IMF and Good Governance

Why is good governance important?

Governance covers all aspects of how a country is governed, including its economic policies, regulatory framework, and adherence to the rule of law.

Poor governance offers more incentives and opportunities for corruption—the abuse of public office for private gain. Corruption undermines the public’s trust in its government. It also threatens market integrity, distorts competition, and endangers economic development.

Because poor governance is so detrimental, the IMF adopted a policy in 1997 on The Role of the IMF in Governance Issues. In 2018, the IMF adopted a Framework for Enhanced Engagement on Governance. The framework aims to promote more systematic, effective, candid, and evenhanded engagement with member countries on governance matters, including corruption, that impact macroeconomic performance.

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How does the IMF promote good governance?

The IMF promotes good governance through its workstreams, including policy advice, lending and capacity development. When warranted, measures to strengthen governance may become part of a program’s conditionality. These measures might call for strengthening controls on public spending, reducing discretion in revenue administration, and issuing audited accounts of government agencies, central banks, and state enterprises.

Other measures may focus on increasing the transparency of natural resource management, enhancing bank supervision, or stepping up efforts to combat corruption and money laundering. IMF policy advice involves annual reviews of countries’ economic policies, conducted through Article IV consultations. In the process, staff may discuss economic consequences from poor governance and advise on reforms to strengthen governance and fight corruption.

The IMF also provides technical assistance to help build effective economic institutions and to advise countries on policies to improve governance and combat corruption. 

What IMF initiatives target better governance?

The IMF promotes good governance in two main areas. The first involves the management of public resources through reforms of public sector institutions. The second area involves creating an economic and regulatory environment that is stable, transparent, and conducive to private sector activities. Several initiatives involve close collaboration with other international organizations:

The IMF encourages member countries to improve accountability through disclosure, in line with its Transparency Policy.

Together with the World Bank, the IMF assesses member countries’ compliance with international transparency standards in 12 policy areas in the context of its Standards and Codes Initiative.

For fiscal, monetary, and financial policies, the IMF has developed codes that set out transparency principles, including the Fiscal Transparency Code.

The IMF partners with other institutions and donors in the Public Expenditure and Financial Accountability (PEFA) program.

For natural-resource-rich countries, the IMF issued its Guide on Resource Revenue Transparency. A multi-donor Topical Trust Fund launched in 2010 provides technical assistance in managing natural resource wealth.

To improve data transparency, quality, and timeliness, the IMF encourages its members to subscribe to the Special Data Dissemination Standard (SDDS) or participate in the General Data Dissemination System (GDDS).

The IMF contributes to the international efforts to combat money laundering and the financing of terrorism (AML/CFT). It assesses members' legal and regulatory frameworks on AML/CFT and provides technical assistance and policy-oriented research in this area.

The IMF participates in various governance initiatives, including the Extractive Industries Transparency Initiative, the G20 Anti-Corruption Working Group, and collaborates with the Stolen Assets Recovery (StAR) initiative.

What is the IMF doing about its own internal governance?

As a means of safeguarding its resources, the IMF assesses the governance and transparency frameworks of central banks of countries to which it lends money.

To promote good governance within its own organization, the IMF has integrity measures, including a code of conduct for staff, bolstered by financial certification and disclosure requirements, and sanctions. There is a similar code of conduct for members of the Executive Board and an integrity hotline offering protection to whistleblowers. The IMF Ethics Office advises the institution and its staff on ethics issues, examines alleged violations of rules and regulations, and oversees the ethics and integrity training program for all staff members.

Good governance

The last update was in April 2023