In a new report, the International Monetary Fund Corruption said recoveries totaling Rs5.3 trillion in just two years represent only a fraction of the true cost to Pakistan’s economy amid “persistent and corrosive” corrupt practices plaguing every level of government.
After almost three months of delay, the country’s Ministry of Finance released the Governance and Corruption Diagnostics Report – a necessary step to meet the IMF’s conditions ahead of the Fund’s executive board meeting, likely to approve the $1.2 billion loan tranche.
The Rs5.3 trillion figure added up from January 2023 to December 2024, the damning assessment says.
The Fund’s report also faults the privileged people and elites in perpetrating the cycle of corruption.
The 186-page IMF report observes there is no reliable measure to quantify the scale of corruption in Pakistan but said that “those costs can be gleaned from the recovery of corruption-related assets”.
The global lender said the NAB recoveries in just two years are just one of the ways to scale the depth of corruption.
The money obtained through asset recoveries by NAB reflects only one element in total costs of corruption to the economy, it added.
The analysis projects that Pakistan could generate between a 5% to 6.5% increase in GDP by pushing through a package of governance reforms over the course of five years.
Pakistan has gone to the IMF 24 times since 1958, making it one of the Fund’s most frequent borrowers. Nearly every government – military or civilian – has had to seek IMF assistance, reflecting Pakistan’s chronic balance of payments crises.
“Shortly after independence, Mohammad Ali Jinnah, Pakistan’s founding father, denounced corruption in 1947 as a poison that needed to be eradicated,” said the IMF.
“More than 70 years later, 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.”
“Corruption is a persistent and corrosive feature of Pakistan’s governance,” the analysis says in a blistering description of the successive governments and dictatorial regimes that have ruled the country.
One example cited is of the PTI government’s decision in 2019 to allow sugar exports as one of the examples of how corrupt elites have captured policies to their benefits.
About the cascading effects of corruption, the report notes that Pakistanis are regularly required to pay officials for access to services.
At a higher level, official policies and practices have been shaped by economic and political elites to make use of public authority to enrich themselves at the cost of greater societal well-being and economic growth.
Significantly, the report points out that the capture of judicial institutions and the lack of accountability for corrupt practices fosters corruption and the outflow of capital tied to the proceeds of corruption that might be more productively used in Pakistan.
Consequently, the indicators reflect weak control of corruption over time with negative consequences for public spending effectiveness, revenue collection, and trust in the legal system.
“The most economically damaging manifestations involve privileged entities that exert influence over key economic sectors, including those owned by or affiliated with the state.”
These dynamics are compounded by perceptions that the anti-corruption approach has lacked consistency and impartiality, contributing to diminished public confidence in enforcement institutions.
The IMF defines corruption as the abuse of authority for private gain. Corruption can be an individual act such as requesting or accepting a bribe, or it can happen through a long-standing network of public and private actors who work together to capture contracts, markets, or sometime entire governments.
Moreover, the IMF said that Pakistan’s corruption risks are generated by weaknesses in budgeting and reporting of fiscal information, and management of public financial and non-financial resources, particularly in capital spending, public procurement, and the management and oversight of state-owned enterprises in an overly complex and opaque tax system.
Pakistan’s judicial sector is organizationally complex, is not able to reliably enforce contracts or protect property rights due to problems with efficiency, antiquated laws, and the integrity of judges and judicial personnel.
“Corruption risks are exacerbated by fragmentation among accountability institutions and limitations in their operational independence,” said the Fund.
The IMF said that governance weaknesses in the judicial sector constrain the ability of parties to rely on the effective enforcement of their economic rights and lead to exposure to corruption risks.
Muhammad Luqman is Associate Editor at Views News Now. He writes on wide-ranging issues including economy, South Asia, the Middle East, agriculture, economy and innovation. Luqman has worked some of the leading news organizations and won acclaim for his original and research-based works.
