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The latest IMF’s 2025 Governance and Corruption Diagnostic Assessment (GCDA) report offers a detailed examination of how institutional fragmentation, regulatory discretion and entrenched privilege continue to obstruct development. It states that unless Pakistan dismantles the structures of elite capture embedded across the state, no stabilisation effort will produce durable or inclusive growth.
Behind this diagnosis lies a deeper political-economic contradiction. The GCDA adopts a neoliberal framework: discipline the state, rationalise institutions and liberalise markets. But Pakistan’s history shows that neoliberalism rarely challenges elite domination. Instead, it often reinforces it by strengthening the very networks capable of absorbing, redirecting or diluting reform.
For decades, Pakistan’s governance has been shaped by state enterprise managers, regulatory elites, business families, cartelised industries and entrenched bureaucratic groups. These networks have survived repeated reform attempts. The IMF itself notes that earlier programmes succeeded in short-term stabilisation but failed to generate institutional transformation. This failure is structural, corruption and exemptions are not the consequences of weak institutions, but deliberate instruments through which elite power is exercised, negotiated and reproduced.
Neoliberalism treats it as technical errors to be fixed through transparency tools, e-procurement, simplified taxes or autonomous regulators. Such steps depoliticise a fundamentally political problem. A state historically shaped by landed power, military-linked enterprises and patronage networks cannot be rebuilt through procedural upgrades alone. Without redistributing political power, technocratic reform risks becoming cosmetic, leaving the underlying political economy untouched.
Nowhere is this clearer than in the budget as it is defined by discretionary grants, subsidies and informal tax exemptions. The IMF urges simplification and limits on discretion, but reform collides with entrenched interests. Pakistan’s chronically low tax-to-GDP ratio is not a design flaw; it is the institutional expression of negotiated privilege.
Regulation faces similar contradictions. Overlapping mandates and outdated compliance systems allow well-connected firms to extract rents, while smaller or rule-abiding businesses bear higher costs. Neoliberalism assumes deregulation will enhance competition. In Pakistan, deregulation without accountability empowers cartels and politically connected corporations, deepening market concentration rather than expanding opportunity.
The judiciary, highlighted extensively in the GCDA, suffers from backlogs and uneven integrity standards. Neoliberalism tends to see courts primarily as instruments for contract enforcement and property protection. Strengthening the judiciary without expanding access for marginalised groups may produce an efficient system that works mainly for the elite.
Pakistan’s anti-corruption architecture adds another paradox. Politicised and selectively applied, anti-corruption drives often empower unelected institutions. The GCDA calls for depoliticisation, but without democratic deepening, such efforts may reinforce existing power structures instead of dismantling them.
The central contradiction of neoliberalism in Pakistan seeks to limit state discretion but never confronts the coalitions that actually command the state. Reforms that appear “transformative” are repeatedly absorbed into the logic of elite preservation.
The IMF estimates that reforms could add 5 to 6.5 per cent to GDP over five years, achieving this requires more than technical fixes. It demands political will, institutional democratization and a genuine redistribution of power. Pakistan has shown it can implement difficult reforms, from central bank independence to energy pricing adjustments. Sustaining them, however, requires confronting the political economy of privilege head-on.
The GCDA provides a roadmap; a structural change or its being once again neutralised by elite interests will determine whether Pakistan repeats another cycle of crisis and stabilisation or moves towards inclusive and lasting growth.
