OPINION: The cost of inactions and mis-governance

The IMF has disclosed that Pakistan could add 5-6.5 percent to its GDP over five years simply by fixing the lapses and exploitation of the governance structure of the state. This is an extraordinary opportunity cost—one Pakistan has paid, year after year, without fully acknowledging the scale of the loss and its impact; notably, on that segment of the citizens of the country who struggle to make their ends meet. This means that by fixing its own doing, the state can move millions out of poverty.

The International Monetary Fund’s (IMF’s) newly released Governance and Corruption Diagnostic Assessment (GCDA) does not consume itself in reflecting errant individuals or isolated scandals, but has opted to hit on the core of the problem, which it identifies as: the entrenched ecosystem of systemic weaknesses that fuel mis-governance across state institutions.

The report, long delayed and now finally made public as a precondition for the IMF Board’s upcoming USD 1.2 billion disbursement, is perhaps the most candid external assessment of Pakistan’s governance architecture in years. And while the findings hardly surprise a nation fatigued by decades of mismanagement, what stands out is the report’s stark economic cost: Pakistan could add 5-6.5 percent to its GDP over five years simply by fixing the governance structure, systems, and processes.

The IMF identifies mis-governance in Pakistan as a systemic phenomenon, embedded not only in weak enforcement but also in the rules, exemptions, and discretion that shape state functioning. From preferential treatment in government procurement to opaque decision-making structures, the problem is less about individual wrongdoing and more about a fragmented governance system that invites opacity and discourages accountability.

The GCDA identifies procurement exemptions, SRO-driven privileges, and “special case” contracts having hollowed out competitive bidding processes, which rewards connection over competence.

Much is being talked about GCDA in media with its conflicting interpretations and political points scoring and following the standard pattern, over a short period of time this subject would move out of public focus — as yet another of IMF report. There is a general conviction, both at the high end and low end of the society, that “Nothing will change in Pakistan”.

The tangible outcome of GCDA depends on how committed IMF is to the cause and taking it to its end. Pima facie, GCDA is looking far beyond the usual pattern and IMF means business to fix the rot and has identified a road map for the purpose to continue with its funding. This needs to be verified at the next IMF tranche.

The IMF’s observation that stronger governance could add over a percentage point to annual GDP growth is meaningful, as mis-governance is not merely an ethical failure, it is also an economic one. It increases the cost of doing business, deters foreign investment, compromises service delivery, and inflates the fiscal deficit. In short, mis-governance bleeds the economy far more than any single financial deterrent.

One sees the effect of all of this in real life with dwindling FDI (foreign direct investment), multinational corporations moving out while large-scale industries of the country are struggling for survival.

One of the GCDA’s most critical recommendations is to limit the executive’s financial powers unless accompanied by stronger parliamentary oversight. Pakistan’s legislature, however, remains largely passive in scrutinising public spending, and parliamentary committees often lack the capacity or independence to challenge the executive. The IMF is effectively telling Pakistan: “you cannot fix state governance without fixing Parliament’s role”.

Pakistan’s anti-corruption framework is sprawling—NAB, FIA, provincial anti-corruption directorates, ombudsmen—but the system is anything but coherent. Agencies operate in silos, duplicate each other’s work, and often select individuals rather than audit systemic graft.

What Pakistan lacks is not more institutions, but credible, independent, predictable accountability. This requires clarity of mandate, insulation from political influence, and transparency in operations and outcomes. Pakistan’s governance reforms typically collapse on three fronts:

Resistance from vested interests; Regulatory capture by vested interests; and Absence of political continuity.

The IMF’s 15-point agenda—spanning procurement, taxation, SOE reforms, asset declarations, and judicial processes—will require not only technical fixes but a political consensus rarely seen in Pakistan.

It’s about time Pakistan reset its governance, which has now become inevitable. Pakistan urgently needs external financing, the IMF wants governance results, and the public wants relief from a system that no longer delivers. The cost of mis-governance is now too high to ignore. Weak institutions have directly contributed to Pakistan’s economic stagnation, soaring inflation, and persistent fiscal crises. Reform is no longer about ticking an IMF box—it is about national survival. Pakistan must move beyond cosmetic reforms and embrace structural changes.

Copyright Business Recorder, 2025