How the IMF is Promoting Transparent and Accountable Use of COVID-19 Financial Assistance

May 5, 2020

COVID-19 is causing tragic loss of life and has disrupted our social and economic order at lightning speed on a scale that we have not seen in living memory. The IMF is working closely with its members to meet their need for emergency financing, while sustaining its fight against corruption and the misuse of urgently needed financial support. In this time of crisis, it is more important than ever to ensure that resources are used to protect lives and livelihoods.

How does the IMF help countries improve governance and fight corruption?

In 2018, the IMF adopted a Framework on Enhanced Engagement on Governance. Since then, the IMF has engaged in deeper and more candid discussions with our member countries when these issues could undermine the efficient functioning of the economy and threaten the interests of its citizens. These discussions take place through several channels:

Article IV surveillance: IMF country teams analyze governance and corruption issues and provide specific recommendations to enhance good governance and address corruption vulnerabilities, including on combatting transnational corruption.[1] To date, more than 30 staff reports have had dedicated, in-depth annexes or Selected Issues Papers on these topics.[2]

  • Lending programs: Governance-related conditionality is included when such vulnerabilities are critical to achieving the goals of the member’s program.[3]
  • Governance diagnostics: Staff has begun conducting detailed diagnostic studies to help identify specific reforms to strengthen governance across a range of areas. To date, 10 such reports have been completed or are underway.[4]
  • Capacity development: The IMF provides extensive technical assistance and training in the areas of fiscal governance, financial sector supervision, central bank governance, anti-money laundering measures, and anti-corruption frameworks.
  • Research and outreach: The IMF has a broad agenda of analytical and research work on governance issues,[5] as well as a range of outreach activities to promote collaboration with other international institutions, academia, and CSOs on this topic.

How can the IMF help enhance transparency and accountability with its emergency financing in the time of COVID-19?

In the wake of the COVID-19 pandemic, the IMF maintains its commitment to address governance and corruption vulnerabilities in member countries. The IMF is working to balance the need for immediate COVID-19 financing against appropriate accountability and transparency to ensure, as best as possible, that financial help reaches those in need.  IMF emergency financing is provided in upfront, outright disbursements. So while there is much less scope for attaching traditional conditions, the IMF is working on the following measures to promote transparency and accountability, and ensure its resources are used for their intended purpose:

1. Asking member authorities to commit in their Letters of Intent to ensuring that emergency assistance is used for the very urgent purpose of resolving the current crisis and not diverted for other purposes. Letters of Intent are published by the member country and are also available on the IMF website.

2. Assessing which public financial management, anti-corruption, and anti-money laundering measures we can ask members to put in place without unduly delaying urgently-needed disbursements. For example, the IMF has asked member countries requesting emergency assistance to commit to (i) enhanced reporting of crisis-related spending; (ii) undertaking and publishing independent ex-post audits of crisis-related spending; (iii) ensuring procurement transparency by, for example, publishing procurement contracts; and/or (iv) preventing conflicts of interest and corruption by publishing the beneficial ownership information of firms awarded procurement contracts.. Specific examples include the following:

  • In Gabonthe authorities have committed to (i) report quarterly on the spending of emergency funds; (ii) commission an independent audit of this spending within six months of disbursements and publish the results; and (iii) publish related procurement contracts and the beneficial ownership information for the companies receiving those contracts.
  • In Moldova, the authorities have committed to (i) publishing information on crisis-related public procurement and beneficial owners of companies contracting with the government; (ii) continuing to enforce the anti-money laundering framework and asset declaration regime; and (iii) subjecting all crisis-mitigation spending to a dedicated audit by the Court of Accounts Chamber and making the report public.
  • In Nigeria, the authorities have committed to: (i) strengthening the role of the Federal Audit Board in combating corruption and the asset-declaration framework; (ii) fully implementing the risk-based approach to AML/CFT supervision while ensuring the transparency of beneficial ownership of legal persons; (iii) creating specific budget lines to facilitate the tracking and reporting of emergency response expenditures and report funds released and expenditures incurred monthly on the transparency portal (http://opentreasury.gov.ng/); (iv) publishing procurement plans, procurement notices for all emergency response activities—including the name of awarded companies and of beneficial owners—on the Bureau of Public procurement website; and (v) publishing no later than three to six months after the end of the fiscal year the report of an independent audit into the emergency response expenditures and related procurement process, which will be conducted by the Auditor General of the Federation.

These measures are generally encouraged as good practices to enhance transparency and accountability. Similar commitments have been made in Afghanistan, Bolivia, Dominican Republic, the Kyrgyz Republic, Mauritania, Pakistan, and São Tomé and Príncipe, among many other countries

3. Ensuring that emergency resources are subject to our “Safeguards Assessment” policy. These assessments provide reasonable assurance to the IMF that a central bank's framework of governance, reporting, and controls is adequate to manage resources, including IMF disbursements. Where there are shortcomings, IMF staff make time-bound recommendations and closely monitor their implementation. Given that emergency financing is provided as an upfront disbursement, such assessments will be conducted after the disbursement, but before the approval of any subsequent financing for the member country under a more traditional multi-year financing arrangement.

4. Continuing to include governance and anti-corruption measures in these countries’ multi-year financing arrangements, where warranted as part of our ongoing implementation of the 2018 Enhanced Governance Framework. Many of the countries receiving emergency assistance now either already have existing multi-year financing arrangements with the IMF or will be seeking such arrangements soon. These multi-year arrangements are better-suited than emergency financing to addressing longer-term structural issues that underpin poor governance and corruption.

 

 



[1] Analysis on combatting transnational corruption has occurred on foreign-bribery issues (France, Germany, and Japan), anti-money laundering issues (the United States), and both areas ( Switzerland, Canada, the Czech Republic, and the United Kingdom).

[2] Topics discussed in Article IVs include fiscal governance (e.g., Bulgaria, Malaysia), central bank governance and operations (e.g., Liberia and Mozambique), financial sector oversight (e.g., India, Moldova), market regulation (e.g. Nigeria, South Africa), contract enforcement and property rights (e.g., Djibouti), anti-money laundering issues (e.g., Malta, Malaysia), and the anti-corruption framework (e.g., Bulgaria, Mexico).

[3] Several new programs have brought the fight against corruption to the forefront of their core objectives (e.g., Angola, Central African Republic, Equatorial Guinea, Honduras, Liberia, Mali, Rep. of Congo).

[4] Upon the authorities’ request, so far governance diagnostic missions have been undertaken for ten countries (Central African Republic, Democratic Republic of Congo, Equatorial Guinea, Mozambique, Honduras, Guinea Bissau, Republic of Congo, Paraguay, Peru, and Zimbabwe).

[5] One example of analytical work is the April 2019 Fiscal Monitor’s chapter on Curbing Corruption. The chapter assesses the fiscal costs of corruption and explores practices and institutions in the fiscal area that reduce opportunities and incentives for corruption.