5 days ago
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- Business Recorder
Bridging governance gap for economic growth
Governance plays a central role in shaping a country's developmental outcomes. It determines how public resources are managed, how decisions are made and how institutions deliver services to the citizens. It is not revealing that Pakistan's economic problems are underpinned by governance issues.
Attempts, supported by the International Monetary Fund (IMF), have been aplenty to address the core of the economic and fiscal crises that are deemed to be rooted in chronic budgetary and trade deficits. The fiscal crises in turn largely draw from persistent governance deficits. The recent evidence is clear — both in Sri Lanka and Bangladesh, it was the lack of transparent, accountable, and rules-based public institutions which undermined the state's ability to deliver, enforce the rule of law, and manage public resources effectively.
In other words, governance issues – lax rules and corruption – compromise the effective implementation of policies; howsoever, cogent they may be.
In case of Pakistan, the country needs structural reforms which can restore macroeconomic stability, address fiscal and external imbalances, and ensure long-term economic sustainability. What is crucially important is that the ongoing reforms must place parallel emphasis on governance, transparency, and anti-corruption.
In 2024, the International Monetary Fund (IMF) approved a $7-billion Extended Fund Facility (EFF) for Pakistan, but this time it has signaled a broader approach, one that emphasizes that without tackling governance deficits, structural reforms cannot deliver lasting results.
As part of the programme, the IMF is preparing a Governance and Corruption Diagnostic Assessment on Pakistan. Governance Diagnostic Assessments (GDAs) are in-depth reviews carried out by the International Monetary Fund (IMF) to assess corruption risks in a country.
In 2023, Sri Lanka underwent a formal GDA following the country's 2022 economic collapse. The assessment, conducted with technical assistance of the IMF, uncovered serious governance failures – particularly the absence of key anti-corruption legislation such as a public procurement law in the country.
Pakistan has showcased the importance of governance reform for meaningful recovery. There are numerous success stories and cases in Pakistan where putting together a sound legal and administrative system has rendered a service largely efficient, harassment-free and corruption-free. However, there are key governance gaps that, if remain unaddressed, can continue to undermine progress towards reform and keep Pakistan in a cycle of economic crisis.
First and foremost, addressing revenue shortfalls and fiscal imbalances requires fundamental reforms in revenue administration and expenditure management. Pakistan's narrow tax base, distorted by weak enforcement, and large informal sectors, continues to undermine the state's fiscal capacity. Bridging gaps in tax collection, particularly in agriculture, real estate, and imports, is critical to improving equity and compliance. At the same time, more effective deficit management through expenditure controls is necessary to reduce the recurring cycle of fiscal crises.
Reinforcing fiscal governance also depends on building our public sector capacity through digitization. Pakistan has made significant strides in this direction and initiatives such as NADRA's digital identity system, the Pakistan Single Window, and the Punjab and KP e-governance platforms demonstrate the feasibility of large-scale digital reforms. However, systemic integration across ministries and levels of government remains limited. A more coordinated, whole-of-government approach is essential to scale up digitization, expand use of digital systems in public offices including in public procurement. This can reduce discretionary power and corruption while improving efficiency and accountability.
Secondly, accountability across all tiers of governance is fundamental to achieving good governance. To strengthen the integrity and effectiveness of financial oversight, there is a need for statutory provision, mandating that the Chairperson of the Public Accounts Committee, at both the national and provincial levels, be the Leader of the Opposition. This legal mandate would institutionalise the principle of impartiality in financial scrutiny, ensuring that the oversight function is not compromised by political interests. Such reforms will align Pakistan with international best practices in public financial management.
Finally, our anti-corruption framework faces significant challenges, and there is a need to pivot from punitive approaches toward preventive systems that emphasize institutional integrity, civic awareness, and independent scrutiny. Transparency laws such as the Right to Information must go beyond legislation to become functional instruments of public empowerment, supported by digital tools, proactive disclosure, and impartial implementation bodies.
Recently, Transparency International Pakistan published a Civil Society Governance Diagnostic Assessment. The report identifies a total of 54 practical recommendations for governance reform, to be integrated into the IMF's lending conditions. Such recommendations include complete digitization of procurement procedures for uniformity and tracking, wider parliamentary oversight and robust transparency laws for greater accountability.
These principles remain essential to restoring trust in public institutions, encouraging investor confidence, strengthening ease of doing business and citizens' confidence in the effective service delivery rendered by the state. However, turning recommendations into real reform will depend on sustained political will. If backed by strong political will, the IMF's governance diagnostic assessment will be an opportunity for Pakistan to ensure that reforms are not only adopted but implemented in ways that truly transform lives of the citizens of Pakistan.
Copyright Business Recorder, 2025
