A new IMF governance assessment has delivered one of the bluntest warnings yet about Pakistan’s economic future, concluding that entrenched corruption and “state capture” by powerful political, military and business elites are costing the country up to 6 percent of its GDP every year.
The Governance and Corruption Diagnostic Assessment (GCDA), finalised in November 2025, describes a deeply weakened state where public institutions fail to uphold the rule of law, protect public funds or provide fair economic opportunities. Corruption, the report says, has become “persistent and corrosive”, distorting markets and undermining fiscal stability.
IMF: Elite privilege drains billions from Pakistan
According to the 186-page report, the most damaging forms of corruption stem from privileged groups that exert control over major economic sectors, often through special tax breaks, subsidies, regulatory exemptions and access to lucrative public contracts.
The fund estimates that better governance and stronger accountability could boost Pakistan’s GDP by 5 to 6.5 percent within five years.
Oxford economist Stefan Dercon agreed with the findings, saying that Pakistan’s failure to enforce accountability has allowed vested interests “free rein”, weakening any chance of sustained economic reform.
Pakistan ranked among worst globally on corruption control
Pakistan continues to perform near the bottom of global governance indicators, with corruption scores stagnating from 2015 to 2024. The IMF argues that the country’s governance problems are structural, rooted in a system where public policy is routinely shaped to benefit a few at the expense of the public.
These findings echo a 2021 UNDP report that estimated the cost of elite privilege at roughly 6 percent of Pakistan’s economy, including benefits granted to political leaders and the powerful military.
Tax exemptions, real estate favours and opaque contracts
The IMF highlights several key areas of weakness:
- Tax expenditures—exemptions and concessions for influential sectors like real estate, manufacturing and energy—cost Pakistan 4.61 percent of GDP in FY2023 alone.
- Government contracts often favour politically connected state-owned entities.
- The Special Investment Facilitation Council (SIFC)—a high-powered civil-military investment body—operates with major transparency gaps. The report warns that broad legal immunity for SIFC officials creates “serious governance risks”.
The IMF has urged the council to publish detailed annual reports on all investment deals and concessions.
Judicial backlog, selective accountability deepen the crisis
The GCDA identifies Pakistan’s judiciary as another major bottleneck, with more than two million pending cases and growing concerns about recent constitutional amendments that critics say weaken judicial independence.
Similarly, the National Accountability Bureau (NAB) and the Federal Investigation Agency (FIA) face credibility challenges, with accusations of selective, politically motivated cases that create fear in the bureaucracy while failing to secure convictions.
Experts: IMF report accurate, but not new
Economists say the IMF’s findings restate what Pakistani and international researchers have long documented: that vested interests shape policy, block structural reform and extract enormous economic benefits.
LUMS economist Ali Hasanain said the IMF report “is hardly a revelation”, noting that elite capture of land, credit, tariffs and regulatory institutions has been well-documented for years.
Islamabad-based economist Sajid Amin Javed welcomed the IMF’s attempt to quantify the economic losses, saying it might force policymakers to act, though he also criticised the report for not analysing why past reform recommendations were never implemented.
Will the government act?
Experts agree that meaningful change requires political will, not just technical reforms.
Hasanain said corruption is fundamentally a political problem:
“Without a political awakening, governance reforms will remain technical fixes built on unstable foundations.”
Javed warned that reform design is often controlled by the same elite groups benefiting from the current system—a form of “policy design capture”.
What reforms are needed first?
Economists highlight three urgent priorities:
- A unified national economic reform plan led directly by the prime minister, replacing overlapping committees and councils.
- Transparent, independent accountability reforms, including overhauling NAB’s appointment process.
- Modernising public procurement, shifting from lowest-bidder awards to quality-based, value-for-money evaluations.
Both experts argue that without structural changes, Pakistan’s economic stagnation will continue.
As Javed put it:
“If Pakistan wants a transparent, flourishing economy, it must overhaul its entire governance framework.”