The International Monetary Fund (IMF) has cautioned that Pakistan’s sovereign wealth funds (SWFs) remain vulnerable to corruption due to gaps in transparency, governance and oversight, according to its Governance and Corruption Diagnostic Assessment (GCD) report.
According to a report by The News, the Fund noted that opaque operations can create space for embezzlement, fraud and other unethical practices. It added that political control over SWFs increases the risk of these institutions being used for personal or political gain, particularly in environments where governance systems are weak.
The report pointed to the 1Malaysia Development Berhad (1MDB) scandal as a key example of how governance failures in sovereign wealth funds can lead to major corruption losses.
According to the GCD assessment, Pakistan’s 2023 SWF Act is not yet operational, and amendments are being drafted to incorporate stronger governance safeguards. The government and IMF have held extensive discussions on the SWF’s structure and functions since the diagnostic mission’s visit to Islamabad.
The IMF highlighted that the current SWF Act contains governance and fiscal weaknesses, noting that seven SWF-owned state enterprises were exempted from the State-Owned Enterprises (SOE) Act, a move the Fund believes undermines accountability.
The report outlines several areas where reforms are needed. It recommends aligning Pakistan’s framework with international standards such as the OECD Guidelines on Corporate Governance of SOEs and the Santiago Principles. It also calls for clarifying the legal nature and mandate of the SWF, subjecting it to the SOE Act with specific provisions suited to a holding entity.
The IMF further stressed the need for transparent rules governing asset sales and procurement. It advised that all transactions be conducted through open, competitive and non-discriminatory processes, with minimum disclosure requirements at each stage — including beneficial ownership information.
The amendments to the SWF Act are currently being vetted by the Law Division before being submitted to Parliament.
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