Corruption a persistent challenge in Pakistan, says IMF

ISLAMABAD: The International Monetary Fund (IMF) has said that corruption is a persistent challenge in Pakistan, with significant adverse implications for economic development, as indicators reflect weak control of corruption over time with negative consequences for public spending effectiveness, revenue collection, and trust in the legal system.

This has been noted in Technical Assistance Report Pakistan Governance and Corruption Diagnostic Assessment released on Finance Division website late Thursday night.

While corruption vulnerabilities are present at all levels of government, the most economically damaging manifestations involve privileged entities that exert influence over key economic sectors, including those owned by or affiliated with the state. These dynamics are compounded by perceptions that the anti-corruption approach has lacked consistency and impartiality, contributing to diminished public confidence in enforcement institutions, noted in the report.

At the request of the Government of Pakistan, an interdepartmental IMF team (LEG, FAD, SPR, MCM, CSF) joined by experts from the World Bank, initiated a Governance and Corruption Diagnostic (“GCD”) in January 2025.

Its publication by August 2025 is a structural benchmark under the ongoing IMF programme.

IMF official highlights impediments to growth

The exercise was based on a mutual appreciation of the macro-economic consequences of corruption and governance weaknesses in Pakistan. Over the course of eight months, and two field missions, the team worked intensively with the Pakistan’s policy efforts under the EFF have already delivered significant progress in stabilizing the economy and rebuilding confidence, amidst a challenging global environment.

Fiscal performance has been strong, with a primary surplus of 2.0 percent of GDP achieved in the first half of FY25, keeping Pakistan on track to meet the end-FY25 target of 2.1 percent of GDP.

Notwithstanding recent progress, longstanding structural challenges continue to weigh on Pakistan’s economic trajectory, it added.

In a context where corruption has significant macroeconomic consequences, the GCD revealed systematic governance weaknesses across state functions. Pakistan is exposed to corruption risk generated by: weaknesses in budgeting and reporting of fiscal information, and management of public financial and non-financial resources, particularly in capital spending, public procurement, and the management and oversight of state-owned enterprises; an overly complex and opaque tax system administered by tax and custom authorities operating with insufficient capacity, management, and oversight; overwhelming regulations and intrusive state action related to business formation, entry and operation in specific economic sectors, administered by insufficiently independent regulatory authorities; and a judicial sector that is organizationally complex, is not able to reliably enforce contracts or protect property rights due to problems with efficiency, antiquated laws, and the integrity of judges and judicial personnel. Reliance on courts to enforce contracts or protect property rights is discouraged by the enormous backlog of cases and concerns over the integrity and independence of judicial institutions.

Corruption risks are exacerbated by fragmentation among accountability institutions and limitations in their operational independence. Overall anti-corruption efforts have not succeeded in mitigating macro-critical corruption risks. Concerns have also been raised that the perceived severity and unpredictability of enforcement may contribute to hesitation among senior officials in taking administrative decisions.

Recent reforms in the anti-money laundering arena have successfully enabled Pakistan to be removed from the FATF grey-list, but much work remains to be done to address the low-rate of corruption-related money laundering convictions, relative to the country’s risk profile, including advancing the identification of suspicious transactions and the effective monitoring of politically exposed persons.

Copyright Business Recorder, 2025