MNZGamerX
Registered Member
Sajjad Ashraf
Published: 31 December 2025
The IMF’s newly released Governance and Corruption Diagnostic Report on Pakistan confirms the country is trapped in a vicious cycle of weak governance, pervasive corruption and institutionalised mismanagement. Coincidentally, the report comes on the day the State Bank of Pakistan’s Governor, addressing a Pakistan Business Council meeting, stated that Pakistan’s current growth model cannot sustain a country of 250 million people. The remark is stark and overdue.
For decades, the country has relied on consumption-led growth, cheap imports and periodic foreign financing to keep the economy afloat. Pakistan’s tax-to-GDP ratio has remained stubbornly low at around 10 per cent of GDP over the past five years, and private investment and FDI inflows rank near the bottom among Pakistan’s peers.
The IMF report comes as Pakistan enters its 25th Fund supported programme — more than any other country — and underscores a systemic failure that can no longer be deflected by blaming external shocks, geopolitical compulsions or cyclical market downturns.
According to the IMF, corruption is a persistent and corrosive feature of Pakistan’s governance and continues to hinder macroeconomic and social development by diverting public funds, distorting markets, impeding fair competition, eroding public trust and constraining domestic and foreign investment.
At its core, the report draws a direct line between governance decay and Pakistan’s chronic economic distress. Corruption is not portrayed as a peripheral irritant but as a central cause of fiscal haemorrhage, elite capture and declining state capacity.
Across its main chapters, the IMF report points to the nature and severity of corruption; flawed fiscal governance; revenue mobilisation and public financial management; market regulation; financial sector oversight; anti-money laundering and combating the financing of terrorism; the rule of law; and anti-corruption policies, strategies and practices. The report finds corruption, leakages and malpractice across these areas, benefiting the ruling elite and politically connected business houses. ‘Previous research has found that politically connected firms in Pakistan borrow 45 per cent more and have a 50 per cent higher default rate’, according to the report.
The report says that tax administration is plagued by discretionary exemptions, political appointments and widespread underreporting. The energy sector is weighed down by circular debt, theft, non-payment by powerful consumers and procurement distortions. State-owned enterprises (SOEs) are rife with political interference and patronage-based appointments that drain public finances. The report also points to weak transparency in public procurement where limited oversight enables inflated contracts and makes procurement a major channel of corruption. It adds that poor ‘rule of law’ indicators deter capital formation, investment and contribute to Pakistan’s low FDI.
The IMF report exposes the political architecture that sustains corruption in Pakistan. Rent-seeking thrives because political elites benefit from discretion. Bureaucratic postings, revenue enforcement, procurement approvals and regulatory waivers are routinely monetised to fund patronage networks. The judiciary remains inconsistent and slow, enabling impunity. Anti-corruption institutions are either politicised or structurally weak. When governments change, the reform agenda is typically reset — sometimes reversed — to accommodate new patronage coalitions.
In this environment, durable economic reform is nearly impossible. No political actor has demonstrated the willingness to confront embedded interests, rationalise taxes or depoliticise institutions. Technocratic fixes alone cannot succeed. Institutions cannot be rebuilt without rebuilding minds.
The first step is acknowledging that genuine reform requires generational work — at least three generations. There are no shortcuts. Pakistan must invest in civic education from the ground up — in homes, schools, universities, mosques and communities. Children should learn about the public good, how institutions serve society and why corruption is not cleverness but theft. The state must model the values it wants society to embrace. Leadership by example is the most powerful moral force. These are not abstract lessons — they are nation-building imperatives.
In the meantime, Pakistan needs to immediately address core governance failures by rationalising the tax burden, eliminating exemptions for powerful lobbies and bringing undertaxed sectors like agriculture and real estate into the tax net. It should also ensure merit-based public service and strengthen judicial independence, including by ensuring court decisions are implemented. It should clear case backlogs and improve contract enforcement.
Pakistan needs to break the cycle of elite capture through procurement, exemptions and SOE reforms. Competitive tendering for state-led projects should be open, transparent and fair, with clear rules and credible oversight.
Pakistan’s history of stop-start reforms shows that changes imposed under external pressure — whether by the IMF, World Bank or friendly countries — rarely endure. The IMF can guide, nudge and warn but it cannot supply political will. Lasting change requires domestic recognition that governance reform is not about satisfying donors but about national survival.
Ultimately, Pakistan’s governance and corruption crisis reflects a deeper moral and civic breakdown. The IMF report is a mirror, not a verdict. It exposes not just economic failings but a political culture where public office is treated as private entitlement and institutions become tools of extraction rather than service delivery.
Unless Pakistan confronts this reality with courage and clarity, it will remain stuck in perpetual IMF dependency — unable to deliver lasting reform or restore effective governance. The window to act is closing.
Sajjad Ashraf was Adjunct Professor at the Lee Kuan Yew School of Public Policy, National University of Singapore from 2009 to 2017. He was a member of the Pakistan Foreign Service from 1973 to 2008.
Published: 31 December 2025
The IMF’s newly released Governance and Corruption Diagnostic Report on Pakistan confirms the country is trapped in a vicious cycle of weak governance, pervasive corruption and institutionalised mismanagement. Coincidentally, the report comes on the day the State Bank of Pakistan’s Governor, addressing a Pakistan Business Council meeting, stated that Pakistan’s current growth model cannot sustain a country of 250 million people. The remark is stark and overdue.
For decades, the country has relied on consumption-led growth, cheap imports and periodic foreign financing to keep the economy afloat. Pakistan’s tax-to-GDP ratio has remained stubbornly low at around 10 per cent of GDP over the past five years, and private investment and FDI inflows rank near the bottom among Pakistan’s peers.
The IMF report comes as Pakistan enters its 25th Fund supported programme — more than any other country — and underscores a systemic failure that can no longer be deflected by blaming external shocks, geopolitical compulsions or cyclical market downturns.
According to the IMF, corruption is a persistent and corrosive feature of Pakistan’s governance and continues to hinder macroeconomic and social development by diverting public funds, distorting markets, impeding fair competition, eroding public trust and constraining domestic and foreign investment.
At its core, the report draws a direct line between governance decay and Pakistan’s chronic economic distress. Corruption is not portrayed as a peripheral irritant but as a central cause of fiscal haemorrhage, elite capture and declining state capacity.
Across its main chapters, the IMF report points to the nature and severity of corruption; flawed fiscal governance; revenue mobilisation and public financial management; market regulation; financial sector oversight; anti-money laundering and combating the financing of terrorism; the rule of law; and anti-corruption policies, strategies and practices. The report finds corruption, leakages and malpractice across these areas, benefiting the ruling elite and politically connected business houses. ‘Previous research has found that politically connected firms in Pakistan borrow 45 per cent more and have a 50 per cent higher default rate’, according to the report.
The report says that tax administration is plagued by discretionary exemptions, political appointments and widespread underreporting. The energy sector is weighed down by circular debt, theft, non-payment by powerful consumers and procurement distortions. State-owned enterprises (SOEs) are rife with political interference and patronage-based appointments that drain public finances. The report also points to weak transparency in public procurement where limited oversight enables inflated contracts and makes procurement a major channel of corruption. It adds that poor ‘rule of law’ indicators deter capital formation, investment and contribute to Pakistan’s low FDI.
The IMF report exposes the political architecture that sustains corruption in Pakistan. Rent-seeking thrives because political elites benefit from discretion. Bureaucratic postings, revenue enforcement, procurement approvals and regulatory waivers are routinely monetised to fund patronage networks. The judiciary remains inconsistent and slow, enabling impunity. Anti-corruption institutions are either politicised or structurally weak. When governments change, the reform agenda is typically reset — sometimes reversed — to accommodate new patronage coalitions.
In this environment, durable economic reform is nearly impossible. No political actor has demonstrated the willingness to confront embedded interests, rationalise taxes or depoliticise institutions. Technocratic fixes alone cannot succeed. Institutions cannot be rebuilt without rebuilding minds.
The first step is acknowledging that genuine reform requires generational work — at least three generations. There are no shortcuts. Pakistan must invest in civic education from the ground up — in homes, schools, universities, mosques and communities. Children should learn about the public good, how institutions serve society and why corruption is not cleverness but theft. The state must model the values it wants society to embrace. Leadership by example is the most powerful moral force. These are not abstract lessons — they are nation-building imperatives.
In the meantime, Pakistan needs to immediately address core governance failures by rationalising the tax burden, eliminating exemptions for powerful lobbies and bringing undertaxed sectors like agriculture and real estate into the tax net. It should also ensure merit-based public service and strengthen judicial independence, including by ensuring court decisions are implemented. It should clear case backlogs and improve contract enforcement.
Pakistan needs to break the cycle of elite capture through procurement, exemptions and SOE reforms. Competitive tendering for state-led projects should be open, transparent and fair, with clear rules and credible oversight.
Pakistan’s history of stop-start reforms shows that changes imposed under external pressure — whether by the IMF, World Bank or friendly countries — rarely endure. The IMF can guide, nudge and warn but it cannot supply political will. Lasting change requires domestic recognition that governance reform is not about satisfying donors but about national survival.
Ultimately, Pakistan’s governance and corruption crisis reflects a deeper moral and civic breakdown. The IMF report is a mirror, not a verdict. It exposes not just economic failings but a political culture where public office is treated as private entitlement and institutions become tools of extraction rather than service delivery.
Unless Pakistan confronts this reality with courage and clarity, it will remain stuck in perpetual IMF dependency — unable to deliver lasting reform or restore effective governance. The window to act is closing.
Sajjad Ashraf was Adjunct Professor at the Lee Kuan Yew School of Public Policy, National University of Singapore from 2009 to 2017. He was a member of the Pakistan Foreign Service from 1973 to 2008.
