July 25, Pakistan — Over the past few weeks, a major corruption case has emerged from the Kohistan area in Khyber Pakhtunkhwa, with public losses estimated to surpass Rs 40 billion. The controversy involves supposed fraudulent and incomplete road projects, where funds were approved, distributed, and allegedly diverted without actual implementation. Although the region’s difficult terrain has always made development both essential and costly, using its isolation to conceal financial mismanagement highlights a more serious issue than the incident alone. It brings up fundamental questions about the effectiveness of public financial management, the breakdown of oversight at different institutional levels, and the absence of accountability that keeps Pakistan’s development system financially exposed.
The pattern of corruption seen in Kohistan is neither novel nor unique. It adheres to a familiar cycle: exaggerated project budgets, lack of immediate oversight, insufficient internal auditing systems, and delayed after-the-fact accountability that seldom leads to substantial institutional improvements. Based on the information available, several contractors received payments for work that was either not carried out or only partially completed. These payments were approved by relevant departments without proper physical inspection. This highlights significant shortcomings in Pakistan’s procurement management, particularly in provincial infrastructure projects.
At the heart of the problem is the inability to incorporate technology and independent supervision into the public spending system. Although significant funding has been allocated to ERP systems, e-procurement platforms, and digital accounting systems over the last ten years, the majority of provincial projects are still carried out using manual or partially automated processes, where personal judgment and collusion can undermine procedural integrity. The Kohistan scandal demonstrates the susceptibility of decentralized spending when there is no centralized oversight. The 18th Amendment transferred financial authority to the provinces, but the necessary enhancement of internal controls, development of capabilities, and implementation of data-based project monitoring have not kept pace.
From the perspective of financial governance, the cost of these failures extends beyond the Rs 40 billion figure that is often highlighted. It disrupts macro-fiscal discipline by exaggerating development expenditure numbers without yielding real economic benefits. In the fiscal year 2024-25, the total provincial development budget surpassed Rs 2 trillion. If just 10% of this amount is lost due to phantom projects, false reporting, or leaks, the nation could be losing Rs 200 billion each year—equivalent to almost 30% of its federal health budget or double its higher education funding. Consequently, the cost of corruption is not solely monetary; it directly affects human development, private investment opportunities, and long-term productivity.
Institutional shortcomings can be observed at three levels. At the planning stage, project evaluations are frequently rushed and impacted by political factors, with cost-benefit analyses either missing or inadequately constructed. The construction of roads in areas with difficult terrain such as Kohistan should undergo geospatial feasibility studies, seasonal viability assessments, and cost realism standards based on local engineering practices. However, most PC-1 documents are typically approved based on paper estimates, often without independent verification. Secondly, at the implementation stage, the lack of real-time monitoring systems—like satellite images, geo-tagged progress reports, and digital contractor records—creates significant opportunities for fraudulent certifications. Thirdly, regarding accountability, post-project audits are usually delayed and poorly funded. Internal audit teams often depend on receipts and signatures instead of measurable, on-site data, which makes detection both challenging and slow.
It is also crucial to recognize that the procurement process remains unclear in numerous projects. Although the Public Procurement Regulatory Authority (PPRA) offers a national framework, every province has its own version with differing degrees of implementation. Single-bid contracts, restricted bidding, and the continuous use of the same group of contractors—often informally connected to those in power—are warning signs that appear repeatedly in various scandals, not only in Kohistan. With a lack of transparency in procurement, the possibility of ongoing financial losses remains deeply rooted.
From an economic perspective, unproductive government spending, such as this, not only hampers the delivery of services but also deteriorates Pakistan’s already fragile financial situation. With interest payments consuming more than 50% of federal income and external debt repayments rising above $23 billion this fiscal year, the government’s capacity for development spending is becoming more limited. Unwise expenses like phantom road projects intensify the shortage of resources and necessitate additional borrowing to keep the budget looking balanced. As the IMF, international organizations, and credit rating agencies closely examine the effectiveness of public spending, ongoing cases of subnational corruption further erode Pakistan’s reputation as a financially responsible borrower.
This controversy should also be examined in the larger framework of institutional deterrence. Although anti-corruption bodies have acknowledged the Kohistan case, their sustained effectiveness relies not solely on arrests but on structural changes. The strongest deterrent is not legal action after the crime, but a proactive setting where the consequences of corruption exceed its advantages. This can only be accomplished through digitalizing procedures, openly sharing project updates instantly, engaging independent monitoring companies, and enhancing public input systems in development regions. Fiscal decentralization cannot thrive in isolation; it needs to be combined with accountability decentralization and openness in data.
In this scenario, the implementation of technologies such as blockchain-based bidding processes, satellite-assisted construction monitoring, and centralized dashboards that are accessible to both provincial assemblies and the public can have a significant impact. Data on budget usage, physical progress updates, contractor performance records, and audit alerts should be provided in machine-readable formats for all Tier 1 and Tier 2 development initiatives. This level of transparency not only fosters trust but also involves the public in monitoring efforts. Nations including Estonia, Rwanda, and Georgia have adopted comparable systems, resulting in noticeable decreases in procurement fraud.
Furthermore, it is essential to examine the budgeting process itself. Numerous development projects are supported through the Annual Development Programme (ADP) without connections to medium-term impact assessments. Initiatives that gain financial approval without undergoing a continuous public investment management assessment (PIMA) may end up as fiscal voids. Implementing a layered evaluation system—where significant projects such as roads, dams, or hospitals exceeding a specific threshold are automatically subjected to PIMA and regular performance evaluations—could assist in focusing on cost-effective efforts.
In conclusion, establishing a national “Corruption Impact Report” within the Economic Survey or budget papers could generate both pressure and transparency. If the annual budget documents explicitly outlined the amount of money recovered from misused development programs, the number of suspended or banned contractors, and the proportion of the budget audited in real time, it would compel the bureaucracy and execution agencies to adjust their internal controls. This is not merely a technical fix; it is a crucial governance requirement.
The Kohistan scandal is more than just a local disgrace. It serves as a national example of why Pakistan continues to be stuck in a cycle of inefficient and untrustworthy governance. It demonstrates the failure to align financial power with ethical procedures. Furthermore, it underscores the economic consequences of allowing corruption to flourish in remote development areas, where the government’s presence is already limited and people’s reliance on it is greatest.
No level of debt renegotiation, support from the IMF, or aid from donors can make up for the decline in institutions at the local level. As long as public funds are not utilized to produce measurable results, and those who misuse them do not encounter real consequences, Pakistan’s route to lasting development will stay obstructed—not due to geography, but because of poor governance.
The present time presents a unique chance. With digital infrastructure established, an increasing emphasis on financial efficiency, and the political room to implement structural changes, there is little reason to delay action. The Kohistan incident should not end up as another overlooked entry in an audit report. It needs to serve as a pivotal moment. If roads are to be constructed, they should pave the way for progress, not deceit. The initial step along this path is accountability—both for individuals and for systems.
