IMF's $1.29 Billion Loan to Pakistan: A Controversial Decision Amid Corruption Concerns

The IMF has approved a controversial $1.29 billion loan to Pakistan, despite a recent report detailing systemic corruption within the country. This decision raises significant concerns about the effectiveness of IMF support in addressing Pakistan's economic challenges. The report highlights alarming financial discrepancies and calls for urgent governance reforms. As Pakistan continues to rely on IMF assistance, the question remains whether these funds will lead to sustainable growth or merely serve as a temporary fix. Explore the implications of this decision and the ongoing struggle against corruption in Pakistan.

By Narendra Chaudhary Dec 28, 2025, 14:09 IST

IMF Approves Financial Aid Despite Corruption Warnings

New Delhi: The Executive Board of the International Monetary Fund (IMF) has controversially sanctioned an additional $1.29 billion in financial assistance for Pakistan, despite a recent report from the organization itself that highlights significant corruption issues within the nation, which hinder its ability to repay loans.

The IMF's newly released 186-page report titled "Governance and Corruption Diagnostic Assessment" presents a bleak overview of the deteriorating institutional framework in Pakistan.

Notably, the timing of this report coincided with the Board meeting that approved the latest funding. As highlighted by Dr. Sakariya Kareem in an article for a UK publication, the IMF recognizes the systemic governance issues in Pakistan yet continues to provide loans without addressing the underlying problems that contribute to the ongoing crisis.

The report serves as a critical examination, indicating that corruption is deeply ingrained in Pakistan's state and economic structures. This pervasive issue affects who benefits economically, why growth remains sluggish, and why the country repeatedly seeks assistance from the IMF.

The findings are alarming. In the fiscal year 2024-25, actual expenditures exceeded the approved budget by a staggering Rs 9.4 trillion, which is five times greater than the previous year's overspending. These financial discrepancies were not subjected to prior parliamentary debate; instead, they were legitimized post-factum through supplementary grants, presented as unavoidable.

This trend is not new; ministries often overspend with the expectation of government bailouts, while the Finance Ministry accommodates these actions to prevent political fallout, and Parliament routinely approves budget overruns that can surpass 10% of the original budget.

The Public Sector Development Programme (PSDP), intended to direct funds toward infrastructure that promotes growth, has instead become a repository of incomplete projects. The IMF notes a significant backlog of ongoing projects with an estimated total cost of Rs 10.7 trillion, while annual allocations remain around Rs 1.1 trillion, indicating that even without new initiatives, it would take nearly a decade to address the existing backlog. Chronic delays, rising costs, and poor execution are the expected outcomes of a system lacking transparent project selection and prioritization criteria.

Advocates for anti-corruption measures argue that the IMF must adhere to its commitments by incorporating anti-corruption strategies into its lending practices. When corruption is identified as "macro-critical," as it is in Pakistan, the Fund should make disbursements contingent upon verifiable governance reforms. Without such accountability, IMF support risks reinforcing the very vulnerabilities it identifies.

Ultimately, the IMF cannot rectify Pakistan's systemic issues; these responsibilities lie solely with the country's institutions. If corruption continues to deplete public resources, the benefits of IMF support will be fleeting. While financial aid may temporarily boost reserves, public trust and economic resilience will remain fragile. Each loan merely offers a short-term solution rather than a pathway to sustainable development.

The IMF's conditions for lending necessitate increased fiscal transparency, which should ideally enhance the chances of corrupt officials being held accountable. However, this does not seem to be occurring in Pakistan, which continues to receive substantial IMF support even as the Fund warns that corruption poses severe risks to its economic stability.

Unless governance reforms transition from theoretical frameworks to practical applications, IMF lending will persist as a temporary fix for Pakistan, stabilizing crises without providing lasting solutions.