The International Monetary Fund (IMF) released a report on global corruption this week. In it, the international finance organization reported that almost $2 trillion worth of public works projects, permits for private work, and other transactions in countries around the world are tainted each year by bribery. That amounts to about 2% of the world’s total economic output.
Aside from that cost, the IMF warns that there are far broader costs associated with graft, fraud, and other forms of corruption. “While the direct economic costs of corruption are well known, the indirect costs may be even more substantial and debilitating, leading to low growth and greater income inequality,” according to the IMF’s Managing Director, Christine Lagarde.
Given the global economic climate of low growth and increasing political strife, increasing levels of corruption are hardly a surprise. A rash of corruption cases, including Brazil, Mozambique, and the infamous “Panama Papers,” has brought these matters to the forefront of the public consciousness.
The IMF paper appears to predict the organization’s intent to use its economic observations and lending powers as a means of combating political and economic corruption in its member nations. It has already begun using its bailout function to try to enact social and political changes in nations that have suffered from long histories of corruption.
For example, the Ukraine has been required to overhaul its network of state-owned companies and enact a number of anti-graft measures in order to receive desperately needed IMF funding. Should it fail to meet these conditions and uphold them, funding will continue to be withheld. A similar strategy was employed last year in Liberia, and earlier this year in Mozambique.
The IMF also plans to enhance its financial transparency requirements. Requiring nations to provide greater transparency, better accountability for reported figures, and clearer regulations with stricter adherence should help to counter the rising tide of government corruption around the world. Going a step further, the IMF also wishes to review its economic surveillance policies to find ways to improve their accuracy even more.
As Lagarde wrote in the IMF’s paper on global economic corruption, “I recognize that there may be considerable sensitivity about the IMF shining a spotlight on corruption…At the same time, the alternative — turning a blind eye to the problem — is not a viable option.” She added that this was especially true “when the problem of corruption is endemic and has a major impact on economic performance.”