Corruption in Pakistan: A risk for South Asia’s stability and a threat for Europe

As Pakistan backs away from its anti-corruption transparency pledge, the consequences could ripple beyond its $7 billion IMF loan programme, threatening regional stability in South Asia and causing repercussions in Europe.

Just months after committing to publish the full United Nations Convention Against Corruption (UNCAC) Country Review Report, Prime Minister Shehbaz Sharif’s government has formed a cabinet committee to reconsider. Instead of the full report, which could run up to 300 pages, the government may now opt for a 7-12 page summary.

This reversal comes at a critical time: an IMF mission is in Pakistan, assessing whether to approve the next $1.1 billion loan tranche. The cabinet committee’s recommendation – due March 13 – coincides with the IMF’s final assessment, making it a pivotal decision.

Of course, corruption has long hindered Pakistan. But this latest crisis comes at a particularly dangerous moment. The country is already facing severe economic distress, with foreign reserves barely covering a few weeks of imports, inflation exceeding 30 per cent, high unemployment worsened by IMF-imposed austerity measures, and escalating Islamist militancy, exploiting public frustration.

These conditions don’t just affect Pakistan, they have regional consequences. Economic instability in Pakistan increases the risk of internal unrest. Historically such crises have also led to military intervention and external confrontations with India to distract from domestic failures.

Moreover, financial desperation fuels radicalisation. The Taliban’s resurgence in Afghanistan has emboldened groups like Tehreek-e-Taliban Pakistan (TTP), which has intensified attacks on security forces. With governance failures and economic collapse, extremist narratives gain traction among disillusioned Pakistanis, particularly the unemployed youth.

The IMF has placed anti-corruption reforms at the centre of its economic recovery plan for Pakistan. The ongoing IMF mission is assessing not only fiscal performance but also governance improvements. Mandatory asset declarations for high-ranking civil servants and revised election laws are among the prerequisites.

If Pakistan fails to meet these benchmarks, it could not only lose IMF support but also struggle to secure future bailouts or attract foreign investment.

Pakistan’s economic turmoil presents serious security concerns for India, too. A financially unstable Pakistan with rising Islamist influence risks increasing terrorist activity and cross-border militancy.

India has long accused Pakistan of harbouring terror groups such as Jaish-e-Mohammed and Lashkar-e-Taiba. If Pakistan’s economy collapses, such groups could become more active, either through state sponsorship or simply due to the lawlessness that follows financial ruin.

Political instability in Pakistan has also often led to external aggression. In the past, Pakistan’s military has diverted domestic discontent by escalating tensions with India. In short, economic desperation could trigger another border crisis.

So Pakistan’s decision on the UNCAC report is not just about an IMF commitment. More critically, an economically paralysed Pakistan would be more vulnerable to internal chaos, Islamist radicalization, and military adventurism – all of which threaten regional stability.

With March 13 approaching, Pakistan must choose: genuine reform or continued secrecy.

But why does this matter for Europe? To begin with, a worsening crisis in Pakistan could trigger a new wave of illegal immigration, further straining Europe’s already burdened asylum systems.

Pakistan is already one of the largest sources of illegal migrants to the European Union. Many attempt dangerous Mediterranean crossings, often aided by human smuggling networks linked to criminal and extremist groups, as well as NGOs. If Pakistan’s economy deteriorates further, these numbers are expected to rise sharply.

Beyond migration, a weakened, radicalised Pakistan poses a direct security threat. Islamist networks that thrive in economic desperation have a long history of expanding their operations beyond South Asia, often recruiting fighters and fundraisers in European cities. The presence of Pakistani jihadist cells in countries like the UK, Germany, and France has been well documented.

As a result, for Europe, Pakistan’s crisis is not just a distant problem. The EU must pay close attention to how Pakistan navigates its corruption crisis and IMF deal, because failure to reform could mean more illegal migration, more radicalization, and more security risks both at home and abroad.

What can the EU do? Well, money talks. If Islamabad continues to evade transparency, the EU should reconsider its financial aid and push for stronger anti-corruption conditions for future aid. Otherwise, Europeans risk facing the fallout of Pakistan’s failures on their own borders and within them.