Around a week has passed since the International Monetary Fund (IMF) released its corruption and diagnostic report on Pakistan. Arguing that ‘elite capture’ is responsible for Pakistan’s sustained economic predicament, the nexus between corruption and governance tends to expose the fragility of Islamabad in dealing with issues, which questions its ability to pull the country out of decades of economic crisis.
What is ‘elite capture’ and how have privileged classes of Pakistan, representing business, corporate, bureaucratic, military, and political interests, jeopardised the country domestically and at the foreign policy level? It is not only corruption, which the IMF report has mentioned as responsible for Pakistan’s economic predicament, but also the manner in which elites support each other in hiding corruption and nepotism.
When the tax-to-GDP ratio is low, exports are stagnant at 30 billion dollars; meagre foreign exchange reserves of 15 billion dollars lie with the State Bank; and per capita income and economic growth rate remain sluggish, the IMF report, issued with the connivance of Islamabad, reflects how serious the issues of economy and governance are.
The shrinking middle class, surge in unemployment, and rise in poverty also expose the poor performance of those who have been at the helm of affairs for a long time. During the financial year 2025–26, Pakistan needs to pay 25 billion dollars to its lenders, and despite the rollover of 12 billion dollars of loans by China, Saudi Arabia, and the United Arab Emirates, the country still needs to arrange 13 billion dollars just to pay interest on loans. The total external debt of Pakistan has surged to 131 billion dollars, which is almost half of its GDP.
Against this background, the release of the IMF report focusing on ‘elite capture’ of the Pakistani state and society is an eye-opener.
According to the summary of the IMF report, “This Governance and Corruption Diagnostic (GCD) was conducted at the request and with the support of the Government of Pakistan to identify and analyse governance weaknesses and corruption vulnerabilities that undermine economic performance and reform efforts. The diagnostic focused on federal-level governance in five core state functions: fiscal governance, market regulation, financial sector oversight, anti-money laundering and combating the financing of terrorism (AML/CFT), and rule of law, and also considered the strength and effectiveness of anti-corruption institutions and approaches to address corruption risks.
The findings reveal persistent and widespread corruption risks embedded in a heavily state-dominated economy that operates with complex regulatory environments, weak institutional capacities, fragmented oversight, ineffective and inconsistent accountability, and constrained rule of law.”
If the bane of corruption is controlled, Pakistan will be self-sufficient and in a position to effectively deal with its huge debt trap
Critics of the IMF report argue that merely putting the blame on the elite culture for augmenting Pakistan’s economic predicament shows that the international money-lending agency has tried to escape from the responsibility of plunging the country deeper into the vicious cycle of debt. The IMF should have, in the beginning, discouraged the Pakistani elite from depending on foreign loans and aid. Instead, since 1958, Pakistan has approached the IMF for a bailout package for the 25th time.
It is not only the IMF which is providing loans to Pakistan. The World Bank, Asian Development Bank, and other multilateral aid-giving agencies also contribute to enhancing the country’s debt. Where funds received from international bodies and friendly countries go, and why Pakistan, despite receiving billions of dollars, has not been able to modernise its infrastructure, mitigate poverty, unemployment, inflation, or improve the socio-economic standard of its 240 million population, remains a pressing question. The country is unable to provide clean and safe drinking water to its population.
How corruption, identified by the IMF report as a major challenge, is sustained with the connivance of elites, and why an ordinary Pakistani is unable to prevail over those responsible for augmenting poverty and shrinking purchasing power, remains a serious issue. However, merely blaming elites for accentuating Pakistan’s economic woes is not a solution to deal with the surge in poverty, unemployment, inflation, and debt. In fact, ordinary Pakistanis must also take responsibility for not standing against corrupt people.
According to a report by Al-Jazeera entitled, “Elite capture: how Pakistan is losing 6 percent of its GDP to corruption,” published by Abid Hussain on 25 November 2025: “A new assessment by the International Monetary Fund (IMF) has concluded that corruption in Pakistan is behind an economic crisis driven by ‘state capture’—where public policy is manipulated to benefit a narrow circle of political and business elites. The Governance and Corruption Diagnostic Assessment (GCDA), finalised in November 2025, presents a grim picture of a system marked by dysfunctional institutions that are unable to enforce the rule of law or safeguard public resources.”
Losing 6% of its GDP to corruption is a serious matter, but based on ground realities, the figure is likely much higher. It is assessed that if the bane of corruption is controlled, Pakistan will be self-sufficient and in a position to effectively deal with its huge debt trap.
Yet it is not only corruption that results from elite negligence. The nexus among mafias encircling all segments of Pakistani society tends to push Pakistan into a web of nepotism, bad governance, absence of rule of law, and lack of accountability of public institutions. The culture of tax evasion and its support base in the elites of Pakistan is also responsible for keeping the country economically dependent, poor, and disempowered in the global economy.
The IMF report may have positives and negatives, but what is required for the stakeholders of Pakistan is to focus on political pluralism, economic vibrancy, providing better education, health facilities, modern infrastructure, and zero tolerance for corruption and nepotism
Around two-thirds of taxes collected in Pakistan are used to pay for debt servicing and defence expenditures. After paying salaries and meeting expenses to run the federal and provincial governments, there is no money left for development. As a result, Pakistan has to borrow from international sources, which tend to maximise its debt. The State Bank of Pakistan also borrows from domestic sources, which is another reason for augmenting national debt.
The IMF report further states, “At the heart of the IMF’s findings is the concept of ‘state capture’, where, according to the fund, corruption becomes the norm and, in fact, the primary means of governance. The report argues that the Pakistani state apparatus is frequently used to enrich specific groups at the expense of the broader public. The report estimates that ‘elite privilege’—defined as access to subsidies, tax relief, and lucrative state contracts for a select few—drains billions of dollars from the economy annually, while tax evasion and regulatory capture crowd out genuine private sector investment.”
Is there a way out of the debt trap, menace of corruption, and the ‘elite capture’ of the Pakistani state and society? The IMF report further states, “The report argues that Pakistan stands to gain substantial economic benefits if governance improves and accountability is strengthened. Such reforms, it notes, could significantly lift the country’s gross domestic product (GDP), which stood at $340 billion in 2024. Based on cross-country analysis of the reform experience of emerging markets, IMF analysis projects that Pakistan could generate between a 5 to 6.5 percent increase in GDP by implementing a package of governance reforms over the course of five years.”
It is yet to be seen how far the IMF report will impact state policies, particularly regarding the elitist mindset. Nevertheless, diagnosing Pakistan’s economic predicament in light of the IMF report needs to be examined from three sides.
First, without total restructuring of Pakistan’s state policies encompassing the economy, politics, security, defence, and foreign policy, there is no hope of removing the country from the web of corruption, bad governance, poverty, and lack of accountability. For that matter, the people of Pakistan, particularly its youth, need to rise and take matters into their own hands. To expect elites to do something tangible to deal with Pakistan’s predicament is wishful thinking.
Second, the elites of Pakistan, whether holding power or in the corporate sector, must realise that time is not on their side. If they fail to put their own house in order and settle things promptly, the vast majority of people buried under poverty, unemployment, and price hikes will take matters into their own hands. In that case, the ‘islands of prosperity’ in the ‘ocean of poverty’ will vanish.
To prevent that eventuality, the elite mindset needs to be reformed. They must consider the interests of Pakistan first rather than protecting their power, privileges, and perks. It would also require the military establishment and its junior civilian partners to follow an inclusive rather than an exclusive political culture. The menace of extremism and terrorism will also be eradicated if the power elites take effective measures for political pluralism, meaningful economic reforms, good governance, and the rule of law. Those holding power must understand that failure to realise the gravity of the situation will further plunge Pakistan into a serious crisis.
Finally, it is high time that Pakistan pursues a policy of self-reliance instead of relying on foreign aid and loans. The examples of China and India, where the policy of self-reliance and conservation of national resources led to economic development and progress, must be taken into account.
The IMF report may have positives and negatives, but what is required for the stakeholders of Pakistan is to focus on political pluralism, economic vibrancy, providing better education, health facilities, modern infrastructure, and zero tolerance for corruption and nepotism. Pakistan cannot pull itself from its economic, political, and foreign policy predicament unless it makes decisions based on merit. The treatment of the age-old diagnosis of corruption and nepotism is home-grown, as there is no shortcut to addressing issues with such deep roots.