Dr. Ikramul Haq & Abdul Rauf Shakoori
In response to a request from the Government of the Islamic Republic of Pakistan, the IMF undertook a Governance and Corruption Diagnostic with World Bank participation…The report is based on information obtained as of the end of the April 2025 main mission. It does not capture reforms that have been introduced since April 2025….This Governance and Corruption Diagnostic Report was possible due to a generous financial support of the Government of Japan. Analysis and conclusions made in this report are of IMF staff only— Pakistan: Governance and Corruption Diagnostic 2025 (November 2025), International Monetary Fund (IMF)
The Government of Pakistan has finally released above-cited technical assistance report [hereinafter “the Report’] by the IMF, generating wide-ranging intense debates across economic, policy circles and media. The Report assesses governance flaws, corruption vulnerabilities, and delay in structural reforms affecting macroeconomic stability and growth.
The exercise by IMF, conducted on the request of Pakistan, spanned eight months, including two field missions, conducted jointly with World Bank experts, to identify challenges and recommend measures for improved accountability, integrity, and economic performance.
The IMF establishes its analysis within the framework of its US$7 billion 37-month Extended Fund Facility (EFF) programme approved for Pakistan on September 25, 2024, aimed at restoring macroeconomic stability and promoting sustainable growth.
The Report highlights fiscal achievements, including a primary surplus of 2% of GDP in the first half of fiscal year (FY) 2025, historic low inflation of 0.3% in April, and improvements in gross reserves from US$9.4 billion in August 2024 to US$10.3 billion in April 2025. The reserves are projected to reach US$13.9 billion by end-June 2025, reflecting progress in macroeconomic stabilization amidst a challenging global environment.
The Report underscores that Pakistan continues to face deep structural challenges that hinder growth. Previous programmes, including the 2013–2016 EFF, 2019–2023 EFF, and 2023–24 Standby Arrangement (SBA), succeeded in stabilizing the economy but fell short in institutionalizing reforms.
The Report links slow improvements in living standards to underinvestment in human and physical capital, fiscal weaknesses, and distortions stemming from the state’s dominant role in the economy.
The IMF analysis identifies governance and corruption risks across fiscal management, tax policy and administration, market regulation, public financial management, state-owned enterprises (SOE) oversight, anti-money laundering, judicial effectiveness, and the rule of law.
The Report notes that corruption persists at all levels of government, with the most economically damaging manifestations arising from privileged actors controlling key sectors. These vulnerabilities weaken public spending effectiveness, compromise revenue collection, and erode trust in legal institutions.
The Federal Board of Revenue (FBR) is identified as a critical actor, with weak internal controls and complex tax administration that contribute to governance vulnerabilities. The IMF further notes deficiencies in the Single Treasury Account framework and debt management processes, fragmented public procurement, and limited auditor capacity, which collectively undermine fiscal discipline and transparency.
The Report identifies shortcomings in market regulation, including overlapping regulatory bodies, excessive compliance costs, and discretionary practices favoring well-connected firms. The financial sector’s oversight remains relatively sound but exposed to state asset concentration risks. Anti-money laundering measures have improved, as evidenced by Pakistan’s removal from the grey-list of Financial Action Task Force (FATF), but challenges remain in prosecuting corruption-related financial crimes and monitoring politically exposed persons.
The Report also evaluates judicial weaknesses, including inefficiency, outdated laws, a backlog of cases, and inconsistent appointment practices that compromise independence and integrity. Anti-corruption efforts remain heavily reliant on a single politically influenced institution. The preventive measures like asset declaration systems exist, however, their implementation is insufficient to mitigate macro critical corruption risks.
The IMF identifies systemic governance issues, including fragmented oversight, limited capacity, discretionary allocation of economic advantages, and restricted public engagement. Additionally, weak governance structures impede private sector development, reduce accountability, and exacerbate economic distortions. Structural reforms recommended include improvements in tax administration, SOE reform, judicial efficiency, anti-corruption mechanisms, market regulation, and financial oversight.
The Report projects that implementing the IMF recommended governance reforms could raise Pakistan’s GDP by 5 to 6.5 percent over five years. Recommended reforms include anti-corruption measures, enhanced regulatory frameworks, business facilitation, and oversight of foreign trade. While framed as a pathway to growth, the recommendations largely reflect external conditionality rather than context-specific domestic priorities.
The Report warrants critical scrutiny. The analysis repeatedly highlights Pakistan’s governance weaknesses but overlooks the IMF’s own role in shaping these outcomes. The IMF has monitored Pakistan for over 70 years, prescribing fiscal policies, structural reforms, and conditionalities through successive programmes. Each review has imposed harsher measures, including additional taxes and regulatory adjustments, which have often conflicted with constitutional and political frameworks. The cumulative effect has been an oppressive taxation environment that discourages domestic and foreign investment despite Pakistan’s strong economic potential.
The IMF’s historical oversight has failed to institutionalize reforms or address the persistent weaknesses it identifies. Quarterly staff reports routinely assess Pakistan’s progress, applauding incremental compliance, yet the structural reforms demanded by the IMF have remained largely unimplemented for decades. This creates a pattern where responsibility for weak governance is shifted onto Pakistan, rather than acknowledging the limitations and consequences of IMF’s programmes.
The IMF’s charge-sheeting of Pakistan in 2025 follows trends seen in other countries under its programmes, including Argentina, Egypt, Ukraine, Uganda, and Malawi. The situation across these cases, the IMF produces critical reports without assuming responsibility for the adverse effects of imposed conditions, including constrained economic growth, investor disinterest, and social costs. The IMF’s approach prioritizes compliance with its frameworks over fostering sustainable development, leaving countries dependent on continued monitoring and conditionality.
The IMF’s recommendations for Pakistan, apparently technically sound, often overlook the practical realities of implementation. Structural reforms in taxation, SOE governance, judicial efficiency, and regulatory oversight require institutional capacity, political consensus, and public buy-in, which cannot be externally enforced. The Report presumes that adherence to external remedies will yield GDP growth, yet historical experience demonstrates that progress requires domestically driven and owned reform, institutional ownership, and context specific strategies.
The IMF’s failure to acknowledge the intended and/or unintended consequences of its programmes undermines its credibility. Pakistan’s engagement with the IMF has resulted in repeated fiscal pressures and regulatory interventions that have hindered investor confidence and limited economic growth. The IMF projects GDP gains from governance reforms, its ongoing supervision often perpetuates dependency rather than supporting self- sustaining economic development.
The way forward for Pakistan requires a clear strategy to reduce reliance on IMF programmes by promoting economic stability and investor confidence. The first step is to broaden the domestic tax base, eliminate politically driven exemptions, and modernize revenue administration.
The second step is to institutionalize governance reforms that strengthen independent oversight, enhance judicial efficiency, and improve public financial management without external imposition. The third step is to create a business-friendly regulatory environment that incentivizes investment, reduces bureaucratic hurdles, and protects property rights.
The fourth step is to diversify international partnerships beyond IMF programmes, leveraging bilateral and multilateral trade and investment agreements to secure capital inflows with fewer conditionalities. The fifth step is to build macroeconomic resilience through fiscal discipline, strategic debt management, and targeted public investments in infrastructure, energy, and emerging sectors. The sixth step is to promote transparency, civic engagement, and rule based governance to ensure that policy implementation aligns with domestic priorities.
The seventh step is to capitalize on regional and global trade corridors, including partnerships with China, Gulf countries, and Southeast Asia, to develop alternative sources of investment and financing. The eighth step is to expand digital governance platforms, including biometric databases, e-governance, and digital taxation systems, to improve efficiency and reduce corruption. The ninth step is to cultivate a culture of evidence based domestic policymaking, prioritizing long term reforms over compliance with external mandates.
The tenth step is to communicate Pakistan’s reform agenda effectively to international investors, emphasizing stability, transparency, and predictable regulatory frameworks. By adopting these measures, Pakistan can gradually reduce dependence on IMF programmes, enhance investor confidence, and unlock sustainable growth potential.
The IMF Governance and Corruption Diagnostic Report 2025 provide a comprehensive critique of Pakistan’s governance system, highlighting systemic vulnerabilities and offering recommendations to strengthen accountability and economic performance. However, the Report also reflects a longstanding pattern where the IMF imposes external conditions, monitors compliance, and attributes shortcomings to recipient countries by neglecting its own role in influencing economic outcomes.
The ultimate lesson is that Pakistan’s economic future depends not on continuous IMF oversight, but on its ability to strengthen institutions, broaden the economic base, and implement reforms that are relatively appropriate and domestically owned. The IMF may continue to issue reports, but sustainable and inclusive development will only be achieved when Pakistan prioritizes internal governance, institutional resilience, and long-term strategic planning over external conditionality.
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Dr. Ikramul Haq, Advocate Supreme Court, specializes in constitutional, corporate, environment, media, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He holds LLD in tax laws with specialization in transfer pricing. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996.
He established Huzaima & Ikram in 1996 and is presently its chief partner. He studied journalism, English literature and law. He is Chief Editor of Taxation. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA).
He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).
He has coauthored with Huzaima Bukhari many books that include, Tax Reforms in Pakistan: Historic & Critical Review, Towards Broad, Flat, Low-rate, and Predictable Taxes (third edition, 2024), Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
He is author of Commentary on Avoidance of Double Taxation Agreements, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax.
Two books of poetry are Phull Kikkaran De (Punjabi 2023) and Nai Ufaq (Urdu 1979 with Siraj Munir and Shahid Jamal).
He regularly writes columns/article/papers for many Pakistani newspapers and international journals and has contributed over 3000 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.
X (formerly Twitter): DrIkramulHaq
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Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansion, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).
Over his career he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and have also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study driven scenarios and exams to insure knowledge transfer.
His notable publications are: Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan and Rauf’s Research on Labour Laws and Income Tax and others.
His articles include: Revenue collection: Contemporary targets vs. orthodox approach, It is time to say goodbye to our past, US double standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly grey listed Pakistan, Corruption is no excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge, Countering corrupt practices .
X (formerly Twitter): Adbul Rauf Shakoori
The recent publication, coauthored by these writes with Huzaima Bukhari is:
Pakistan Tackling FATF: Challenges & Solutions, available at:
https://aacp.com.pk/book-detail/pakistan-tackling-fatf-challenges-and-solutions-35
https://www.amazon.com/dp/B08RXH8W46