IMF flags Pakistan’s corruption, eroding public trust, system favouring elite

Over the course of 8 months, and two field missions, the GCD took place within the context of a 37-month $7-billion IMF Extended Fund Facility (EFF) approved on September 25, 2024. The publication of the report is a precondition for the IMF executive board’s approval of a $1.2-billion disbursement next month.

The report comes at a time of the controversial 27th constitutional amendment, which increases the powers of Pakistan Army chief Field Marshal Asim Munir and curtails the powers of the Supreme Court by establishing another court above it.

Pakistan is targeting 4.2% growth this year and IMF estimates that Islamabad could boost economic growth by about 5 to 6.5% over five years if it implements a package of governance reforms beginning within next three to six months.

The diagnostic found that “corruption is a persistent feature of Pakistan’s governance landscape, with significant adverse effects on economic gro­wth, investment, and public trust”. It said that Pakistan’s governance indicators consistently rank poorly, reflecting weaknesses in controlling corruption, enforcing contracts, and protecting property rights.

It said that “the state’s dominant role in the economy, including extensive ownership of enterprises and control over critical sectors, creates systemic vulnerabilities to rent-se­e­king and regulatory capture”.  Alluding to military and the government and blurred lines between the two, the GCD flagged that overlapping regulatory frameworks, coupled with “discretionary enforcement,” and limited transparency “foster an environment where privileged actors can extract undue benefits.”

“Economic governance is characterized by systemic and structural weaknesses in the management and use of public resources and a lack of clarity in when and how the state intervenes in the economy. A complex and opaque tax system, combined with a revenue authority that operates with considerable authority and limited oversight, and a relatively porous customs administration, yields a low tax-to-GDP ratio and a high level of exposure to corruption risks,” it said.

It said that Anti Money laundering/combating financing of terrorism frameworks have improved, enabling Pakistan’s removal from the FATF grey list, “yet enforcement remains weak, especially in prosecuting corruption-related money laundering…”