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

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.
According to the 186-page report, corruption in Pakistan is “persistent and corrosive”, distorting markets, eroding public trust and undermining fiscal stability.

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

While corruption vulnerabilities are present at all levels of government, according to the report, “the most economically damaging manifestations involve privileged entities that exert influence over key economic sectors, including those owned by or affiliated with the state.”

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 $340bn 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,” the report said.
Stefan Dercon, a professor of economic policy at the University of Oxford who has advised the Pakistani government on economic reforms, said that he agreed that the absence of accountability in corruption cases was eating away at the country’s economic potential.

“Failure of implementation [of laws and principles of accountability] gives vested interests too often free rein and addressing this must be at the core of efforts for economic reform,” he told Al Jazeera.

Here is what we know about the IMF report, the areas of weakness it highlights, the policy recommendations it makes, and what the experts say.

What does the IMF report say?
Pakistan has turned to the IMF 25 times since 1958, making it one of the fund’s most frequent borrowers. Nearly every administration, whether military or civilian, has sought IMF assistance, reflecting chronic balance of payments crises.

The current programme was started under Prime Minister Shehbaz Sharif.
The GCDA’s release comes ahead of the IMF executive board’s expected approval of a $1.2bn disbursement next month, part of the ongoing 37-month-long, $7bn programme.

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

According to the GCDA, Pakistan consistently ranks near the bottom of global governance indicators among nations. Between 2015 and 2024, the country’s score on control of corruption remained stagnant, placing it among the worst performers worldwide and within its neighbourhood.

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.

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