IMF Flags Systemic Corruption in Pakistan

The International Monetary Fund (IMF), in its long-awaited Governance and Corruption Diagnostic Assessment (GCDA), has delivered a stark warning on Pakistan’s persistent corruption challenges, citing systemic weaknesses across state institutions and demanding urgent reforms as a precondition for the next $1.2 billion loan disbursement. The report, which the government had delayed publishing since August, lays out a 15-point reform agenda and estimates that Pakistan could boost economic growth by 5% to 6.5% over five years if it implements a comprehensive package of governance reforms within the next three to six months. The IMF’s executive board is expected to review the $1.2 billion tranche next month, with publication of the GCDA a key requirement. The IMF assessment highlights deep-rooted vulnerabilities in fiscal management, public procurement, tax administration, and the oversight of state-owned enterprises (SOEs). It calls for an end to special treatment for influential public sector entities in government contracts, greater transparency in the operations of the Special Investment Facilitation Council (SIFC), and tighter limits on government financial powers without increased parliamentary oversight. “A unifying theme is the emphasis on increasing transparency and accountability in policy formulation, implementation and monitoring,” the report states, urging improved access to information and stronger participation by both state and non-state actors in economic decision-making. The IMF also demands that all public sector procurements eliminate preferences for SOEs and that e-governance procurement become mandatory for all state transactions within 12 months. The GCDA points to a complex and opaque tax system, frequent rule changes, and low public trust as key factors behind Pakistan’s declining tax-to-GDP ratio. It also criticizes the government’s discretionary spending, noting that budget allocations are often skewed toward politically connected districts, undermining the effectiveness of public investment. The report further questions the creation and broad powers of the SIFC, including the immunity its staff enjoy, and calls for the immediate publication of its first annual report detailing all facilitated investments and concessions. While the government has made progress under the current $7 billion IMF program, achieving a primary fiscal surplus, reducing inflation, and rebuilding foreign reserves, the GCDA warns that these gains are at risk without institutionalized reforms. The IMF notes that past programs have stabilized the economy but failed to address underlying structural weaknesses, leaving Pakistan vulnerable to recurring crises. Both the IMF and the government agree that tackling corruption vulnerabilities is essential for sustainable reform. The report stresses that anti-corruption efforts are most effective when combined with broader governance improvements and enhanced integrity. The IMF’s analysis projects that meaningful progress on governance and anti-corruption could unlock significant economic gains and help Pakistan achieve more sustainable, inclusive growth.