IMF’s report on governance and corruption: limited and naïve—II

The GCD report does not address this extractive policy design, these efforts to preserve and perpetuate this capital order. So, to begin with, the GCD report is strongly limited and the ‘package of governance reforms’ that in turn is approached from the lens of neoliberal- and austerity-based framework is not only significantly limited in improving governance and incentive structures but also debilitates the already weak capacity of demos – at the back of decades of similar minded policies – to empower demos in meaningfully pushing for policies – like meaningful expansion of tax base, deep investments in education, meaningful empowerment of election-related frameworks in much better price discovery for both labour and goods/services, and in overall creating institutions/ministries/departments that help lower transaction costs and create organizations, and markets – that allow equal opportunities for reaching inclusive and equitable growth outcomes for most.

Hence, some of the policies that are being suggested in GCD report may be discussed as an example to understand not only the limited nature of these reform-related recommendations for reducing corruption and elite capture, but how they might actually be accentuating this capital order; for instance, ‘improving the performance of the public procurement system by eliminating preferences for State-Owned Enterprises’.

SOEs are generally strategically important industry for domestic production and exports, and therefore to leave it to otherwise weak price discovery and volatile nature of prices at the back of frequent supply frictions, sellers’ inflation, and import price shocks-related inflation is not recommended because as Naomi Klein in her internationally reputed book ‘Shock doctrine: the rise of disaster capitalism’ pointed out that under situations of shocks, incidents of corrupt practices generally are likely to rise, and of those policies that are difficult for elites to practice to serve their interest during normal times when the demos are more vigilant, and focused, get practiced.

At the same time, while it is important to increase the ‘use of the e-Government Procurement system’ as recommended by the GCD report, it is nonetheless may not be very effective to improve price discovery of procured goods and services in the first place due to corrupt practices in the presence Neoliberalism-led least regulated market fundamentalism and low-level check by demos – through pushing legislation that right-sizes the role of government in improving its capacity to regulate and co-create organizations and markets – under practice of austerity policies.

With regard to improving the performance of FBR, and that of Tax Policy Office, which the report calls for, is once again only a marginal reform in the presence of strong, over-arching extractive institutional design, under limited role of public sector – which is different from discussion on size of government – where what is needed. for instance, is whole of government approach and non-neoliberal, mission-oriented, symbiotic, entrepreneurial role of government.

OPINION: IMF’s report on governance and corruption: limited and naïve—I

Similarly, while it is important to ‘enhance accountability of FBR by publishing audit findings relating to PRAL…’ the real question is the lack of push on government by demos to act on already plethora of audit observations that only receive very sub-optimal attention from government authorities. Also, while it is important to enhance investigation and prosecution of money laundering offences, what is equally important for major countries in terms of voting rights at multilateral institutions like IMF to improve global financial architecture in terms of effectively dismantling off-shore tax heavens, where this money laundering most probably mostly lands.

Here, IMF needs to enhance its oversight of ‘transnational aspects’ for better understanding the role it plays in positively impacting corruption, and recommend governments to check these aspects more effectively in the light of greater depth of IMF’s own analysis, given it is pointed out in a June 25, 2020 published IMF paper ‘Progress in implementing the framework for enhanced Fund engagement on governance’ that ‘…provides an interim update on implementation of the 2018 Framework for Enhanced Fund Engagement on Governance [the guiding document/framework for the GCD assessment for Pakistan].

This update is in advance of a comprehensive formal review of the Framework scheduled for mid-2021’ as ‘In general, staff focused more on developing countries and less on advanced economies; more on those that needed Fund lending and less on those that did not; and more on domestic corruption (the demand-side) and less on the transnational aspects (supply-side and cross-border concealment).’

Moreover, while it is important that the State Bank of Pakistan (SBP) has independence of action and thinking in terms of effectively implementing the monetary, and exchange rate policies, including proper surveillance of banks, it is ultimately the elected representatives of people – the government – that provides the ‘rules of the game’ for the central bank, and for GCD report to suggest the government to ‘change the SBP act to remove the secretary of the Ministry of Finance from the Board of Directors’ is going many steps over-board, and as such significantly under-cuts democracy in terms of government playing a meaningful role in aligning the monetary and fiscal policies for overall coherent macroeconomic policy, including debt management.

Also, for GCD to recommend government to ‘…publish on a Government website the results of the first monitoring exercise in all federal Administrative Tribunals and Special Courts relating to commercial cases’ is unnecessary and, in fact, in bad taste – the purpose should be reform, and not holding a public trial of judiciary in any way, or up to any level of judiciary, but to leave the performance review of judiciary entirely to the internal affairs of their technically competent authorities within judiciary.

Last but not the least, the GCD report does not highlight much the otherwise likely significant impact of climate change-related catastrophes, including that on account of the ‘Pandemicene’ phenomenon on pushing people towards corrupt practices, where not everyone is likely to be of high moral standards and is all the more prone to corrupt practices under pressure of shocks, and even during otherwise normal times of sub-optimal, and limited functioning of public sector institutions and their lack of effective role in reaching meaningful price discovery, and appropriate level of welfare policies.

For this, the GCD report, IMF programmes, and overall government policies in general need to move away from neoliberal- and austerity-based policies, something which the report does not identify as among the main causes of elite capture.—Concluded

Copyright Business Recorder, 2025