IMF sees corruption as major challenge in Pakistan, urges SIFC to publish first report

ISLAMABAD: The International Monetary Fund (IMF) stated that corruption remains a persistent challenge in Pakistan, urging the Special Investment Facilitation Council (SIFC) to publish its first annual report.

IMF, in its Governance and Corruption Diagnostic Assessment (GCDA), stated that corruption poses serious risks to economic development and public trust. The Fund urged the government to enhance transparency, strengthen governance structures, and immediately begin implementing a comprehensive reform agenda.

According to the report, the IMF has called on the SIFC to develop clear protocols for its operations and significantly improve transparency to ensure effective oversight and accountability.

It further recommended that the SIFC must publish its first annual report, detailing all investment deals it has facilitated, including any tax, policy, regulatory, or legislative concessions granted—along with the full rationale and the monetary value of each concession.

IMF Governance and Corruption Assessment Findings

The GCDA, which the IMF conducted to evaluate corruption risks across key state functions, is a requirement before the IMF Executive Board approves the upcoming $1.2 billion disbursement next month.

The Fund noted that corruption is entrenched across institutions and has “significant adverse implications for economic development.” Indicators show a long-term decline in Pakistan’s control of corruption, affecting public spending effectiveness, revenue collection, and trust in the justice system.

While corruption vulnerabilities are present at all levels of government, the most economically damaging manifestations involve privileged entities that exert influence over key economic sectors, including those owned by or affiliated with the state, the reports said.

Weak Accountability and Enforcement

The IMF highlighted that Pakistan lacks strong institutional accountability mechanisms, weakening overall governance. There is currently no clear framework to evaluate how authorities prevent corruption-linked money laundering.

Although the National Accountability Bureau (NAB) and Federal Investigation Agency (FIA) have the legal mandate to investigate money laundering related to corruption, the number of resulting enforcement actions and prosecutions remains low, the report said.

Quarterly meetings among NAB, the Financial Monitoring Unit (FMU), and the National AML/CFT Authority take place, but the IMF noted uncertainty about whether substantial progress is being made.

The report warned that corruption—from petty bribery to large-scale rent-seeking—has severe macroeconomic consequences. Comparative assessments show Pakistan’s ability to control corruption remains weak relative to its regional peers.

Uneven enforcement of laws, often influenced by political considerations, further diminishes the effectiveness of anti-corruption efforts.

Uneven enforcement of laws, often influenced by political considerations, further diminishes the effectiveness of anti-corruption efforts. Government officials have expressed reluctance in decision-making due to fears of selective investigations and overreach by NAB. Past abuses of power by the Bureau, the Fund noted, have eroded its credibility and contributed to a culture where bribery is seen as a necessary evil in an administration riddled with red tape.

Asset Declaration System Needs Strengthening

The IMF described Pakistan’s asset and income declaration regime as a potentially valuable tool, but noted that it suffers from major limitations. While the system has recently been strengthened, it still lacks robust, risk-based verification, reducing its ability to deter corruption.

Concerns Over Judicial Independence

The report also flagged challenges affecting judicial independence in Pakistan. It noted that the judicial system faces structural obstacles and recent changes in the process of appointing Supreme Court judges have triggered debate and a constitutional petition regarding possible implications for the rule of law.

Economic Growth Potential Linked to Reforms

The IMF estimated that Pakistan could increase its economic growth rate by 5% to 6.5% over the next five years if it implements a comprehensive set of governance reforms within the next three to six months.