Pakistan stands today at a moment where questions of power, law and governance are no longer confined to constitutional commentary or political theatrics. They now cut directly to the core of whether the economy stabilises, investment returns and growth becomes possible.
The 27th Amendment – framed as a major institutional restructuring exercise – must therefore be understood not only for what it alters within the state, but also for what it signals to investors, lenders and the international financial system. Because the world now assesses Pakistan on one overriding criterion: credibility. And credibility rests on whether key institutions such as the judiciary and anti-corruption agencies function predictably, impartially and consistently.
This is particularly relevant in the context of the IMF programme, where the next tranche of the Extended Fund Facility (EFF) is linked to the publication of the Governance and Corruption Diagnostic Report (GCDR). The report assesses governance vulnerabilities, institutional integrity and the risks of leaks embedded in the system. For the first time, governance quality is not merely a political talking point – it sits at the centre of Pakistan’s macroeconomic stability framework. The GCDR is not symbolic. It is a condition for the disbursement of the next tranche.
It is in this context that the 27th Amendment becomes economically consequential. The amendment restructures the judicial framework by creating a new Federal Constitutional Court with strong executive influence over judicial appointments, authorises transfer of judges without their consent, reduces the Supreme Court’s jurisdiction in key constitutional matters and grants expanded constitutional standing, lifetime privileges and immunity to senior military leadership. Regardless of stated intentions, the outcome is a rebalancing of power away from independent judicial review and toward the executive–establishment axis.
This shift is occurring precisely when Pakistan is attempting to convince the IMF, multilaterals and investors that it is strengthening rule of law, not diluting it. The fact is that judicial independence is not a matter of political ideology. It is a core economic variable. It underpins contract enforceability, commercial dispute resolution, regulatory accountability and the credibility of reform commitments across political cycles.
When courts are perceived to lack independence, the enforceability of agreements, especially those involving the state or politically connected actors, becomes uncertain. And as soon as legal predictability weakens, investment behaviour changes: capital becomes defensive, short-term or exits.
The IMF does not dictate how constitutions must be designed. However, it does raise the question of whether reforms can be enforced and sustained. If judicial independence weakens just as governance integrity is under review, the IMF is likely to interpret this as heightened implementation risk. That means tighter monitoring, more demanding prior actions, stricter structural benchmarks and slower programme progression. In other words, even if Pakistan secures the next tranche, the cost of every subsequent tranche will increase.
Equally consequential is how the amendment will shape Pakistan’s standing with international financial institutions. The World Bank and the Asian Development Bank use the Country Policy and Institutional Assessment (CPIA) to determine both the scale and the cost of concessional financing. Pakistan’s latest overall CPIA score is 3.0, but its score in the governance cluster – which includes judicial independence, rule of law, accountability and public financial management – is lower, at 2.7, compared to the South Asian regional average of 3.3.
Within this cluster, indicators relating specifically to rule of law and judicial independence are estimated around 2.5–2.6, signalling fragile institutional checks and weak enforcement credibility. For context, regional comparators perform noticeably better: India scores 3.5 overall; Nepal scores 3.4; and Bangladesh scores 3.2.
These differences matter. They translate directly into how much Pakistan pays for external financing and how much confidence investors and lenders are willing to place in its institutional stability. If the 27th Amendment is interpreted as weakening judicial independence and effectiveness, Pakistan’s governance score is likely to fall further, pushing financing toward higher cost and stricter conditionality.
Similarly, the European Union’s GSP+ trade concessions require credible adherence to rule of law and institutional fairness. If power consolidation is perceived to override judicial checks, renewal of trade concessions becomes more complex.
None of these assessments are political. They are structural signals of state capability and reliability.
Foreign investors evaluate one thing above all: whether the rules of the game are predictable. They do not exit because politics is noisy. They exit when the rules appear adjustable in favour of those who hold power. When legal outcomes appear to be influenced by political or institutional alignment, the risk premium increases. Investment horizons shorten. Capital seeks safer jurisdictions.
Pakistan already ranks among the slowest countries in the world in enforcing contracts. Regulatory unpredictability and policy reversals have long been barriers to private-sector confidence. The 27th Amendment risks reinforcing the perception that institutional continuity depends less on law and more on the balance of political force. In such an environment, long-term investment becomes extremely difficult to justify.
The impact on domestic business is even more immediate. Local investors adjust quietly and rationally: expansion plans are paused, hiring slows, liquidity is hedged, savings shift into dollars and wealth moves offshore. Economic decline does not always unfold dramatically. Sometimes. it takes the form of a silent withdrawal of confidence.
Pakistan’s challenge is not that it lacks institutions. It is that institutions increasingly exist in form, but not in function. Elections are held, but mandates are shaped. Courts operate, but do not deliver timely justice. Parliament sits, but lawmaking is orchestrated elsewhere. Accountability agencies exist but are selectively activated.
The 27th Amendment does not reverse this pattern. It formalises and accelerates it.
This is why its economic implications are significant. Stabilisation and recovery do not succeed on technical correctness alone. They succeed when economic actors believe that rules will hold tomorrow, that contracts will remain valid across governments, and that reforms reflect institutional commitments rather than temporary power arrangements. Without this belief, even successful stabilisation produces shallow recovery and quick relapse.
In the near term, Pakistan may manage IMF negotiations and secure the upcoming tranche. But the long-term cost will show up in tighter conditions, slower disbursements, cautious investment sentiment and higher risk premiums – all of which reduce the space for sustainable recovery.
The deeper reality is straightforward: economic stability is built on trust. The 27th Amendment may consolidate power in the hands of those in control in the short term. But it does so at the cost of weakening the foundation on which investment, reform and growth rely – the independence and credibility of the institutions that uphold rule of law.
When rules that deliver justice outlast governments, economies grow. When governments rewrite rules to outlast the judiciary, economies shrink. And capital – domestic and foreign – always knows the difference.
The writer is a former managing partner of a leading professional services firm and has done extensive work on governance in the public and private
sectors. X/Twitter: Asad_Ashah