Can imf lending promote corruption

A message that was recently reinforced. In order to identify these measures as part of the financial assistance agreements, we track publicly available information on IMF emergency funding to countries in response to the COVID crisis.

To help anti-corruption analysts and activists around the world, we have set up a tracker through which we flag the presence or not of anti-corruption and transparency measures in each loan agreement, classifying them under nine categories, including public procurement, beneficial ownership, expenditure reporting and audits.

We provide details about each measure, including the original text of each government's commitment. Additionally we look at press releases issued for each financial agreement in order to see if the IMF includes in its communications mentions of key words such as anti corruption, transparency and governance.

This finding is worrying. This raises critical questions: Why, despite applying the same financial instruments during the same period, do so few include specific anti-corruption commitments? To what extent are the IMF's own anti-corruption recommendations and governance concerns in their other assessments of IMF member countries, such as Article IV reports , taken into account when approving loans? When governments do commit to anti-corruption measures, the most widely used are related to audits of COVID related spending 67 funding agreements include commitments ; public procurement 56 funding commitments ; and beneficial ownership 50 funding commitments.

To allow for effective monitoring of their implementation, anti-corruption commitments should be specific, measurable, actionable and time bound.

This is not the case for a significant number of the financial agreements. Other financial agreements, such as for Guatemala , include information such as the website where spending information will be published. In other cases, details that make anti-corruption commitments specific and measurable are missing. In Kosovo , financial agreements include language that is so broad as to be more of an expression of goodwill than a commitment. In total, we found 47 agreements without a single government commitment linked to using funds in a transparent way.

Alarmingly, in this category is North Macedonia. Less than five months earlier, the IMF itself highlighted governance concerns in the country, yet a loan was approved without a clear government commitment to address these.

Commitments are fine, but are just words without concrete action. IMF member countries can include specific, measurable anti-corruption commitments in their loan agreements, helping funds reach their intended beneficiaries.

While governments alone make anti-corruption commitments, the IMF can and should play a bigger role in safeguarding the funds. These measures should include:. Emergency financing deployed since the start of the crisis, such as through the Rapid Credit Facility and Rapid Financing Instrument, are characterized by speed and flexibility, and limited conditionalities.

The IMF should extend these measures to all countries by integrating those governance safeguards, and applying them equally to all countries, into its policy. This would not only help prevent the misuse of IMF funds, but also address the lack of consistency of anti-corruption measures in emergency financing that the IMF itself has recently recognized. The policy already mentions a number of commitments that countries should make, such as undergoing a safeguard assessment. In order to reduce the risk of misuse of emergency financing in time of crisis, the Fund should add the need for countries to commit to specific governance safeguards under its policy so it would apply equally to all countries benefiting from such financing.

The IMF publishes policies, fact sheets, Article IV reports and loan agreements, but they are scattered across its website and are not always user-friendly.

Finding the conditions countries must meet in their loan agreements means examining long and often technical documents, making it difficult for civil society, the media and researchers to keep track. This should be replicated for issues such as the conditionalities applied to countries in all the IMF lending. There is a growing recognition of the role civil society organizations CSOs play in supporting accountability and in tracking the implementation of the commitments.

The IMF must strengthen its efforts to consult with CSO experts before loans are approved, in particular to get ideas on what anti-corruption measures are needed. In Nigeria, civil society organizations have flagged the need for effective protection for whistle-blowers. The IMF must consistently take into account the risks that its own staff may have identified in the past, as well as the input from other actors, such as civil society as mentioned in the previous points.

Broad and vague commitments should not be accepted. IMF member countries must make specific, concrete and time-bound commitments. The language of the commitments matters because it allows citizens, civil society, and the IMF itself, to hold governments accountable and to monitor accurately their implementation.

Public procurement, beneficial ownership and audits are key areas in order to reduce the risks of corruption. Data gaps are another constraint in some cases. All of this points to the need for being patient with results , but persistent in our efforts. Over the last year, Transparency International analysed 96 IMF reports and found an increase in references to corruption. However, these references are heavily skewed towards a minority of reports and countries.

Afghanistan for example represents over 10 per cent of all mentions. How can you ensure that you are treating all your member countries similarly in the future? First, let me say that it is always useful when civil society organisations CSOs analyze our work and hold us accountable.

It helps with our internal analysis, and it helps the Fund deliver a better service to its members. I am glad that your research found a big increase in references to corruption—it helps to show that the Framework is having its intended effect.

On your question, we do, of course, take great care to be evenhanded in how we treat member countries, and we have a strong internal review processes in place to promote this.

But we also recognize that governance and corruption issues vary across countries and take account of these differences in our analysis and surveillance. The good news is that the new framework allows us to take a risk-based approach to individual countries—so we can dial up the attention we give to governance and anti-corruption issues based on the severity of their governance vulnerabilities.

Although, we have seen an uptake in transparency, accountability and anti-corruption measures in some countries, this is not consistent across the board. What is the IMF doing to reduce the risks of these funds being lost to corruption and not reaching their intended beneficiaries, particularly where some countries are reducing access to public information and media freedom?

You are right that the IMF has responded at record speed, because this is truly a crisis like no other. While moving at great speed, the IMF has consistently emphasized the importance of improving governance and accountability.

Our message to governments has been very clear: in this time of crisis, please spend whatever is needed. But spend wisely and keep your receipts. We don't want accountability to be lost. First, governments receiving emergency financing have committed to adopt a range of measures. These range from publishing procurement contracts online, as well as the beneficial owners of companies receiving these contracts, to publishing independent audits of crisis-mitigation spending. The measures serve to improve transparency, anti-corruption efforts, anti-money laundering mechanisms, and public financial management.

In each case, we assess which measures will not unduly delay urgently needed disbursements. Where there are shortcomings, IMF staff make time-bound recommendations and closely monitor their implementation. Third, many of the countries receiving emergency assistance either already have existing multi-year financing arrangements with the IMF or will be seeking such arrangements soon.

These arrangements are better-suited to addressing longer-term structural issues that underpin poor governance and corruption. The nature and severity of governance weaknesses, including corruption, cannot be understood from official sources only. It requires input from a range of actors, including civil society. We've observed the IMF taking different approaches in its engagement with civil society in different countries.

What role does the IMF see for CSOs in its fight against corruption and how will it address this issue of consistency in the context of shrinking space for civil society in many countries? Thieves and fraudsters are very determined, and they use sophisticated techniques to divert funds away from their intended use. We can only stop fraud and corruption if we work together, and civil society has a critical role to play in holding to account both governments and institutions like the IMF.

Through your advocacy, you put pressure on governments and businesses to stick to their commitments and to clean up their act. And through your work with institutions like the IMF, you show us where we can do better. I know that you are facing significant challenges around the world in doing this kind of work, so here is my ask of you—please keep up your good work.

At a time of crisis, it is more important than ever. We will continue to play our part, even in challenging times like during the COVID pandemic—for example, by working with governments to improve fiscal transparency. The IMF has repeatedly demonstrated its ambition to play a leading role in tackling corruption worldwide.

Thinking further ahead to and beyond, what do you see as the next frontier in the field of anti-corruption? The global anti-corruption agenda is already very full—many current initiatives are not yet fully implemented and best practices are not adopted as widely as is necessary.

Looking to , we can take big steps forward in the fight against corruption and reaching the Sustainable Development Goals, if we focus on delivering on these priorities—like stronger asset declaration requirements for senior public officials, and transparent beneficial ownership for legal entities.

Looking beyond , I am hopeful that technology, though it also has its risks, can help in the fight against corruption.