Corruption—the abuse of public office for private gain—is a many-headed monster. It is pervasive in many countries, but only a fraction of cases make headlines; fewer are successfully prosecuted. Yet the cumulative burden is massive. By some estimates, bribery alone amounts to $1 trillion each year, and corruption more broadly to much more. While the precise figures are the subject of debate, the importance of the problem is not.
The burden falls disproportionately on the disadvantaged. Corruption drains public resources and drags down economic growth in multiple ways. IMF economists and others have examined the links between corruption and higher infant mortality, and lower spending on education and health services—all of which hit poor people hardest. Corruption thus exacerbates inequality. In a domino effect, the interplay of corruption and inequality feeds populist politics, anti-corruption group Transparency International recently concluded.
“When corruption is systemic, it undermines governments’ ability to mobilize investment,” IMF legal counsellor Sean Hagan told the Global Parliamentary Network during the IMF Spring Meetings. Corruption undermines financial institutions and systems, discourages foreign investment and distorts international capital flows. These threats to economic growth and financial stability are precisely why the IMF works with member countries to improve public institutions and legal frameworks, as outlined last year in a staff discussion note on the costs and counter-measures for corruption
The IMF fights corruption in several key ways:
Where critical, IMF legal and financial experts provide advice directed specifically at combating corruption when it is critical in our annual Article IV “health checks” and lending programs. Targeted programs for countries facing particular challenges offer technical assistance and training for government officials, with a focus on preventing the laundering of the proceeds of corruption. This work anti-money laundering work is also embedded in every Financial Sector Assessment, which G20 countries representing some 85 percent of the global economy have committed to undergo every five years.).
Our fiscal and financial experts help countries improve public financial management, tax collection and transparency in public spending—allowing parliaments and citizens to hold governments accountable. We have designed assessment tools like the Fiscal Transparency Evaluation (FTE), Tax Administration Diagnostic Assessment Tool (TADAT), Public Investment Management Assessment (PIMA), and worked with the World Bank and other partners to develop the Public Expenditure and Financial Accountability (PEFA) framework and Debt Management Performance Assessment (DeMPA).
The IMF contributes to international initiatives like the Extractive Industries Transparency Initiative and the G20 Anti-Corruption Working Group, bringing our expertise, country experience and global reach.
Our statistical specialists help member countries improve the quality of national economic statistics and data dissemination, including through the establishment of global standards, contributing to better governance and transparency.
IMF experts help central banks improve their governance arrangements, internal controls and transparency. For example, in Albania and Bangladesh, better controls have been put in place to help prevent a repeat of thefts from their central banks. Whenever we lend money, our financial specialists conduct a “safeguards assessment” to ensure the receiving central bank manages the funds in a secure and accountable manner.
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