‘Elite capture’: How Pakistan is losing 6 percent of its GDP to corruption

Islamabad, Pakistan – A caller appraisal by the International Monetary Fund (IMF) has concluded that corruption successful Pakistan is down an economical situation driven by “state capture” – wherever nationalist argumentation is manipulated to payment a constrictive ellipse of governmental and concern elites.

The Governance and Corruption Diagnostic Assessment (GCDA), finalised successful November 2025, presents a grim representation of a strategy marked by dysfunctional institutions that are incapable to enforce the regularisation of instrumentality oregon safeguard nationalist resources.

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According to the 186-page report, corruption successful Pakistan is “persistent and corrosive”, distorting markets, eroding nationalist spot and undermining fiscal stability.

The report, requested by the Pakistani government, warns that without dismantling the structures of “elite privilege”, the country’s economical stagnation volition persist.

While corruption vulnerabilities are contiguous astatine each levels of government, according to the report, “the astir economically damaging manifestations impact privileged entities that exert power implicit cardinal economical sectors, including those owned by oregon affiliated with the state.”

The study argues that Pakistan stands to summation important economical benefits if governance improves and accountability is strengthened. Such reforms, it notes, could importantly assistance the country’s gross home merchandise (GDP), which stood astatine $340bn successful 2024.

“Based connected cross-country investigation of the betterment acquisition of emerging markets, IMF investigation projects that Pakistan could make betwixt a 5 to 6.5 percent summation successful GDP by implementing a bundle of governance reforms implicit the people of 5 years,” the study said.

Stefan Dercon, a prof of economical argumentation astatine the University of Oxford who has advised the Pakistani authorities connected economical reforms, said that helium agreed that the lack of accountability successful corruption cases was eating distant astatine the country’s economical potential.

“Failure of implementation [of laws and principles of accountability] gives vested interests excessively often escaped rein and addressing this indispensable beryllium astatine the halfway of efforts for economical reform,” helium told Al Jazeera.

Here is what we cognize astir the IMF report, the areas of weakness it highlights, the argumentation recommendations it makes, and what the experts say.

What does the IMF study say?

Pakistan has turned to the IMF 25 times since 1958, making it 1 of the fund’s astir predominant borrowers. Nearly each administration, whether subject oregon civilian, has sought IMF assistance, reflecting chronic equilibrium of payments crises.

The existent programme was started nether Prime Minister Shehbaz Sharif.

Pakistan Prime Minister Shehbaz Sharif, right, meets with the managing manager of the IMF, Kristalina Georgieva, successful Paris, France, June 22, 2023 [Handout/Prime Minister’s Office via Reuters]

The GCDA’s merchandise comes up of the IMF enforcement board’s expected support of a $1.2bn disbursement adjacent month, portion of the ongoing 37-month-long, $7bn programme.

Pakistan narrowly avoided default successful 2023, surviving lone aft the IMF extended an earlier nine-month deal, which was followed by the ongoing 37-month programme.

According to the GCDA, Pakistan consistently ranks adjacent the bottommost of planetary governance indicators among nations. Between 2015 and 2024, the country’s people connected power of corruption remained stagnant, placing it among the worst performers worldwide and wrong its neighbourhood.

At the bosom of the IMF’s findings is the conception of “state capture”, where, according to the fund, corruption becomes the norm and, successful fact, the superior means of governance. The study argues that the Pakistani authorities apparatus is often utilized to enrich circumstantial groups astatine the disbursal of the broader public.

The study estimates that “elite privilege” – defined arsenic entree to subsidies, taxation alleviation and lucrative authorities contracts for a prime fewer – drains billions of dollars from the system annually, portion taxation evasion and regulatory seizure assemblage retired genuine backstage assemblage investment.

These findings echo a 2021 United Nations Development Programme (UNDP) report, which said economical privileges granted to Pakistan’s elite groups, including politicians and the almighty military, magnitude to astir 6 percent of the country’s economy.

Ali Hasanain, an subordinate prof of economics astatine the Lahore University of Management Sciences, said the IMF’s statement of elite seizure is close but added that it was “hardly a revelation”.

He pointed to the 2021 UNDP report and different home studies that picture however Pakistan’s economical strategy has agelong served politically connected actors who unafraid “preferential entree to land, credit, tariffs and regulatory exemptions.”

“The IMF diagnostic repeats what galore home studies, including those by the World Bank and Pakistan’s ain institutions, person already emphasised: Powerful interests signifier rules to support their advantage,” helium told Al Jazeera.

The caller study notes that taxation expenditures, including exemptions and concessions granted to influential sectors specified arsenic existent estate, manufacturing and energy, outgo the authorities 4.61 percent of GDP successful the 2023 fiscal twelvemonth alone.

It besides calls for an extremity to peculiar attraction for influential nationalist assemblage entities successful authorities contracts and urges greater transparency successful the functioning of the Special Investment Facilitation Council (SIFC).

The SIFC, created successful June 2023 during Sharif’s archetypal term, is simply a high-powered assemblage comprising civilian and subject leaders and tasked with promoting concern by easing bureaucratic obstacles. Although positioned arsenic a flagship inaugural jointly owned by the authorities and the military, it has faced sustained disapproval for a deficiency of transparency.

The study describes wide ineligible immunity granted to SIFC officials, galore from the equipped forces, arsenic a large governance concern. It warns that this immunity, combined with the council’s authorization to exempt projects from regulatory requirements, creates important risks.

Highlighting the lack of transparency, the GCDA says the SIFC should people yearly reports with details of each investments it has facilitated, including concessions granted and the rationale down them.

“The precocious established Special Investment Facilitation Council, which has been vested with important authorization to facilitate overseas investments, operates with untested transparency and accountability provisions,” the study said.

Judiciary and regularisation of law

The study identifies the judiciary arsenic different captious bottleneck. Pakistan’s ineligible strategy is overwhelmed by much than 2 cardinal pending cases. In 2023 alone, the fig of unresolved cases earlier the Supreme Court accrued by 7 percent.

Over the past 12 months, Pakistan has passed 2 law amendments, some of which faced terrible backlash from galore successful the ineligible assemblage who said that they correspond a “constitutional surrender”. In essence, the amendments make a parallel Federal Constitutional Court that critics accidental volition trim the powers of the Supreme Court, portion besides changing rules that usher however judges are appointed and transferred, successful ways that opponents accidental could springiness the enforcement large power implicit whom to beforehand and whom to punish.

The government, however, has insisted that the changes were made to amended the ratio and efficacy of the judicial system.

Similar credibility challenges impact the National Accountability Bureau (NAB) and the Federal Investigation Agency (FIA), the 2 main bodies liable for investigating corruption.

The GCDA cites a 2024 authorities task force, which recovered that NAB has, astatine times, exceeded its mandate and launched politically motivated cases. This selective accountability, the study says, has damaged nationalist spot and created a clime of fearfulness wrong the bureaucracy, slowing decision-making.

While NAB says it recovered 5.3 trillion rupees ($17bn) betwixt January 2023 and December 2024, the study notes that condemnation rates stay low.

The diagnostic calls for cardinal reforms to NAB’s assignment processes to guarantee independency and a displacement from “political victimisation” to “rule-based enforcement”.

Was the study necessary?

The IMF outlines reforms which experts acknowledged would beryllium broad if pursued by authorities.

Yet analysts besides enactment that planetary institutions and home researchers person repeatedly made akin observations successful the past, with small follow-through by the government.

Sajid Amin Javed, a elder economist astatine the Sustainable Development Policy Institute (SDPI) successful Islamabad, says the information that Pakistan is already nether an IMF programme whitethorn compel the authorities to instrumentality the findings much seriously.

He said that the IMF study could person gone further than it has by acknowledging that galore of its recommendations person been made by others successful the past, “without bringing immoderate change”.

“Perhaps the appraisal could person been made to spot wherefore these failures happened,” helium said.

Javed welcomed the report’s effort to quantify economical losses from corruption, hoping it mightiness propulsion policymakers to act.

“Corruption and governance are intrinsically tied to each other. Corruption leads to anemic governance, and anemic governance promotes corruption, making them conjoined,” helium said.

Hasanain, however, was much sceptical, questioning wherefore the IMF waited for a ceremonial petition from the Pakistani authorities contempt having its ain interior appraisal mechanisms.

Pakistan’s system was adjacent to a default successful June 2023, earlier the resumption of the IMF’s enactment programme  [File: KM Chaudhry/AP Photo]

What tin the authorities do?

Analysts said Pakistan’s economical scenery has agelong been shaped by politically connected actors who bask preferential entree to land, credit, tariffs and regulatory exemptions. The IMF’s observations, they noted, are not new.

Hasanain argues that corruption, including elite seizure of markets, regulatory bodies and nationalist policy, is governmental successful quality and cannot beryllium addressed without deeper reforms.

“Without a broader governmental awakening, governance reforms volition stay method fixes built connected unstable foundations. Ultimately, elite seizure is undone lone erstwhile governmental incentives change,” helium said.

Javed, meanwhile, pointed to what helium called argumentation plan capture, arguing that those liable for drafting governance and anticorruption reforms are often portion of the aforesaid elite ecosystem.

“Elite argumentation seizure connected argumentation plan is possibly the astir important constituent which allows the elite capture. The report’s recommendations amusement that we indispensable spell for participatory and inclusive methods to get retired of our existent conundrum,” helium said.

For Hasanain, the astir urgent betterment is simply a unified economical turnaround program that is afloat owned by the premier curate and communicated clearly.

He said that Pakistan’s economical scenery was cluttered with “committees, councils, task forces and overlapping ministries”, each producing its ain documents without accountability.

“The authorities should consolidate these scattered structures into 1 wide betterment level with defined priorities, timelines and measurable outcomes. Progress should beryllium published monthly, debated publicly, and subjected to autarkic scrutiny,” helium said.

Hasanain argued that specified consolidation would amended coordination, physique nationalist spot and awesome seriousness to investors.

For Javed, the astir contiguous precedence is reforming the nationalist procurement system, which governs however authorities bodies bargain goods and services utilizing nationalist funds.

“Our procurement strategy is not moving connected worth of money, but alternatively it focuses connected quantity of money, wherever lowest bidder wins the bid,” helium said, arguing that this attack meant that contracts often did not spell to those champion suited to present what was needed. “This strategy needs urgent modernisation.”

“An urgent realisation is the bid of the time that if we request to person a flourishing, transparent economy, we person nary prime but to overhaul our full economical framework,” Javed said.