IMF’s big warning on Pakistan economy! Flags deep corruption risks; $1.2 billion approval hinges on urgent action

Pakistan’s long-delayed Governance and Corruption Diagnostic Assessment has drawn a stark picture of weak institutions and widespread corruption, with the International Monetary Fund warning that only rapid and sweeping reforms can put the country on a stable economic path. The assessment, published after months of delay to meet an IMF condition, is required before the Fund’s executive board considers a $1.2 billion disbursement next month.According to news agency ANI, the IMF found that systemic failures across budgeting, fiscal reporting, procurement, and oversight of state-owned enterprises have kept the country exposed to persistent corruption risks. Citing the GCDA, Dawn reported that Pakistan could lift economic growth by 5% to 6.5% over five years if it begins implementing a full governance reform package within the next three to six months. As per IMF, Pakistan could generate “between a 5pc to 6.5pc increase in GDP” if those reforms are adopted, reported news agency PTI.The Fund has demanded an end to preferential treatment for powerful public sector entities in government contracts and greater transparency in the Special Investment Facilitation Council. IMF wants the first detailed SIFC report published immediately and insists on mandatory e-procurement for all public transactions within a year. The GCDA also questioned the circumstances surrounding the Council’s creation, noting that the Board of Investment continues to exist alongside it.Corruption-related recoveries of PKR 5.3 trillion were recorded between January 2023 and December 2024, underscoring what the IMF called “persistent and corrosive” malpractice. The report noted that citizens regularly pay officials for basic services, while political and economic elites have shaped public policy for their own benefit. The IMF observed that weak control of corruption has undermined revenue collection, public spending efficiency and trust in the judiciary, describing the court system as outdated and unable to reliably enforce contracts, according to ANI.IMF has warned that Pakistan’s complicated and opaque tax structure, frequent rule changes and low public trust have driven the tax-to-GDP ratio down. Dawn added that substantial discretionary spending power in the hands of the government has resulted in budgets that diverge sharply from actual expenditure and tend to favour districts linked to political or bureaucratic influence.The IMF has recommended a 15-point reform plan covering governance, anti-corruption measures, business regulation and foreign trade oversight, PTI reported. The GCDA further highlights Pakistan’s long history with the Fund. The country has sought IMF support 24 times since 1958, and the current programme under Prime Minister Shehbaz Sharif is the 25th, with two tranches already released and a third expected next month.Both the IMF and Pakistan’s government, agree that tackling corruption vulnerabilities is essential to achieving sustainable reform and economic recovery.