When a governance report reads like a structural diagnosis, it confirms that Pakistan’s crisis is much deeper than the economy. The IMF’s Governance and Corruption Diagnostic Assessment (GCDA) does just that.
It is the most systematic study to date of how Pakistan’s institutions work and why they repeatedly generate economic, fiscal, and governance failures.
Much of what the report says is not news to Pakistanis. What is new is that, for the first time, the IMF has described these governance deficiencies as “deep-rooted, systemic and macro-critical”. Governance is no longer a fundamental problem but the main reason why Pakistan continues to slide into crisis.
It is also the most severe GCDA the IMF has issued against any country to date – a reflection of the breadth and depth of Pakistan’s institutional decadence. Yet the GCDA often uses sober and cautious terms – terms like “weaknesses,” “gaps,” “vulnerabilities,” “challenges.”
This gentle tone risks obscuring the much more serious reality behind it. The analysis is devastating even if the language is diplomatic; The report’s findings, read carefully, depict a state suffering from a systemic erosion of its capacity, predictability and integrity.
One of the most striking examples is that of public financial management. The IMF observes that Pakistan’s fiscal system suffers from “low credibility”, “fragmentation” and “ad hoc decision-making”.
Behind these seemingly gentle words lies a harsh truth: Pakistan’s budgets do not reflect actual fiscal outcomes, spending repeatedly deviates from approved plans, and fiscal risks remain hidden or poorly monitored.
The country essentially operates without a reliable financial steering mechanism. Stabilization becomes episodic and fiscal crises recur with each economic cycle because the institutions that administer fiscal governance are structurally weak.
Concerning public procurement, the report classifies several areas as presenting “high corruption risks”.
Pakistan’s public procurement practices suffer from a lack of transparency, broad discretion, limited use of e-procurement, and inconsistent enforcement of regulations. These vulnerabilities inflate project costs, degrade infrastructure quality, and create rent-seeking opportunities. In a resource-constrained economy, such leakages are not simply inefficiency; it is a major constraint to development.
The GCDA’s review of state-owned enterprises is also sobering. The IMF notes that many state-owned enterprises are “loss-making” and that their governance suffers from “political influence,” “lack of transparency” and weak performance monitoring. At the same time, the Fund recognizes some recent progress, including the promulgation of the State-owned Enterprises Law, improved reporting on state-owned enterprises, and the establishment of the Central Supervisory Unit.
These are positive measures, but far from sufficient. Pakistan’s public enterprise sector remains a huge fiscal burden, particularly in the energy chain, where governance failures directly fuel circular debt and power sector losses.
On revenue administration, the IMF highlights Pakistan’s structural failures by using phrases such as “weak enforcement”, “large tax expenditures” and “discretion” in applying exemptions.
Although the report does not use the exact term “elite capture,” its findings unequivocally point to a tax apparatus geared toward protecting powerful groups through exemptions and discretionary treatments, leaving the burden disproportionately on compliant taxpayers and the formal sector.
This undermines equity, encourages informality and keeps Pakistan perpetually dependent on borrowing. Anti-corruption institutions are also under close surveillance.
The IMF points to “overlapping mandates,” “coordination failures,” policy inconsistencies, and weaknesses in investigation and prosecution capacity. It shows how corruption risks emerge not only from rent-seeking, but also from ambiguity, weak systems and discretion.
The result is a patchwork of accountable agencies that lack coherence and effectiveness – an architecture incapable of preventing corruption or imposing predictable consequences.
The most important part of the report concerns the rule of law and the judicial system. The IMF highlights “vulnerabilities to corruption of judicial institutions”, weaknesses in “judicial independence and integrity” and “capture of judicial institutions”. Courts, he notes, often struggle to effectively enforce contracts and face large backlogs, procedural delays and inconsistent decision-making.
Although the wording is subtle, the implication is not: a legal system that cannot reliably enforce contracts or protect property rights becomes a fundamental barrier to investment and economic transformation. Pakistan’s ranking in the “bottom quartile of countries” in terms of rule of law indicators reflects a system that undermines rather than supports economic development.
The report also analyzes the Special Investment Facilitation Council (SIFC). The IMF recognizes improvements in coordination and speed of decision-making, noting that the ITFC has the potential to accelerate investments.
However, this raises serious governance issues: the ITFC’s broad mandate creates “institutional fragmentation”, parliamentary oversight is reduced due to limited transparency, and immunity provisions introduced through legal amendments “weaken accountability”. The Fund recommends explicit protocols, increased transparency and the integration of ITFC operations into existing PFM and regulatory frameworks, rather than allowing it to operate as a parallel institutional structure.
The message is clear: accelerating investment must not come at the expense of rules-based governance.
Importantly, the GCDA recognizes areas for progress. The IMF recognizes improvements in beneficial ownership transparency, AML/CFT compliance, digitalization of certain revenue processes, SOE reporting reforms, progress in monetary policy governance, and adoption of multi-year fiscal planning frameworks. These gains are important, but they are insufficient to offset the scale of the systemic weaknesses identified by the report.
Perhaps the most powerful contribution of the GCDA is its quantification of lost economic potential. The IMF says Pakistan’s growth has been “hampered by long-standing governance weaknesses” and corruption vulnerabilities “are holding back private sector development.”
It estimates that Pakistan could increase its GDP by 5.0 to 6.5 percentage points over five years by implementing a set of governance reforms focused on anti-corruption, business regulation and foreign trade regulation, with positive effects starting “within three to six months”.
This is a conclusion based on country-wide evidence: governance is the single largest driver of unrealized growth in Pakistan.
Why should Pakistan act now? Because each year of delay worsens institutional decadence.
Stabilization efforts fail without credible governance. Investor confidence will not return without the reliability of the rule of law. Public trust erodes when the state is seen as serving the few rather than the many. Governance reform is not a political slogan; it is the foundation of economic recovery. This requires transparent budgeting, depoliticized state-owned enterprises, automated public procurement, predictable tax enforcement, strengthened regulatory bodies, and an autonomous and efficient justice system.
The IMF diagnosis does not reprimand Pakistan but warns it. Behind his gentle tone lies a clear and urgent message: the crisis in Pakistan is not a mystery. This is the predictable result of failing governance. And the path to a sustainable recovery is just as predictable: good governance and results will follow. Failed governance produces broken results. But with political will, the opposite is also true.
The author is a former managing partner of a major professional services firm and has done extensive work on governance in the public and private sectors. X: @Asad_Ashah
Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the editorial policies of PK Press Club.tv.
Originally published in The News
