International Monetary Fund (IMF) headquarters building is seen during the IMF/World Bank annual meetings in Washington, U.S., October 14, 2017. 

© 2017 Reuters

The International Monetary Fund has unveiled a new blueprint for tackling the global scourge of corruption, conceding that its approach to the issue has been “uneven” in the past.

The new policy isn’t perfect, but, if implemented, could represent an important step in throwing the IMF’s weight behind global fight against corruption.

This week, the IMF published a New Framework for Enhanced Engagement on Governance, the result of a comprehensive examination of how it has dealt with corruption over the past two decades. The new paper dispels any doubt that corruption is an important economic issue that is well within the IMF’s mandate.

Under the new policy, the IMF will analyze countries’ financial governance to get an idea of how rampant corruption is, and the economic impact. If it concludes corruption is having a significant economic impact, the Fund will offer policy advice and in some cases financial assistance to strengthen governance. Critically, the IMF may even make these steps a condition of lending. To address the “supply side” of corruption or bribe-paying, the IMF will encourage countries to volunteer to have their legal systems assessed to ensure the criminal penalties are significant enough to discourage corruption in the private sector.

While these steps are welcome, by framing corruption exclusively in economic terms, the new policy overlooks the way in which corruption’s corrosive social impact has far-reaching economic implications. For example, it does not direct IMF staff to analyze or document governments’ social spending, such as on health and education. For countries where such data is not publicly available or reliable, it can be an important measure of how corruption undermines social investment.

The social cost of corruption was powerfully illustrated recently by Ngozi Okonj-Iweala, the former minister of finance of Nigeria, who recounted how a girl who was the first in her family to attend college failed a class after she refused to pay her teacher a bribe. “She dropped out and you can imagine the impact this had not just herself and her family but for all the other people who can see what was happening.” Now imagine the economic impact of an entire village losing faith in education.

The Framework also does not envision a role for civil society, even as the IMF has recognized that is a powerful tool not only for fighting corruption but the insidious sense of powerlessness it engenders is a strong civil society.

Integrating the social impact would strengthen the IMF’s analysis of corruption as an economic problem rather than run afoul of its mandate.