The IMF identifies corruption threats in Pakistan’s state institutions.

Islamabad: In its eagerly anticipated Governance and Corruption Diagnostic Assessment (GCDA), the International Monetary Fund (IMF) has called for the prompt implementation of a 15-point reform agenda to enhance transparency, fairness, and integrity while highlighting Pakistan’s ongoing corruption issues, which are caused by systemic flaws in state institutions.

According to the report, which must be published in order for the IMF executive board to approve a $1.2 billion disbursement next month, Pakistan could increase economic growth by roughly 5 to 6.5% over the course of five years if it starts implementing a set of governance reforms within the next three to six months.

The GCDA calls for transparency in the Special Investment Facilitation Council’s (SIFC) operations and decision-making, as well as an end to preferential treatment for a small number of powerful public sector organizations in direct government contracts. It also suggests simplifying anti-corruption organizations and placing stricter restrictions on the government’s financial authority without increasing parliamentary supervision. Since August, the government had been postponing the report’s release.

The emphasis on enhancing accountability and openness in the creation, execution, and oversight of policies is a common topic. The report called for the advancement of rule-based governance and stated, “This entails improving access to information and strengthening the capacity of state and non-state stakeholders to participate effectively in governance and economic decision-making.”

It stated that enhancing governance, accountability, and integrity in accordance with the GCDA’s recommendations will have a significant positive economic impact on Pakistan.

It stated that starting in three to six months, “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.” Enhancements in governance and anti-corruption, corporate regulation, and international trade regulation are the main topics.

It stated that anti-corruption efforts are most effective when they combine initiatives to strengthen governance with initiatives to directly confront corruption and enhance integrity, and that both the government and the IMF agreed that addressing and reducing corruption vulnerabilities was necessary for sustainable reform.

Over time, indicators revealed a lack of control over corruption, which had detrimental effects on the efficiency of governmental expenditure, revenue collection, and public confidence in the legal system.

The GCDA identified systemic governance flaws in all state functions and pointed out that the nation was at risk of corruption due to flaws in fiscal information reporting and budgeting, as well as in the management of public financial and non-financial resources, especially in capital spending, public procurement, and the administration and supervision of state-owned enterprises (SOEs).

Additionally, it found an excessively complicated and opaque tax system run by tax and customs officials with inadequate capability, management, and supervision.

In addition, the legal system has a complicated organizational structure and is incapable of consistently upholding contracts or safeguarding property rights because of issues with efficiency, outdated legislation, and the honesty of judges and judicial staff.

In addition to requiring the implementation of e-governance procurement for all state transactions within a year, the IMF asked that favors for SOEs be eliminated from all public sector procurements, including specific provisions for direct contracting.

It demanded that the SIFC promptly prepare and release its first annual report, which would include details on all investments it enabled, including tax, policy, regulatory, and legislative concessions, along with a thorough justification and the results.

It stated that the SIFC needed to establish clear procedures for carrying out its operations and improved transparency arrangements in order to facilitate efficient oversight and accountability, given its wide and varied organizational functions and authority.

It also questioned the SIFC’s original establishment and the decision-making immunity granted to its employees. It stated that although the Board of Investment (BoI) remained in place, the council was established by a modification to the BoI law to expedite investment and privatization activities.

It noted that corruption vulnerabilities also have a significant impact on the fiscal performance of the public sector. Pakistan’s tax-to-GDP ratio is low and declining, primarily because of the intricacy of the tax system, frequent rule changes, and poor public faith in the government, though other variables also affect public sector performance.

It also pointed out that, in a setting with little public transparency or parliamentary involvement in budgetary matters, the government maintained considerable discretionary power over the use of public funds due to notable discrepancies between enacted budgets and actual spending.

The system’s susceptibility to political interference is shown in the disproportionate distribution of discretionary funds to districts represented in the government or senior bureaucracy. As a result, the return on public investment was low.