IMF mission arrives to assess governance and corruption

ISLAMABAD: A mission from the International Monetary Fund (IMF) is currently in Pakistan to conduct a Governance and Corruption Diagnostic Assessment (GCDA), aiming to evaluate the extent of corruption risks in six key areas: fiscal governance, central bank governance and operations, market regulation, and the rule of law.

According to the IMF country report under the Extended Fund Facility (EFF) released in October 2024, a structural benchmark was established in the Memorandum of Economic and Fiscal Policies to ensure that strong governance and anti-corruption institutions would foster inclusive growth, create a level playing field, and sustain reform efforts.

Corruption, bureaucratic hurdles, and a challenging business environment have long been significant structural obstacles to Pakistan’s socio-economic progress. Influential vested interests within the government can hinder or even reverse necessary reforms. To combat this, the government has sought capacity development assistance from the IMF for the GCDA and has committed to releasing the findings along with an action plan by the end of July 2025.

Moreover, the government will formalise its commitment to publicly disclose the results of its compliance review with the UN Convention against Corruption by implementing regulations by the end of September 2024, once the review is complete.

To combat corruption impunity, address allegations of politically motivated persecution, and bolster investigative capabilities, enhancements to the independence and effectiveness of the National Accountability Bureau (NAB) are planned, pending a forthcoming Supreme Court ruling on the agency’s legal framework.

Furthermore, asset declarations from high-ranking public officials, akin to those of parliament members, will be made publicly accessible through legislative amendments by the end of February 2025, with certain personal data safeguards. The asset declaration process will also be digitised by the Federal Board of Revenue (FBR) and will undergo risk-based verification by the Establishment Division.

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However, the government has yet to implement the necessary legal amendments, and the FBR has not yet digitalised the asset declaration system. The three-member IMF scoping mission, which will remain in Pakistan until February 14, is expected to engage with various organisations, including the Finance Division, Federal Board of Revenue, State Bank of Pakistan, Auditor General of Pakistan, Securities and Exchange Commission of Pakistan, Election Commission of Pakistan, and the Ministry of Law and Justice.

The forthcoming GCDA report will provide recommendations for addressing corruption risks and enhancing governance and integrity, aiding the government in implementing reforms that promote transparency, strengthen institutional capacities, and promoting inclusive and sustainable economic growth.

The Finance Division stated that as part of the 2024 EFF programme, there is a structural benchmark that commits the Government of Pakistan, with IMF support, to conduct a GCDA to analyse governance and corruption challenges and identify prioritised structural reforms. The results of this assessment will be shared publicly.

Aligned with this commitment, the three-member IMF scoping mission is in Pakistan to undertake the GCDA, focusing on the examination of corruption vulnerabilities in six core areas: fiscal governance, central bank governance and operations, financial sector oversight, market regulation, rule of law, and anti-money laundering/counter-terrorism financing.

While the IMF primarily concentrates on addressing macroeconomic imbalances—reducing inflation and implementing essential market reforms—it has recognised that a broader array of institutional reforms is necessary to cultivate private sector confidence and establish foundations for sustained growth.

In 1997, the IMF introduced a policy for addressing economic governance, detailed in the ‘Guidance Note on the Role of the IMF in Governance Issues’. To bolster this policy’s implementation, the IMF adopted a new Framework for Enhanced Engagement on Governance (Governance Policy) in 2018, which aims for more systematic and candid engagement with member countries regarding governance vulnerabilities, including corruption, crucial to macroeconomic performance.

Under this policy, the IMF offers to conduct GCDA assessments with member countries to identify and address corruption risks and promote good governance. Since 2018, the IMF has finalized twenty GCDA reports, involving countries such as Sri Lanka, Mauritania, Cameroon, Zambia, and Benin, with ten additional diagnostics currently ongoing and several others under consideration.