Pakistan Has Lost Nearly $38 Billion Since Being Put on FATF’s Grey List

Pakistan has sustained economic losses of approximately $38 billion due to the Financial Action Task Force’s (FATF) decision to place the country on its grey list.

These findings were revealed in a new research paper titled ‘Bearing the Cost of Global Politics — the Impact of FATF Grey-listing on Pakistan’s Economy’ by Dr. Naafey Sardar that was published by an independent think tank called Tabadlab.

The grey list of the FATF includes countries whose anti-money laundering and terror financing laws are not fully compliant with global standards, and this is the third time since 2008 that Pakistan has been placed on it.


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Pakistan had been placed on the list in 2008 and exited it the next year. It was removed from the list again in 2012 following amendments to the Anti-Money Laundering and Anti-Terrorism Act of 2015 in which measures had been enacted to “confiscate the properties of the affiliated groups, as well as act against the financers of terrorist activities within the state”.

In June 2018, Pakistan was placed on the grey list again for persistently inadequate controls to deter terror financing and money-laundering. The decision to place Pakistan on the list was taken in February 2018 following a US-sponsored move supported by the UK, France, and Germany.

Pakistan currently needs to progress on at least three out of six remaining action points, sources familiar with the matter said. While the Government of Pakistan is hopeful that the ongoing plenary meetings of the FATF will result in Pakistan being removed from the grey list, the research paper predicts that the chances of this happening are low.

However, according to a news report by Express Tribune, a  source from the Ministry of Finance said that nothing could be said until a formal announcement by the global watchdog.

The research paper said that grey-listing events spanning from 2008 to 2019 may have resulted in cumulative GDP losses worth $38 billion.

These estimates are based on the reduction in consumption expenditures, the fall in exports, and the decrease in foreign direct investment (FDI).

While the research paper acknowledged that it was difficult to get “empirical evidence documenting these harmful effects”, these projections do seem to hold true with the fact that the economy had noticeably recovered both the times when Pakistan has been removed from the list. Consequently, the GDP for 2017 and 2018 had increased significantly after Pakistan had exited the grey list.

The paper also showed the economic losses for 2010, 2011, and 2016 when Pakistan had not been on the grey list, showing that there are numerous factors that determine the overall economic direction of the country above and beyond FATF’s classification.


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The maximum economic losses in any year have been in 2019 when the economy had sustained $10.3 billion losses, including a reduction of $6.5 billion in consumption expenditures. The second-highest losses in any year have been shown in 2010 when the country had losses of $6 billion when it was not on the grey list.

The paper also revealed that the FATF sanctioning between 2012 and 2015 had cost the economy approximately $13.4 billion. Despite Pakistan having drawn itself out of the FATF’s crosshair in June 2015, it had taken a while for its GDP to recover with an estimated loss of $1.54 billion in 2016. The author argued that this implied that the FATF sanctioning has short-to-medium-run implications for the economy.

It is possible that Pakistan’s re-entry into the FATF grey list in June 2018 had wiped off most of its GDP gains from the first half of 2018, followed by a staggering loss of $10.31 billion in 2019.

The paper underlined that the decision to place Pakistan on the grey list in 2018 appears to be against the norms of the FATF, and Pakistan has also blamed the US-India nexus for putting it on the grey list.