Beheading the Hydra: How the IMF Fights Corruption
IMF Blog, May 18, 2017
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Bibliographic details
- Authors: Alistair Thomson
- Published: May 18, 2017
Overview of the problem
- Corruption is defined as "the abuse of public office for private gain" and is described as "a many-headed monster."
- By some estimates, bribery alone amounts to "$1 trillion each year."
- Corruption drains public resources and drags down economic growth in multiple ways, disproportionately harming the disadvantaged.
- IMF economists have examined links between corruption and:
- higher infant mortality,
- lower spending on education and health services.
- Corruption exacerbates inequality and can feed populist politics, as noted by Transparency International.
How corruption affects economic and financial systems
- "When corruption is systemic, it undermines governments’ ability to mobilize investment," (Sean Hagan).
- Corruption undermines financial institutions and systems, discourages foreign investment and distorts international capital flows.
- The cumulative burden of corruption poses threats to economic growth and financial stability, motivating IMF engagement with member countries to improve public institutions and legal frameworks.
IMF tools, assessments, and technical work
- IMF legal and financial experts:
- Provide advice directed specifically at combating corruption in annual Article IV consultations and lending programs when corruption is critical.
- Offer targeted technical assistance and training for government officials, with a focus on preventing laundering of proceeds of corruption.
- Embed anti-money laundering work in every Financial Sector Assessment.
- Global peer commitments:
- G20 countries representing "some 85 percent of the global economy" have committed to undergo Financial Sector Assessments "every five years."
- Fiscal and financial expertise helps countries improve:
- public financial management,
- tax collection,
- transparency in public spending.
- Assessment tools and frameworks mentioned:
- Fiscal Transparency Evaluation (FTE),
- Tax Administration Diagnostic Assessment Tool (TADAT),
- Public Investment Management Assessment (PIMA),
- Public Expenditure and Financial Accountability (PEFA) framework (developed with the World Bank and other partners),
- Debt Management Performance Assessment (DeMPA).
- Statistical work:
- IMF statistical specialists help member countries improve national economic statistics and data dissemination and establish global standards to improve governance and transparency.
- Central bank governance:
- IMF experts help central banks improve governance arrangements, internal controls and transparency.
- Example practice: safeguards assessments are conducted whenever the IMF lends money to ensure the receiving central bank manages funds securely and accountably.
International collaboration and standards
- The IMF contributes to international initiatives such as:
- the Extractive Industries Transparency Initiative,
- the G20 Anti-Corruption Working Group.
- The IMF has incorporated standards developed by the Financial Action Task Force into its regular anti money-laundering work to make it easier to identify and trace the proceeds of corruption.
Country examples and outcomes
- Positive outcomes with IMF support:
- Kenya, Indonesia and Ukraine have improved their anti-corruption legislative frameworks and law enforcement functions.
- Specific country actions:
- Mali: Disbursements were delayed in 2014 over the extra-budgetary purchase of a new presidential aircraft, triggering an audit that led to cancellation of other problematic contracts and tightening of budget and procurement procedures.
- Mozambique: Lending was suspended in 2016 pending improvements in auditing and transparency after the undisclosed contracting of "well over $1 billion in external debt."
- Albania and Bangladesh: Better central bank controls were put in place to help prevent a repeat of thefts from their central banks.
Challenges, urgency, and evolving threats
- Corruption can reach high levels of government (examples cited: Korea and Brazil).
- Opportunities to commit and conceal corruption evolve with rapid technological innovation.
- The globalized threat of illicitly-funded international terror groups like ISIS and Al Qaeda heightens urgency.
- Membership message at IMF Spring Meetings: "Press on!"
- US Treasury Secretary Stephen Mnuchin: "It is … imperative that the IMF be a leader in fighting corruption."
Ongoing IMF reviews and next steps
- The IMF is reviewing how it treats corruption and other governance issues following a request from its global membership.
- The IMF is exploring ways to work more closely with other organizations, for example by drawing on Transparency International’s country experts to strengthen Fiscal Transparency Evaluations.
- The IMF commits to continuing efforts with members and partners to reduce the burden of corruption on world growth, countries’ economies and their citizens.
Source: "Beheading the Hydra: How the IMF Fights Corruption", Alistair Thomson, May 18, 2017.
Content in this bundle
- 直击要害：基金组织如何反腐, 作者：Alistair Thomson, 2017年5月18日
- ヒュドラ退治：Imfの汚職対策; アリステア・トムソン Imfブログ, 2017年5月18日掲載
- Обезглавить гидру: как МВФ противодействует коррупции; Алистер Томсон; 18 мая 2017 года
- IMFC Statement by Steven Mnuchin, Secretary of the Treasury, United States; April 22, 2017
References
- عربي
- https://www.imf.org/wp-content/uploads/2017/05/BLOG-1099x500-GENERIC-Corruption-Man-Hiding-Envelope-in-SuitPocket_Dareknie_iStock-172133209.jpg
- Corruption
- IMF economists
- staff discussion note
- fights corruption
- Financial Sector Assessment
- Fiscal Transparency Evaluation
- Public Investment Management Assessment
- global standards
- safeguards assessment
- Kenya
- Mozambique
- message from our membership
