Azhar Rashid Khan PSP*
The International Monetary Fund’s 186-page Governance and Corruption Diagnostic Assessment was completed in July 2025, handed to Pakistan’s government, and promptly buried. It remained concealed for over three months—until the threat of withholding the next $1.2 billion tranche forced its release “in the darkness of night”. This episode reveals an uncomfortable truth about Pakistan’s three-decade relationship with the IMF: we adopt austerity measures not out of conviction, but coercion. Twenty-five programmes later, the patient remains critically ill—not because the diagnosis is wrong, but because the medicine is never properly administered.
Austerity’s False Promise Austerity—the strict economic medicine of tax hikes and spending cuts prescribed to control spiralling public debt—has been Pakistan’s companion since 1982 . Between 2023 and 2026, Pakistan recorded the largest fiscal adjustment in its history—cumulatively 5.6 percent of GDP. On paper, this represents textbook austerity. In reality, 73 percent of this adjustment came from revenue measures falling “disproportionately on already-taxed formal firms, salaried individuals and the less-affluent”. The expenditure side remained conspicuously untouched. Consolidated public expenditure rose by 60 percent in nominal terms. Personnel- related spending ballooned from Rs3.7 trillion to Rs5.9 trillion—a 59 percent increase. Defence spending rose 20 percent in FY2026, with the IMF flagging an additional unexplained expenditure of nearly $2-2.5 billion over six months .This is austerity in name only—a “sham austerity” where the burden is shifted entirely onto the vulnerable
while elite expenditure remains sacrosanct.
The Panama and Pandora Test : The release of the Panama Papers in 2016 and the Pandora Papers in 2021 should have been watershed moments for Pakistan’s anti-money laundering framework. Instead, they became enduring case studies of institutional failure—a forensic examination of how politically exposed persons (PEPs) navigate a broken accountability system with impunity.
Pakistan’s obligations under the UN Convention Against Corruption (UNCAC), ratified in 2007, are unambiguous. Over 400 Pakistanis appeared in the Panama Papers and more than 700 in the Pandora Papers . The Supreme Court’s April 2017 judgment in the Panama Papers case remains the most damning judicial indictment—explicitly noting that NAB “appeared to be indifferent and even unwilling to perform his part.” Yet by 2025, the IMF would report that Pakistan’s beneficial ownership system remains “weak and not fully functional,” with data sharing among SECP, SBP, and FBR remaining “poor” . The institutional memory lasted only as long as the news cycle.
The IMF’s Devastating Post-Mortem: The Fund’s Governance Diagnostic found “persistent and widespread corruption risks embedded in a heavily state-dominated economy that operates with complex regulatory environments, weak institutional capacities, fragmented oversight, with ineffective and inconsistent accountability and constrained rule of law”. NAB, the IMF reports, “often needs around four months to open a formal inquiry due to heavy administrative vetting, leading to many complaints being either put on the backburner for years, or never progressing at all” . This paralysis, combined with “very low conviction rates” and “constant judicial delays,” renders the accountability architecture largely performative.
The Fund’s observation on judicial vulnerability is particularly significant: Pakistan’s courts remain “greatly susceptible to external pressure from the public, or other third parties,” especially in “high-profile and politically sensitive cases” .The Human Cost of Austerity The Pakistan Economic Survey 2023-24 is silent on current poverty figures—failing to update the estimated 40 percent of Pakistanis living below the poverty line . Public health expenditure stands at a mere 1 percent of GDP, while education receives just 1.5 percent—among the lowest in the region .
The World Bank’s 2025 Human Capital Complementary Indicators paint a devastating picture: learning poverty at 80 percent, neonatal mortality at 38 per 1,000 live births, child mortality at 7 per 1,000 for ages 5-14, and youth literacy declining from 75 percent to 73 percent . Youth not in employment, education, or training has risen from 30 percent to 34 percent .
The SDGs Status Report 2023 confirms that “about one-third of indicators deteriorated (including SDG 3Health, SDG 8 Decent Work & Economic Growth and SDG 17 Partnerships), with the remainder largelyunchanged (especially SDG 4 Education)” . The IMF estimates achieving the SDGs would require additional annual spending of about 16 percent of GDP by 2030 .
Why We Cannot Wean Off: The problem is not a lack of diagnosis, but a lack of political will. The IMF’s own assessment confirms reforms are “diluted or deferred,” that “subnational governance is under-examined,” and that “institutional independence is insufficiently secured” . The Fund’s analysis notes that while Pakistan has issued over PKR 944 million in fines to 17 banks for AML violations, “implementation of punishments under FATF-related targets has been slow, with few decisions against individuals involved in money laundering” .
Each tranche buys time, not reform. Pakistan learns that the IMF will always return, no matter how little progress is shown. When the IMF mission returned to Washington without signing a Staff-Level Agreement in October 2025—denying Pakistan’s request for “grace time”—the message was clear: even our coercive reforms are insufficient .
Conclusion: The IMF may have stabilized the numbers, but it has not stabilized Pakistan. Until austerity targets elite expenditure—defense, subsidies, and political patronage—rather than social services, and until accountability institutions can investigate PEPs with the same vigor applied to ordinary citizens, the Panama Papers and Pandora Papers will remain symbols of a system designed to appear functional while remaining substantively captive.
Pakistan’s latest loan solves nothing. It only postpones the next crisis. And that, in the end, is the real failure of austerity.
Bibliography
Official Reports and Government Publications
1. Government of Pakistan, Finance Division. Pakistan Economic Survey 2023-24. Islamabad: Finance
Division, 2024. Available at: https://finance.gov.pk/survey_2024.html
2. Government of Pakistan, Planning Commission. Pakistan SDGs Status Report 2023. Islamabad: Planning
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2025. Available at: https://www.imf.org/en/publications/technical-assistance-reports/issues/2025/11/20/
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World Bank Data and Reports
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2025. Available at: https://data.worldbank.org/country/T3
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Pak SC 2. Judgment dated July 28, 2017. Full excerpt available at SCC Times Blog: https://
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News Media and Investigative Journalism
8. Khaleej Times. “Panama verdict: Pakistan SC dismisses Sharifs’ review petitions.” September 15, 2017.
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in-pandora-papers
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Press Release dated December 8, 2021. Available at: https://pid.gov.pk/site/press_detail/18575
Multilateral Organizations and Policy Analysis
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Secondary Analysis
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13. Institute of Cost and Management Accountants of Pakistan (ICMAP). “An Insight on Economic Survey
2023-24 and Finance Bill 2024.” Karachi: ICMAP, 2024. Available at: http://www.icmainternational.com/
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The writer is a police officer of Pakistan. The views expressed are personal and based on publiclyavailable documents and legal analysis.
