Corruption and COVID-19
IMF Blog, July 28, 2020
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- Authors: Vitor Gaspar, Martin Mhleisen, Rhoda Weeks-Brown
- Published: July 28, 2020
Overview: why corruption matters more during the pandemic
- Corruption is defined as "the abuse of public office for private gain."
- The COVID-19 pandemic has heightened the importance of stronger governance for three reasons:
- Governments around the world are playing a bigger role in the economy to combat the pandemic and provide economic lifelines to people and firms, which "increases opportunities for corruption."
- As public finances worsen, countries need to prevent tax evasion and the waste and loss of funds caused by corruption in public spending.
- Crises test people’s trust in government and institutions; ethical behavior becomes more salient when medical services are in high demand—evidence of corruption could undermine a country’s ability to respond, deepen the economic impact, and threaten political and social cohesion.
- IMF message to governments: "spend whatever you need but keep the receipts, because we don’t want accountability to be lost in the process."
IMF operational response during the crisis
- Emergency financing and governance safeguards:
- In lending work, the IMF provided quick disbursements to meet urgent needs while including enhanced governance measures to track COVID-19 related spending.
- Borrowing countries committed to:
- (i) undertake and publish independent ex-post audits of crisis-related spending; and
- (ii) publish crisis-related procurement contracts on the government’s website, including identifying the companies awarded the contract and their beneficial owners.
- The IMF ensured that emergency resources are subject to the IMF’s Safeguards Assessment policy.
Longer-term governance and anti-corruption efforts
- The IMF’s enhanced framework (adopted in 2018) aimed to make IMF work with countries more candid, evenhanded, and effective; this laid the foundation for the COVID-19 policy and lending response.
- Key highlights from a recent staff analysis assessing progress:
- The IMF "speak[s] more candidly and in-depth about governance issues with countries."
- Text mining analysis findings:
- Governance-related references more than doubled in staff reports in the 18 months after the IMF approved the framework, compared with 2017.
- In 2019, the IMF discussed governance with countries four times more than the average over the prior ten years.
- Surveillance examples cited:
- Central bank governance and operations in Liberia.
- Financial sector oversight in Moldova.
- The anti-corruption framework in Mexico.
- Fund staff are proposing more concrete governance and anti-corruption recommendations.
- IMF-supported lending programs now include specific conditionality related to governance and anti-corruption reforms, with governance improvements being a core objective of many programs.
- Technical assistance and training have been stepped up to help countries improve governance in areas such as:
- tax administration,
- expenditure oversight,
- fiscal transparency,
- financial sector oversight,
- anti-corruption institutions,
- asset declarations for senior officials.
- Governance diagnostic missions to a dozen countries provide detailed analysis of governance weaknesses based on legal frameworks and propose prioritized solutions.
Transnational corruption assessments and international cooperation
- Ten advanced economies have participated in voluntary assessments of their national frameworks to limit opportunities for transnational corruption:
- Austria, Canada, the Czech Republic, France, Germany, Italy, Japan, Switzerland, the United Kingdom, and the United States.
- Purpose of these IMF-conducted assessments:
- Determine the degree to which a country (1) criminalizes and prosecutes bribery of foreign public officials; and (2) prevents foreign officials from concealing corrupt proceeds in its own financial system or domestic economy.
- The IMF strongly encourages member countries to volunteer for such coverage in its annual economic health checks.
Policy implications and recommendations
- Curbing corruption requires:
- government ownership of reforms,
- international cooperation,
- a joint effort with civil society and the private sector,
- political will and assiduous implementation of reforms over months and years.
- The crisis will sharpen the IMF’s focus on governance in the years ahead because of the pandemic’s devastating effects and costs for people and economies.
- Closing remark: "If ever there was a time for anti-corruption reforms, it is now."
Vitor Gaspar, Martin Mühleisen, Rhoda Weeks-Brown — July 28, 2020
Content in this bundle
- Box 1. the Ebola Virus Disease Outbreak