What Hold Pakistan Economy Back?

After months of delays, the IMF Governance and Corruption Diagnostic Assessment (GCDA) on Pakistan has finally been released, and its diagnosis is quite grim. The report is damning, and would surprise no one with the Fund observing that “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 report finds that institutional weaknesses, lack of transparency in state functions, preferential treatment for select businesses and inefficiencies in public-sector transactions are major constraints to growth.

On November 20, the Finance Division released an IMF report which offers the most detailed assessment in years of how fragmented regulation, opaque budgeting and elite capture are curbing investment and weakening revenue. Titled “Pakistan Governance and Corruption Diagnostic Assessment, the 186-page scathing report presents a grim analysis of Pakistan's persistent corruption challenge. exposes the scale of elite capture across Pakistan's most influential sectors, warning that entrenched interests in key sectors, including sugar, real estate, agriculture and energy, continue to undermine the country's reform trajectory. It singles out the sugar industry as a textbook example of how the intertwined relationship between economic elites and state regulators captures public benefits at a deep cost to the overall public. The authors of the report have predicted that Pakistan could lift its gross domestic product (GDP) between 5% and 6.5% over five years if the country tackles corruption and deep-rooted governance failures.