The United States and its European allies are trying to put Pakistan on a global terrorist-financing watch list for failing to comply with anti-terrorist financing and anti-money laundering regulations.
They are making their case to the Financial Action Task Force (FATF), a global body that combats terrorist financing and money laundering, at a meeting that concludes later this month in Paris.
"I hope that the international community does not take any actions that prevent our efforts to fight against terrorism," Ahsan Iqbal, Pakistan's interior minister, told the media Monday.
A published report says Iqbal called Washington's efforts an insult to his country's sacrifices in the war on terror.
Pakistan was on the list from 2012 to 2015. With new signs that its economy is entering choppy waters, the return of the designation could further deter foreign investment and hurt Pakistan's access to international financial markets.
In an attempt to demonstrate compliance with international anti-terrorist financing regulation, Pakistan amended its anti-terrorism law last week. The change authorizes the government to blacklist charities linked to Islamist leader Hafiz Saeed. Saeed has been wanted by the United States since 2012 for planning the 2008 Mumbai terrorist attacks.
The list includes Saeed's Jamaat-ud-Dawa (JuD) and its subsidiary, the Falah-e-Insaniat Foundation (FIF), which according to experts, serve as the front organizations for Lashkar-e-Taiba, a U.S and European Union-designated terrorist group that is accused of carrying out attacks in India.
The FATF meetings in Paris will involve more than 700 delegates from the 203 jurisdictions of the Global Network, including the U.N., the International Monetary Fund and the World Bank.
The U.S., France, the U.K. and Germany are expected to introduce the motion to FATF and suggest placing Pakistan on a global terrorist financing watch list.
Some analysts in Washington believe that once Pakistan is placed on the so-called gray list, it would be difficult to be taken off.
"This sanction would eliminate the opportunities that could be used to solve other problems," said Stephen Tankel, assistant professor in the School of International Service at American University.
Economists are concerned that placing Pakistan on the gray list would not only close the doors of financial aid to the country, but would prevent it from exporting its goods.
Mike Casey, a partner at the Kirkland & Ellis law firm in London, told Reuters that the decision would heighten Pakistan's risk profile, and some financial institutions would be wary of transacting with Pakistani banks and counterparties.
"Others might elect to avoid Pakistan altogether, viewing the legal risks associated with doing business there to outweigh any economic benefits," he said.
But Daniel Markey, a South Asia expert at the School of Advanced International Studies at John Hopkins University, told The Associated Press that the downgrade would be primarily symbolic, demonstrating the Trump administration's intent to ratchet up the pressure.
"It suggests that more serious moves could be coming," Markey said, noting the U.S. could exercise similar pressure if Pakistan seeks a bailout from the IMF.
Washington suspended aid worth $2 billion to Pakistan last year, and is pressuring Islamabad to cut its alleged ties to Islamist militants waging war in Afghanistan.
Pakistan denies any links with militants.
Source: Voice of America