The State Bank of Pakistan (SBP) has refused to release funds for the Taliban, defying a request  by the Pakistan Prime Minister Imran Khan to do so. The SBP said that the funding Taliban is not legitimate as its government is not internationally recognised. Besides, it warned that opening an Afghan Relief Fund account could invite sanctions against Islamabad by the Financial Action Task Force (FATF). The FATF is expected to review Pakistan’s performance next month. Islamabad has fallen under the watchdog’s grey list for the last four years.

Also Read : Yet again Pakistan is unable to shake off FATF’s Grey List tag

According to a report in  Asia Times, the SBP has advised the government that funnelling funds to the Taliban government without involving “international organisations of repute” could result in FATF sanctions.

Khan’s Afghan relief fund faces fire on all fronts

Last year in December, the Imran Khan government had ordered the SBP to  “open the bank account with immediate effect” to receive cash donations from Pakistan and abroad to help Afghan people meet their immediate humanitarian needs. This fund was given to the Taliban government in Afghanistan. But the SBP told the government that transferring funds directly to the Taliban bypassing the international agencies “through banking channels are difficult”. The bank also told the government that opening funds accounts at overseas bank branches would require permission from overseas regulators. It asks the government to examine the Afghanistan Relief Fund to ensure that Pakistan fully complied with its international commitments.

The bank also informed the government that it is undergoing some autonomy-enhancing reforms under a deal with the International Monetary Fund (IMF) for a $6 billion extended fund facility.  According to the new rule, which is yet to be endorsed by the parliament, the bank will have full autonomy and will adhere to the international laws. Interestingly, the Pakistani Prime Minister, the military establishment and opposition parties have been opposing the bill on concerns that the reforms would make the bank more powerful than the parliament.

According to Pakistani economists and bankers, the Taliban has got about  $3 billion in aid and exports but the  rulers of the militant group have not  expended their resources to minimise the sufferings of the Afghan population.

“If the Pakistani government funds directly to the Taliban government which is still illegal, it will draw attention from the FATF.”

Pakistan has been on the FATF grey list since June 2018 and at its last October plenary meeting, the global body had unanimously decided to keep Islamabad on its grey list again because Islamabad has failed to effectively implement the global FATF standards, and over its lack of progress on investigation and prosecution of senior leaders and commanders of UN-designated terror groups. These two points are the most crucial ones, which was also the reason to keep the country on the FATF watch list.

Also Read : Pakistan's links with terror-tainted Taliban could derail FDI flows, crater the economy