IMF Report Identifies Persistent Instability Risks for Pakistan
- Security Risks Monitor
- 1 day ago
- 3 min read
Elitocracy, corruption, lack of accountability and marginalisation of the under class through persistent neglect by privileged entities bodes ill for stability in Pakistan ahead as the military has once again captured de jure state power.
The International Monetary Fund (IMF) Report on Governance and Corruption Diagnostic Assessment (GCDA), has highlighted long term risks for Pakistan which is restraining stability in the country.
Pakistan’s weak governance are well known but the IMF flagging the same in the Report released by Ministry of Finance of Pakistan provides the factual basis from an international agency which is possibly having to subsidize ill and misgovernance by the country’s elite – the political class and the military.
The IMF underlined that, in line with its framework, the exercise is confined to corruption and governance issues at the federal level and does not address wider governance concerns among and between provinces. In fact these two factors combined can make up about 75 % of government’s efficiency and effectiveness and thus the Report’s conclusions should be highly distressing for Islamabad. No doubt that was the reason why Pakistan Ministry of Finance kept it under the carpet so to say for almost three months.
What Aspects the Report Covers?
Guided by the IMF’s 2018 Framework on Enhanced Engagement on Governance, the assessment focuses on corruption risks and governance weaknesses at the federal level in five critical areas: fiscal governance, including public financial management, procurement, state assets and tax policy; market regulation; financial sector oversight; anti-money laundering and combating the financing of terrorism (AML/CFT); and the rule of law, with particular emphasis on enforcement of contracts, protection of property rights and judicial integrity.
What Critical Issues Does the Report Expose?
The GCDA exposed systemic governance weaknesses across state functions and noted that the country was exposed to corruption risk 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 (SOEs).
Overly complex and opaque tax system administered by tax and customs authorities operating with insufficient capacity, management and oversight is another major weakness.
The judicial sector is organisationally complex, unable to reliably enforce contracts or protect property rights due to problems with efficiency, antiquated laws, and the integrity of judges and judicial personnel says the GCDA report.
The IMF notes that Pakistanis are often compelled to make continuous payments to officials to obtain basic services, while funds lost to corruption could otherwise support higher production and development.
While vulnerabilities exist at all levels of government, the IMF finds that 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 report says political and economic elites have obstructed economic development by seizing control of policies and capturing public benefits for their own gain.
Market regulation is described as being marked by multiple regulators issuing overlapping rules through opaque processes, high compliance costs and perceptions of regulatory capture.
Despite the existence of multiple accountability institutions, the report notes, Pakistan has faced systemic challenges in enforcing accountability on individuals and organisations for non-performance and malfeasance in the application of business regulations.
Recommendations of the IMF
A 15-point plan for implementation focuses on ministries and departments, including the Public Procurement Regulatory Authority (PPRA), the Special Investment Facilitation Council (SIFC), the Securities and Exchange Commission of Pakistan (SECP), the Federal Board of Revenue (FBR), the National Accountability Bureau (NAB), and the ministries of information technology (IT), law, finance, interior and planning.
“Pakistan could generate between a 5pc to 6.5pc increase in GDP by implementing a package of governance reforms over the course of five years” beginning in three to six months, the report said.
“A unifying theme is the emphasis on increasing transparency and accountability in policy formulation, implementation and monitoring. This involves improving access to information and strengthening the capacity of state and non-state stakeholders to participate effectively in governance and economic decision-making,” the report said, calling for advancing rule-based governance.
