By Chady El Khoury, Jiro Honda, Johan Mathisen and Etienne Yehoue
Governments around the world are playing a crucial role in providing lifelines for people and businesses to help fight the pandemic and its economic fallout. To support the effectiveness of these efforts, it is important that these expenditures are subject to adequate transparency and accountability.
The IMF insists on better governance through greater transparency.
To this end, the IMF has called for transparency and accountability in pandemic-related spending, so that money and measures help those who need it most, using the adage “spend what you owe, but keep the receipts â.
The IMF insists on better governance through greater transparency, and has sought governance measures for countries receiving IMF financing during the crisis. These include commitments to publish purchase contracts related to the pandemic and beneficial ownership of the companies that awarded those contracts, as well as COVID-19 expense reports and audit results.
The measures are adapted to the circumstances of the country and the seriousness of the corruption risks. In addition, all beneficiary countries commit to undertake a Safeguards assessmentâA due diligence exercise to ensure that a country’s central bank is able to provide reliable information and transparently manage the funds it receives from the IMF.
Tackling corruption is a long game. These emergency spending measures are not silver bullets and will only go so far to tackle deeper challenges. Longer-term vulnerabilities in governance and corruption will continue to be addressed under the framework. 2018 framework for increased engagement of the Fund in governance, with an emphasis on multi-year IMF loan agreements, annual health checks of IMF member countries and capacity building.
Are the receipts arrive?
One year after the start of the emergency response, information becomes available on the progress made in implementing these governance measures in pandemic-related spending.
- At publication of the contract information, most of the commitments have been or are about to be fulfilled, including, for example, in the Dominican Republic, Guinea, Nepal and Ukraine. In some countries, capacity constraints are contributing to limited progress. In these cases, the IMF provides capacity building to support implementation.
- Collect and publish beneficial ownership of contracting companies is a measure aimed at deterring corruption, in particular by facilitating the detection of potential conflicts of interest involving public officials. It obliges the bidding companies to provide the names of the people who exercise effective control over a company, ie the âbeneficial ownersâ. This information is provided to the procurement agency, which must publish it.
The implementation of this innovative practice has proven difficult in some cases, with only half of the countries (including Benin, Ecuador, Jordan, Malawi and Moldova) having implemented this commitment or made progress substantial in its achievement.
However, these commitments made in the context of IMF financing during the pandemic helped to encourage some countries, such as Kenya and the Kyrgyz Republic, to adopt this reform on a permanent basis. That is to say beyond the expenses related to the pandemic.
- At emergency expenditure audits, the deadline for the realization ex post audits are generally set for 3 to 12 months after the end of the fiscal year. As a result, it is too early to assess the implementation – most audits are being prepared based on existing systems.
However, some countries, such as Jamaica, Honduras, Maldives, and Sierra Leone, have already taken swift action by performing real-time risk-based audits. Where appropriate, the IMF is also increasing its capacity building to help Supreme Audit Institutions discharge their responsibilities, while supporting efforts to ensure that this information is easily retrievable.
- At declaration of pandemic-related expenses, most countries are or will soon begin to report publicly on the execution of these expenditures.
- Backup assessments are being undertaken rapidly, with the pace of these assessments doubling after the onset of the pandemic.
Take on deeper challenges
Beyond these measures focused on accountability and transparency in responding to the crisis, broader governance and anti-corruption reforms are also advancing in the context of the IMF’s multi-year financing arrangements.
These reforms cover several areas, including fiscal governance in countries such as Ecuador, Gambia, Jordan, Liberia, Rwanda, and Senegal; anti-corruption and money laundering frameworks Angola, Armenia, Republic of Congo, Kenya, and Tunisia; and financial sector supervision and central bank governance Liberia and Ukraine, among others.
Beyond IMF financing
Transparency and accountability in crisis response are important to all countries regardless of income level, and such measures are of course common in many countries beyond those receiving IMF funding.
These efforts vary. For example, some countries publish detailed information on spending on dedicated transparency portals, such as Brazil, Colombia, Costa Rica, France and Peru. Others, like South Korea, frequently perform external audits to verify pandemic-related spending. Some develop clear guidelines for emergency public procurement, as in Spain, and / or detect conflicts of interest by analyzing data on beneficial owners and financial information of senior officials, as in Romania.
Through the IMF’s regular âArticle IVâ health check of member economies and through regular policy dialogue, staff continue to discuss transparency and accountability in related spending. pandemic, for example by Poland, the UK, and the United Statesand, more generally, in fiscal, monetary and financial measures.
Focus on progress
Sustained country commitment to governance and the fight against corruption will be necessary to support the effective implementation of reforms undertaken during the pandemic and beyond. A key element is the implementation of Frame 2018âWhich remains a priority for the IMF and goes beyond the fight against corruption to address fiscal governance, financial sector surveillance, central bank governance, market regulation, rule of law and anti-money laundering frameworks. As the critical capacity to implement governance measures varies by country and by type of measure, staff will also continue to provide tailor-made capacity building on these issues through channels such as the ‘technical assistance, training and webinars.
The IMF will take stock of progress made in implementing the 2018 framework in mid-2022, with a view to assessing how it can continue to support member countries in strengthening governance.
Efforts to improve governance will depend even more on high-level political ownership of reforms, international cooperation and a joint effort with civil society and the private sector, among other stakeholders. Progress also requires sustained implementation of reforms over a long period. Such progress is not easy, but it is nonetheless achievable – and it is essential to foster stronger and more inclusive economic growth.