The International Monetary Fund has unveiled alarming insights into the scale of elite capture in Pakistan, warning that entrenched interests in key sectors are draining billions from the national economy and undermining the country’s reform trajectory. The findings were detailed in the IMF’s Technical Assistance Report, titled Pakistan Governance and Corruption Diagnostic Assessment, published on the Finance Division’s website on Thursday night. The report identifies structural vulnerabilities in sectors such as sugar, agriculture, real estate, and energy, highlighting how economic elites leverage political connections to secure disproportionate benefits.
The sugar industry emerged as a primary example of elite capture, with the IMF describing it as a “textbook case” of how collusion between industry magnates and government regulators has allowed firms to manipulate policies in their favor. According to the report, sugar mill owners, many of whom hold political influence or government positions, have historically benefited from favorable pricing for sugarcane, protective tariffs, and regulatory loopholes. These arrangements have enabled sustained profitability while limiting competitiveness and driving up costs for consumers.
The IMF noted that sugar industry elites have also influenced export and pricing policies to maximize private gain. In 2018–19, a government decision permitted significant subsidized sugar exports, which the report claims caused domestic shortages and led to price spikes. Such interventions exemplify how public resources and policy decisions are skewed toward the interests of a small elite, often at the expense of broader economic stability.
Beyond sugar, similar patterns of preferential treatment are evident in real estate, agriculture, manufacturing, and the energy sector. Generous tax exemptions and favorable regulatory arrangements continue to erode public revenue. For instance, agricultural income has historically gone untaxed, while other key sectors benefit from selective fiscal privileges. The IMF estimates that such tax expenditures resulted in revenue losses equivalent to 4.61% of Pakistan’s GDP in FY2023, significantly constraining government capacity to finance public services and investment.
The report situates these challenges within a historical context, noting that elite control in Pakistan is rooted in colonial-era land policies, which favored large landowners and reinforced wealth concentration. Post-independence continuation of these policies allowed elites to consolidate power over land and economic activity, perpetuating a cycle of influence and privilege. The IMF referenced a 2020 UNDP study, which estimated that elite privilege alone accounted for $4.7 billion in advantages accruing to the corporate sector.
IMF officials cautioned that without addressing these entrenched privileges, Pakistan’s economic stabilization and reform efforts risk being repeatedly undermined. The report emphasized that selective law enforcement, arbitrary policy application, and the intertwining of political and economic power perpetuate a system where the benefits of public policy are captured by a few, leaving the majority of citizens to bear the cost.
The IMF’s assessment serves as a stark reminder of the structural barriers to equitable growth and fiscal consolidation in Pakistan. It highlights the urgent need for transparent governance, fair taxation, and robust regulatory frameworks to dismantle the mechanisms of elite capture and support long-term economic stability.
Follow the PakBanker Whatsapp Channel for updated across Pakistan’s banking ecosystem.