Fighting Corruption, Enter the IMF
29 April, 2018
IMF Managing Director Christine Lagarde
Fighting corruption has been a hot issue in many countries and throughout different times, but with little success. Despite efforts by various organizations to tackle the issue from publicizing it as a deterrent measure to taking some steps, but hardly any breakthrough has been achieved.
A new player trying its luck is the International Monetary Fund (IMF), who is throwing its weight to combat corruption. Last week it issued new guidelines to tighten the ones it had before. High among them is to review the role of advanced countries in corruption practices be it providing bribery or a safe sanctuary for stolen funds or money laundry as well as improving clampdown on wrong doings in poor countries. Also the IMF will work to include the issue of corruption in its famous article 4 consultations with member countries. The idea is to be able to estimate the economic impact of governance weaknesses and provide policy recommendations that can help member countries address the issue in a practical way.
“The flip side of every bribe taken is a bribe given,” IMF Managing Director Christine Lagarde said in a blog post. “Funds received through corruption are often funds concealed outside the country -- often in the financial sectors of major capitals. It is quite possible for countries to have ‘clean hands’ at home but ‘dirty hands’ abroad.”
She added that there was empirical evidence to show that high levels of corruption were linked to significantly lower growth, investment, foreign direct investment and tax revenues. "
Though the IMF has had guidelines for dealing with corruption since 1997 but it is currently developing a clear and transparent methodology to assess how big a problem corruption was in individual poor countries. This would involve looking at the quality of government departments in charge of tax and spending, and the integrity of central banks.
The revised good governance guidelines, which take effect on July 1, with the hope of filling the gaps in discussing corruption in member states as it hurts prospects of growth and attaining sustainable development goals.
The effort will start with preparing a clear methodology for assessing the nature and of governance weaknesses through specific indicators like the quality of the budgetary institutions; supervision of the financial sector; the central banks integrity; market regulation impartiality; the command of the rule of law, especially contract enforcement; and how stringent are regulations to fight money laundering and terrorism financing.
That measure will be followed by country-specific policy recommendations in response over specific time framework. Accordingly, the IMF will discuss good governance concerns in all annual economic reviews of member countries. Though it will not investigate specific instances of corruption, but it will focus on the strength of key economic institutions like the central bank governance, market regulation, the rule of law and policies on money laundering and countering terrorism financing.
This is a new development for sure, but will it work? That is the question that only time will tell how it is going to develop though past experiences don’t augur well.
It is not the first time that the issue of fighting corruption gets world attention. Earlier in this millennia, then British Prime Minister Tony Blair was on the forefront campaigning for the issue. He went as far as spearheading at one point the campaign The Publish What You Pay, which was an umbrella of more than 60 non-governmental (NGO) and civil society organisations from around the world. The campaign was focusing on oil and gas companies urging them to declare any payments they make to government so as to provide a base for transparency.
Though Blair was enthusiastic in the beginning to push through this campaign, but he fell short of following his enthusiasm with concrete regulatory measures like delisting those companies not abiding by the new rules from London Stock Exchange as he promised initially.
Such campaigns and despite the noise surrounding them proved to be easy to talk about, but hardly possible to implement. Some countries have threatened companies committed to the new approach that they would suffer cancellation of their contracts.
Sudan is not far from this battle now that fighting corruption came into the center of political debate and activity fuelled by the deteriorating economic conditions. However, seeking an IMF advice on the issue could provide some help, but the bottom line is to have a political will to forge ahead in the fight.
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