The IMF and Good Governance
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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, threatens market integrity, distorts competition, and endangers economic development.
- IMF governance engagement history:
- 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 to promote more systematic, effective, candid, and evenhanded engagement with member countries on governance matters, including corruption, that impact macroeconomic performance.
- In 2023, the IMF conducted an in-depth stocktaking of the Fund’s engagement on governance and corruption since the adoption of the 2018 framework; the review found that such Fund engagement has been in line with its objectives and provided concrete proposals to strengthen engagement in these areas.
- The last update was in April 2023.
How does the IMF promote good governance?
- Principal workstreams: policy advice, lending, and capacity development.
- When warranted, measures to strengthen governance may become part of a program’s conditionality, including:
- strengthening controls on public spending;
- reducing discretion in revenue administration;
- issuing audited accounts of government agencies, central banks, and state enterprises.
- Other governance-related measures may focus on:
- increasing the transparency of natural resource management;
- enhancing bank supervision;
- stepping up efforts to combat corruption and money laundering.
- IMF policy advice is delivered through annual reviews of countries’ economic policies via Article IV consultations; staff may discuss economic consequences from poor governance and advise on reforms to strengthen governance and fight corruption.
- Technical assistance is provided to help build effective economic institutions and to advise countries on policies to improve governance and combat corruption.
What IMF initiatives target better governance?
- Two main areas of IMF promotion:
- management of public resources through reforms of public sector institutions;
- creating an economic and regulatory environment that is stable, transparent, and conducive to private sector activities.
- Collaborative and normative initiatives:
- Encourages member countries to improve accountability through disclosure, in line with its Transparency Policy.
- Together with the World Bank, assesses member countries’ compliance with international transparency standards in 12 policy areas in the context of its Standards and Codes Initiative.
- Developed transparency codes for fiscal, monetary, and financial policies, including the Fiscal Transparency Code.
- Partners with other institutions and donors in the Public Expenditure and Financial Accountability (PEFA) program.
- Issued a Guide on Resource Revenue Transparency for natural-resource-rich countries; a multi-donor Topical Trust Fund launched in 2010 provides technical assistance in managing natural resource wealth.
- Encourages members to subscribe to the Special Data Dissemination Standard (SDDS) or participate in the General Data Dissemination System (GDDS) to improve data transparency, quality, and timeliness.
- Contributes to international efforts to combat money laundering and the financing of terrorism (AML/CFT): assesses members' legal and regulatory frameworks on AML/CFT and provides technical assistance and policy-oriented research.
- Participates in 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?
- Safeguarding resources: assesses the governance and transparency frameworks of central banks of countries to which it lends money.
- Internal integrity measures:
- A code of conduct for staff, bolstered by financial certification and disclosure requirements, and sanctions.
- A similar code of conduct for members of the Executive Board.
- 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.
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