This blog is part of our series, Tracking the Trillions, which takes a closer look at how the International Monetary Fund (IMF) can tackle corruption, while promoting transparency and accountability.
With a one trillion dollars in available lending capacity since the outbreak of COVID-19, the IMF has played a leading role in mitigating the economic impacts of the pandemic. To date, the Fund has made available, through its various lending facilities and debt service relief initiatives, more than US$83 billion to more than 80 countries.
Maria Emilia Berazategui, Global Advocacy Coordinator, Transparency International, explains the importance of having anti-corruption measures in place in IMF loans, especially during COVID-19.
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Wisely used, these resources provide an opportunity for countries to not only prevent more deaths and protect livelihoods, but to strengthen healthcare systems, protect jobs and boost economic recovery. An opportunity that cannot be wasted.
People should be able to trust that governments will use the funds in the public interest, and that businesses will not exploit them. Yet corruption risks don’t disappear in a crisis. Transparency is not optional - not if we want resources to reach the most vulnerable. To prevent misuse and reduce the risks of corruption undermining the response, it is critical that countries use these resources in a transparent and accountable manner.
In April, Human Rights Watch, Global Witness and Transparency International requested urgent action from the IMF to make sure the money given to its member countries is used to safeguard public health, save lives and support livelihoods. The IMF Managing Director, Kristalina Georgieva, responded with a clear message to governments receiving COVID-19 financial assistance transparency and accountability must not be lost during these challenging times. A message that was recently reinforced.
Since then, TI has been closely following the IMF’s funding agreements with its members in order to track the inclusion of transparency and anti-corruption measures.
Analysing more than 120 financial assistance agreements
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-19 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.
What measures are countries promising to take?
An analysis of the table as of 23 July 2020 shows that 80 per cent of total funds disbursed by the IMF went to just 10 countries: Chile; Peru; Colombia; Egypt; Ukraine; Nigeria; Pakistan; Jordan; Ghana and Tunisia. Somewhat over half - 58% - of all financial agreements contain specific measures to ensure transparency and/or reduce the risks of corruption.
This finding is worrying. Since the early stages of the pandemic we’ve seen dozens of media reports related to COVID-19 corruption. 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-19 related spending (67 funding agreements include commitments); public procurement (56 funding commitments); and beneficial ownership (50 funding commitments).
Taking a deeper dive into anti-corruption 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.
Those of Afghanistan; The Bahamas; Bangladesh; Benin; Gabon and Montenegro, contained time bound commitments linked to audits of COVID-19 related spending. 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. The Dominican Republic government committed to 'adhere to best practices in procuring and awarding contracts … as well as publishing an externally audited report on virus-related expenditures once the crisis is over’. The lack of precision about what ‘best practices’ and ‘once the crisis is over’ mean, makes it unclear what the government has specifically committed to do.
In Kosovo, financial agreements include language that is so broad as to be more of an expression of goodwill than a commitment. In the table we have marked these as “N/A*” (not applicable*).
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.
The way forward
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. To ensure the US$1 trillion goes to those most in need and help save lives, more countries need to make similar commitments, and all of them have to prove they can move from words to action.
While governments alone make anti-corruption commitments, the IMF can and should play a bigger role in safeguarding the funds. These measures should include:
1. Amend the 2011 policy on liquidity and emergency assistance
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. Yet, the IMF’s response to COVID- 19 has shown that it is feasible to include specific governance and anti-corruption safeguards in emergency loan agreements.
The IMF should extend these measures to all countries by integrating those governance safeguards, and applying them equally to all countries, into its 2011 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 2011 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.
2. Be more user friendly
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.
The publication of the COVID-19 Financial Assistance and Debt Service Relief tracker was a positive step by presenting loan agreement information in one place. This should be replicated for issues such as the conditionalities applied to countries in all the IMF lending.
3. Engage civil society in the process
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.
4. Be consistent with previous anti-corruption findings
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.
5. Encourage countries to be specific
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.
6. Extend anti-corruption commitments to areas essential to the crisis context
Public procurement, beneficial ownership and audits are key areas in order to reduce the risks of corruption. The crisis has highlighted two additional areas to address.
Key authorities must have the financial and technical resources to respond to corruption. Early in the pandemic international bodies already noted COVID-19 affecting the ability of national supervisory and enforcement authorities to carry out their jobs. Encouragingly, a loan to the Kyrgyz Republic made a specific commitment in this direction.
Conflicts of interest in decision-making can lead to increased corruption risks. Identifying these risks and using tools like transparent asset disclosure by public officials help tackle these risks.
7. Publicly report on implementation of commitments
The IMF has stated that a failure to implement commitments may lead to further governance and anti-corruption-related conditionalities under upcoming programs and/or relevant policy advice. The IMF should publicly and comprehensively report on the implementation and impact of anti-corruption measures in rapid emergency financial instruments at their 2021 Spring Meetings.