IMF Report Exposes "Corrosive" Corruption At Pakistan's Highest Levels

In a scathing new assessment, the International Monetary Fund (IMF) has released a 186-page Governance and Corruption Diagnostic Report that lays bare Pakistan's deep-rooted governance failures, warning that corruption has become woven into the country's political and economic structure.

The report describes corruption in Pakistan as "persistent and corrosive", a systemic force undermining growth, distorting markets, and hollowing out public institutions.

The findings offer one of the most alarming portraits yet of how entrenched elite capture and opaque decision-making have crippled the state's ability to govern effectively.

State Captured By Privilege And Patronage

The IMF team writes bluntly that "corruption continues to hinder Pakistan's macroeconomic and social development by diverting public funds, distorting markets, impeding fair competition, eroding public trust, and constraining domestic and foreign investment." It cites two decades of governance indicators that place Pakistan among the worst performers globally in controlling corruption.

The report warns that the most damaging form of corruption is elite capture, noting that "the most economically damaging manifestations involve privileged entities that exert influence over key economic sectors," many of them linked to the state itself.

In a striking statistic, the IMF reveals that between January 2023 and December 2024, Pakistan reported Rs 5.3 trillion in corruption-related recoveries-a figure the Fund stresses "reflects only one element" of the actual losses sustained by the economy.

The analysis report goes further, describing the number as "a narrow slice" of a far larger pool of unaccounted graft, pointing to a chronic "failure to quantify corruption's full impact."

Judiciary And Bureaucracy Under Fire

The IMF delivers an unusually sharp critique of Pakistan's judicial system, calling it "organizationally complex", slow, and vulnerable to political interference. It warns that judicial weaknesses "discourage reliance on courts to enforce contracts or protect property rights," deterring long-term investment and enabling impunity for the powerful.

The report notes that corruption perception surveys consistently list the judiciary and police among the most corrupt institutions. The Fund cites national survey data where 68% of Pakistanis believe anti-corruption bodies are used as tools for political victimization, exacerbating public distrust.

A Public Sector Built For Discretion, Not Accountability

The IMF finds "major governance weaknesses across state functions," from tax administration to public procurement, state-owned enterprises (SOEs), customs, and capital spending. It highlights a "persistent gap between formal policy and actual practice," noting extensive discretion in fiscal decisions, weak transparency, and the widespread misuse of supplementary grants that bypass parliamentary approval.

The report warns that state dominance of the economy, including SOEs with assets equal to 48 per cent of GDP, produces "significant corruption vulnerabilities," crowds out private investment, and allows politically connected entities to capture markets and rents.

Explosive Concerns Around SIFC

The IMF also scrutinizes the Special Investment Facilitation Council (SIFC), the civil-military forum controlling key investment decisions. It warns that the SIFC "operates with untested transparency and accountability provisions," raising the risk of unchecked discretionary powers over major economic deals.

The report urges publication of a full annual SIFC report, including details of all concessions, tax exemptions, and regulatory relaxations granted-an unprecedented call for transparency.

The Warning: Reform Or Remain Stagnant

In perhaps the report's most consequential finding, the IMF estimates that Pakistan could increase GDP by 5-6.5 per cent within five years if it implements a package of governance reforms, including strengthening procurement systems, reducing tax exemptions, improving judicial performance, and enforcing rule-based oversight.

But without such reforms, the IMF warns, Pakistan will remain trapped in a cycle of "economic stagnation and dependency on external financial support" - a conclusion the analysis document bluntly frames as the reason Pakistan stands "economically brittle, politically unstable, and chronically dependent on bailouts."