The International Monetary Fund (IMF) has warned that persistent corruption and “state capture” in Pakistan are at the root of its ongoing economic crisis, where public policy is manipulated to benefit a narrow circle of political and business elites.The findings are part of the Governance and Corruption Diagnostic Assessment (GCDA), finalised in November 2025 and requested by the Pakistani government. The 186-page report paints a grim picture of dysfunctional institutions unable to enforce the rule of law or safeguard public resources, reported Aljazeera
According to the IMF, corruption in Pakistan is “persistent and corrosive”, distorting markets, eroding public trust, and undermining fiscal stability. The report warns that without dismantling structures of “elite privilege”, economic stagnation will continue.“Failure of implementation [of laws and principles of accountability] gives vested interests too often free rein and addressing this must be at the core of efforts for economic reform,” said Stefan Dercon, professor of economic policy at the University of Oxford.The GCDA highlights that corruption is most damaging when privileged entities exert influence over key economic sectors, including state-owned or affiliated industries. The IMF estimates that tax exemptions and subsidies to such entities drain billions annually, limiting private sector growth.Ali Hasanain, associate professor at Lahore University of Management Sciences, said the IMF’s conclusions are consistent with prior domestic and international studies.“Powerful interests shape rules to maintain their advantage,” Hasanain told Al Jazeera, noting similar findings in a 2021 UNDP report.The report estimates that Pakistan could achieve 5–6.5 per cent GDP growth over five years by implementing governance reforms. Pakistan’s GDP stood at $340 billion in 2024.The IMF identifies the special investment facilitation council (SIFC) and public sector entities as major areas of concern. The SIFC, formed in June 2023 to promote investment, operates with limited transparency and legal accountability. The report urges the council to publish annual investment reports and details of concessions granted.The judiciary and key anti-corruption bodies like the national accountability bureau (NAB) and federal investigation agency (FIA) are also flagged. The judiciary faces over two million pending cases, while selective accountability by NAB has damaged public trust. Despite recovering 5.3 trillion rupees ($17 billion) in 2023–24, NAB’s low conviction rates remain a concern.The GCDA criticises recent constitutional amendments that created a parallel Federal Constitutional Court, warning that they could increase executive influence over judicial appointments.
Context and IMF programmes
Pakistan has turned to the IMF 25 times since 1958. The current programme, initiated under Prime Minister Shehbaz Sharif, is a 37-month, $7 billion arrangement, with a $1.2 billion tranche expected next month. The country narrowly avoided default in 2023.The report underscores that state capture and elite privilege—through tax exemptions, regulatory capture, and subsidies—remain systemic challenges. Implementing reforms, the IMF argues, could significantly restore economic growth, fiscal stability, and public trust.
