Corrosive and Costly Corruption
IMF Blog, July 14, 2017
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Bibliographic details
- Authors: The Editors
- Published: July 14, 2017
Overview
- Publication: The Editors, July 14, 2017.
- Core message: Corruption generates pervasive distrust in government, can produce violence, civil strife, and conflict, and has devastating consequences for people’s economic and social prospects.
- IMF legal counsellor cited: Sean Hagan.
Social and distributional impacts
- IMF research findings:
- In countries with greater levels of corruption, infant mortality and dropout rates are especially high.
- These outcomes are partly due to less spending on health and education.
- Reduced investment in health and education tends to hurt poor people the most and contributes to higher inequality.
- Summary statement: Corruption can hurt growth and ruin people’s economic chances.
Fiscal and economic impacts
- Corruption undermines two main government duties:
- Fiscal policy—taxes and spending:
- Quote: "When a significant portion of the population does not pay taxes, the entire tax system can be delegitimized."
- Consequence: This can leave countries unable to service their debts, which leads to financial instability.
- On spending: Corrupt officials are less likely to invest in things that promote inclusive growth and benefit society—like health and education services—and instead may choose wasteful construction projects for their ability to generate kickbacks.
- Encouraging foreign investment:
- Bribery effectively creates a tax on investment, making it more expensive and less appealing to potential investors.
- Quote: "Bribes can also create significant uncertainty for an investor, and may dissuade the investor from making the investment decision in the first place."
Cost estimates and global scale
- IMF study estimate: bribery costs roughly $1.5 to $2 trillion annually, or approximately 2 percent of global GDP.
IMF priority and actions
- With serious social and economic consequences at stake, the fight against corruption is a priority for the IMF and its member countries.
- Readers are invited to:
- Watch the full video featuring Sean Hagan.
- Read more on what the IMF is doing to combat corruption.
Source: IMFBlog — "Corrosive and Costly Corruption" — The Editors, July 14, 2017.
Content in this bundle
- Staff Discussion Note