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IMF’s Initial Steps on Corruption Issue

Rethinking How to Address a Touchy Subject

The International Monetary Fund is best known for doling out financial advice to governments and supporting programs that it believes will improve the country’s financial health, even when the reforms it recommends are a bitter pill for a government to swallow. But it frequently avoids the politically sensitive issue of corruption, despite its 1997 commitment tackle corruption as essential to fulfilling its mandate.

In a new paper, published on August 2, the IMF acknowledges some of these gaps, recognizing its approach to corruption as “uneven” and often couched in “indirect language.” It promises to be the first step in rethinking how it addresses corruption, rightly recognizing that systemic corruption poses a direct threat to sustainable and inclusive growth, contributes to the neglect of health and education, and exacerbates inequality.

© 2015 Angel Xavier Viera-Vargas

Last month, Human Rights Watch published a report showing how the IMF can blind itself to the corrosive effect of corruption on a country’s financial and social systems. The report examines the nefarious impact of corruption on health and education in Equatorial Guinea – a country that consistently ranks among the most corrupt in the world.

IMF reports on the oil-rich country have repeatedly called on the government to curb its wild spending on infrastructure projects of questionable social utility, and instead invest its dwindling resources in social projects such as health and education. While identifying the symptoms of corruption in detail, the reports stop short of examining the permissive laws, lack of oversight, and perverse financial conflicts of interest that are incentives for such lopsided government spending. Moreover, the IMF included government statistics showing a steep decline in poverty, while admitting to us that the data had “significant methodological weaknesses.”

The IMF should also ensure that more controversial elements of governments’ economic conduct are never left out of its analysis or programs, including when the military or military-owned businesses are involved. For example, the IMF did not address the lack of transparency and accountability with respect to Egypt’s military budget when agreeing to a $12 billion loan, despite the central role the military plays in Egypt’s economy.

Recognizing the central role that journalists and activists play in exposing corruption, the IMF should also draw on the work of experts to acknowledge barriers independent groups face in investigating and reporting on corruption without reprisal.

Without question, the IMF should do more to promote better government regulations and transparency to fight corruption. Improving its reporting is the right place to start.

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