Islamabad: Pakistan was taken off a global money laundering watchlist on Friday, officials said, a move Islamabad hopes will ease foreign investment and boost the country's beleaguered economy.
The Financial Action Task Force, an international money-laundering watchdog, put Pakistan on its so-called grey list in June 2018, after Islamabad failed to implement policies aimed at stamping out money laundering and the financing of international terror groups.
The move severely curtailed exchange flows and discouraged foreign direct investment by putting reams of red tape around even the simplest projects.
In a statement Friday, the Paris-based FATF said it "welcomes Pakistan's significant progress" in its anti-money laundering efforts.
"Pakistan is therefore no longer subject to the FATF's increased monitoring process," it added.
Pakistan's foreign ministry said in a statement the decision was "much-awaited good news".
"Congratulations to the people of Pakistan," Foreign Minister Bilawal Bhutto Zardari tweeted.
While the move is a boost for the country's image, it is not expected to have an immediate effect on the economy.
"The decision will help remove uncertainty that currently grips the overall investment climate in the country," said Pakistani economist Kaiser Bengali.
While it removes one of the major barriers to foreign investment, Bengali cautioned that high inflation and interest rates would prevent a sudden inflow of cash.
Pakistan, which has long struggled with low-level militancy within its borders, has faced scrutiny over its ability to combat illicit financing, including to militant organisations.
US regulators in 2017 and 2022 slapped major fines on separate Pakistani banks for failing to heed concerns over possible terrorist financing and money laundering.
But in June, former FATF president Marcus Pleyer said Pakistan had demonstrated that it was pursuing terrorist financing investigations and prosecutions against senior leaders of UN-designated terror groups and money laundering investigations.
Friday's decision by FATF comes after Pakistan in recent years filed terror financing changes against several senior Lashkar-e-Taiba leaders, including the group's founder Hafiz Saeed and his brother-in-law Abdul Rahman Makki, who the United States and India accused of being involved in the 2008 Mumbai attacks.
Talat Masood, a former general and now political analyst, told AFP that doubts about security affected confidence in Pakistan.
"This decision will improve our image and establish the fact that Pakistan is not supporting any terrorist organisations and is a safe destination for foreign investments," Masood said.
Pakistan was already struggling to put its finances in order, with a cost-of-living crisis, a nose-diving rupee and dwindling foreign exchange reserves, when devastating floods caused at least $30 billion in damage and losses and sent inflation and food prices soaring.
Ratings agency Moody's later downgraded Pakistan's sovereign credit rating, saying the floods had exacerbated Pakistan's liquidity and external credit weaknesses.
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