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Islamabad, Pakistan – A recent analysis from the International Monetary Fund (IMF) found that corruption in Pakistan is responsible for the country’s economic crisis, which uses “state capture” to bolster a select few political and business elites.

The Governance and Corruption Diagnostic Assessment (GCDA), finalised in November 2025, presents a grim picture of a system marked by dysfunctional institutions that are unable to enforce the rule of law or safeguard public resources.

According to the 186-page report, corruption in Pakistan is “persistent and corrosive”, distorting markets, eroding public trust and undermining fiscal stability.

The Pakistani government requested the report, which warns that the country’s economic stagnation will continue without destroying the institutions that support “elite privilege.”

Although there are corruption problems at all levels of government, the report states that “privileged organizations that have an impact on key economic sectors, including those owned by or affiliated with the state,” are the most economically damaging manifestations.

The report argues that Pakistan stands to gain substantial economic benefits if governance improves and accountability is strengthened. According to the report, these reforms could have a significant impact on the nation’s gross domestic product (GDP), which was $ 340 billion in 2024.

According to the report, “Pakistan could implement a package of governance reforms over the course of five years” based on a cross-country analysis of the reform experience of emerging markets.

Stefan Dercon, a professor of economic policy at the University of Oxford who has advised the Pakistani government on economic reforms, said that he agreed that the absence of accountability in corruption cases was eating away at the country’s economic potential.

According to him, “[the lack of implementation] of laws and principles of accountability] gives vested interests too frequently free rein, and addressing this needs to be at the forefront of efforts for economic reform.”

What are the key points of the IMF report, its policy recommendations, and what the experts have to say about it?

What does the IMF report say?

Since 1958, Pakistan has been one of the fund’s most frequent borrowers by 25 different means. In response to frequent balance of payments crises, almost every government, whether military or civilian, has requested IMF assistance.

The current programme was started under Prime Minister Shehbaz Sharif.

The GCDA release comes inainte of the IMF executive board’s anticipated approval of a $1.2 billion disbursement as part of the ongoing $7 billion program, which will last for 37 months.

Pakistan narrowly avoided default in 2023, surviving only after the IMF extended an earlier nine-month deal, which was followed by the ongoing 37-month programme.

Pakistan consistently comes in at the bottom of the list of nations’ indicators of global governance, according to the GCDA. The nation’s performance on preventing corruption remained stagnant between 2015 and 2024, making it one of the worst countries in its own country.

At the heart of the IMF’s findings is the concept of “state capture”, where, according to the fund, corruption becomes the norm and, in fact, the primary means of governance. According to the report, the Pakistani state apparatus frequently contributes to the enrichment of particular populations over the general public.

According to the report, “elite privilege” — defined as a group of people’s access to subsidies, tax relief, and lucrative state contracts — drains billions of dollars annually, while tax evasion and regulatory capture depresses real private sector investment.

These findings echo a 2021 United Nations Development Programme (UNDP) report, which said economic privileges granted to Pakistan’s elite groups, including politicians and the powerful military, amount to roughly 6 percent of the country’s economy.

The IMF’s description of elite capture is accurate, according to Ali Hasanain, an associate professor of economics at Lahore University of Management Sciences.

He cited the 2021 UNDP report and other domestic studies that describe how politically connected actors have long been given preference over those who have access to “preferential access to land, credit, tariffs, and regulatory exemptions” by Pakistan’s economic system.

“The IMF diagnostic repeats what many domestic studies, including those by the World Bank and Pakistan’s own institutions, have already emphasised: Powerful interests shape rules to maintain their advantage”, he told Al Jazeera.

The state was incurred by 4.61 percent of GDP in the state alone in the 2023 fiscal year as a result of tax expenditures, including exemptions and concessions granted to important industries like real estate, manufacturing, and energy.

Additionally, it calls for the Special Investment Facilitation Council (SIFC) to be transparent about how the government contracts are conducted, and forbids the use of special treatment for powerful public sector organizations.

The SIFC, created in June 2023 during Sharif’s first term, is a high-powered body comprising civilian and military leaders and tasked with promoting investment by easing bureaucratic obstacles. Although viewed as a flagship initiative that the government and the military jointly own, its lack of transparency has been met with constant criticism.

The report views the extensive legal protection SIFC officials, many of whom are members of the armed forces, as a significant governance issue. It warns that this immunity, combined with the council’s authority to exempt projects from regulatory requirements, creates significant risks.

The GCDA urges the SIFC to publish annual reports detailing all investments it has supported, including concessions that were granted, and the justification for them, underlining the lack of transparency.

According to the report, “The newly established Special Investment Facilitation Council, which has been vested with substantial authority to facilitate foreign investments, operates under untested transparency and accountability.”

Judiciary and rule of law

The judiciary is yet another significant bottleneck, according to the report. More than two million pending cases are currently occupying Pakistan’s legal system. In 2023 alone, the number of unresolved cases before the Supreme Court increased by 7 percent.

Two constitutional amendments have been passed in Pakistan over the past year, and many in the legal community have criticised them, calling them “constitutional surrenders.” In essence, the amendments create a parallel Federal Constitutional Court, which opponents claim will weaken the Supreme Court’s authority and alter the rules that govern judges’ appointments and transfers, giving the executive greater influence over who to promote and punish.

The government, however, has insisted that the changes were made to improve the efficiency and efficacy of the judicial system.

The Federal Investigation Agency (FIA), the two main agencies charged with investigating corruption, and the National Accountability Bureau (NAB), both experience similar credibility issues.

A 2024 government task force, according to the GCDA, found that NAB has occasionally overstepped its bounds and launched cases with political motivations. This selective accountability, the report says, has damaged public trust and created a climate of fear within the bureaucracy, slowing decision-making.

The report notes that conviction rates are still low despite NAB’s claim that it recovered 5.3 trillion rupees ($17 billion) between January 2023 and December 2024.

The diagnostic calls for fundamental changes to the NAB’s hiring procedures to guarantee independence and a transition from “political victimization” to “rule-based enforcement.”

Was the report necessary?

The IMF lists reforms that, according to experts, would be beneficial if implemented by authorities.

However, according to analysts, the government hasn’t followed-through on similar observations made by foreign institutions and domestic researchers in the past.

Sajid Amin Javed, a senior economist at the Sustainable Development Policy Institute (SDPI) in Islamabad, says the fact that Pakistan is already under an IMF programme may compel the government to take the findings more seriously.

He claimed that acknowledging that many of its recommendations have been made by others in the past “without bringing any change,” the IMF report could have gone further than it has.

He claimed that it might have been possible to determine the reasons for these failures.

Javed welcomed the report’s attempt to quantify economic losses from corruption, hoping it might push policymakers to act.

“Government and corruption are inextricably linked.” He claimed that corruption causes weak governance and weak governance promotes corruption, which makes them mutually exclusive.

Hasanain, however, was more sceptical, questioning why the IMF waited for a formal request from the Pakistani government despite having its own internal assessment mechanisms.

What is available to the government?

Analysts said Pakistan’s economic landscape has long been shaped by politically connected actors who enjoy preferential access to land, credit, tariffs and regulatory exemptions. They noted that the IMF’s observations are not recent.

According to Hasanain, corruption, including the elite’s control of markets, regulatory bodies, and public policy, is a political issue that needs to be addressed.

“Without a broader political awakening, governance reforms will remain technical fixes built on unstable foundations. He claimed that only political incentives that alter elite capture can be reversed.

In contrast, Javed argued that policy design capture is prevalent among those involved in creating governance and anticorruption reforms.

“Elite policy capture on policy design is perhaps the most important component which allows the elite capture. According to him, the recommendations in the report indicate that we must adopt inclusive and participatory approaches to solve the current conundrum.

A unified economic turnaround plan, fully owned by the prime minister and clearly communicated, is Hasanain’s most urgent reform.

He said that Pakistan’s economic landscape was cluttered with “committees, councils, task forces and overlapping ministries”, each producing its own documents without accountability.

The government should combine these dispersed structures into a single, clear reform plan with timetables, goals, and quantifiable outcomes. According to him, progress should be reported on monthly, discussed in public, and given independent scrutiny.

Hasanain argued that such consolidation would improve coordination, build public trust and signal seriousness to investors.

The most pressing issue for Javed is reforming the public procurement system, which regulates how public entities make purchases of goods and services with public funds.

According to him, “our procurement system does not focus on the value of the money; rather, it concentrates on the quantity of the money, where the lowest bidder wins the bid,” arguing that this strategy frequently led to contracts being awarded to those who were best suited to provide the services needed. “This system needs urgent modernisation”.