Force (FATF) review next month, India will insist on Pakistan’s return to the grey list and submit a detailed dossier highlighting Pakistan's involvement in terror funding.

West supported military regime in Pak: EAM

External Affairs Minister S Jaishankar has blamed the western world for backing military dictatorships and undermining democracy in Pakistan over the past eight decades.

In an interview with the Danish publication Politiken, he specifically called out Europe, saying, “(It) has stood side by side with military dictatorships in the region.”

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The government will also seek a review of the World Bank’s planned $20 billion package for Pakistan. Grey listing by the FATF involves enhanced monitoring of a country and restricted financial inflows. It indicates that the FATF has identified deficiencies in the country’s anti-money laundering (AML) and counter-terrorism financing (CFT) systems.

Pakistan was removed from the grey list in 2022 after being on it since 2018. Top sources said it was done on Pakistan’s assurances of legal reforms to curb terror financing and money laundering.

“Those laws have not come through. Of course, a dossier will go from India. But the FATF itself would have no reason to leave them there (outside of the grey list),” a top government source said, adding, “India will also urge the World Bank to drop its financial assistance plan for Pakistan.”

“The World Bank’s Pakistan package agenda is coming up in June, and of course, we will demand a review. We will not let go of any of these opportunities to expose Pakistan until there is visible positive effort to stop perpetration of terror activities,” the source said.

Pakistan has been on the FATF grey list multiple times. First for 848 days starting February 28, 2008; second for 1,106 days from February 16, 2021; and third for 1,576 days beginning June 28, 2018.

Earlier this month, India opposed the International Monetary Fund’s (IMF) decision to approve $2.1 billion in loans to Pakistan under its Extended Fund Facility (EFF) programme, part of a $7 billion agreement signed last year. The sources said India objected to the IMF’s timing, given recent Pakistan-sponsored terror attacks in Pahalgam and border disturbances. India even conveyed to IMF chief Kristalina Georgieva that Pakistan’s arms procurements rose every time the agency extended loans to it.

Highly placed sources said Finance Minister Nirmala Sitharaman spoke to the IMF chief and demanded that the Pakistan agenda be deferred for the time being.

"It was communicated that India was not against development aid to any country, but the timing of the IMF's meeting to review Pakistan's agenda was not appropriate. It was also communicated that IMF's own data shows Pakistan’s arms procurement rose substantially every time IMF extended loans to it,” the sources said. Public data indicates Pakistan spends an average of 18 per cent of its budget on defence, significantly higher than conflict-ridden nations, which average 10-14 per cent.

“Pakistan’s arms imports increased dramatically from 1980 to 2023 by over 20 per cent on average in the years when it received IMF disbursements compared to years when it did not,” the sources added. When asked about the IMF approving Pakistan's loan despite India's objections, a top source remarked, “It beats my logic that you (the IMF) do not stand by the people affected by terrorism. You (IMF) have failed. India has to stand on its own to defend itself.”