## Beheading the Hydra: How the IMF Fights Corruption

_IMF Blog, May 18, 2017_

## Source details

**Canonical URL:** [Beheading the Hydra: How the IMF Fights Corruption](https://www.imf.org/en/blogs/articles/2017/05/18/beheading-the-hydra-how-the-imf-fights-corruption)

## Other formats

- [Markdown version](/en/blogs/articles/2017/05/18/beheading-the-hydra-how-the-imf-fights-corruption/index.md)
- [Structured JSON version](/en/blogs/articles/2017/05/18/beheading-the-hydra-how-the-imf-fights-corruption/index.json)
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## Bibliographic details
- Authors: Alistair Thomson
- Published: May 18, 2017

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### 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.*

---

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---

## References

- [عربي](https://blog-montada.imf.org/?p=5396)
- [https://www.imf.org/wp-content/uploads/2017/05/BLOG-1099x500-GENERIC-Corruption-Man-Hiding-Envelope-in-SuitPocket_Dareknie_iStock-172133209.jpg](https://www.imf.org/wp-content/uploads/2017/05/BLOG-1099x500-GENERIC-Corruption-Man-Hiding-Envelope-in-SuitPocket_Dareknie_iStock-172133209.jpg)
- [Corruption](https://blogs.imf.org/2015/11/05/corruption-a-hidden-tax-on-growth/)
- [IMF economists](http://www.imf.org/external/pubs/nft/2002/govern/)
- [staff discussion note](http://www.imf.org/external/ns/search.aspx?NewQuery=sdn+corruption&submit=)
- [fights corruption](http://www.imf.org/en/about/factsheets/the-imf-and-good-governance)
- [Financial Sector Assessment](https://www.imf.org/external/np/fsap/faq/)
- [Fiscal Transparency Evaluation](http://www.imf.org/external/np/fad/trans/)
- [Public Investment Management Assessment](http://www.imf.org/external/np/fad/publicinvestment/)
- [global standards](http://www.imf.org/en/about/factsheets/sheets/2016/07/27/15/45/standards-for-data-dissemination)
- [safeguards assessment](http://www.imf.org/external/np/sec/pr/2002/pr0219.htm)
- [Kenya](http://www.imf.org/en/Publications/CR/Issues/2017/02/02/Kenya-First-Review-Under-the-Twenty-Four-Month-Stand-By-Arrangement-and-the-Arrangement-44607)
- [Mozambique](http://www.imf.org/external/np/sec/pr/2016/pr16304.htm)
- [message from our membership](https://www.imf.org/en/News/Articles/2017/04/22/sm2017-communique-of-the-thirty-fifth-meeting-of-the-imfc)

_Source: https://www.imf.org/en/blogs/articles/2017/05/18/beheading-the-hydra-how-the-imf-fights-corruption_