Part I of this post reported that last December the International Monetary Fund approved a $282 million loan to Equatorial Guinea to pull the economy out of recession and restore growth. Equatorial Guinea’s government is by any measure one of the world’s most corrupt, and the Fund determined that if it did not reduce corruption, the loan would have little or no impact. It therefore made addressing corruption a condition for extending the loan. IMF conditionality could be a potent weapon in the struggle to contain corruption. If Equatorial Guinea is held to the anticorruption condition, other governments will be on notice that to qualify for an IMF bailout, they too must combat corruption.
The loan requires Equatorial Guinea not only to enact new anticorruption legislation but to enforce it as well. The loan will be disbursed in tranches over three years; the Fund can suspend or terminate it at any time if the government fails to comply with the anticorruption conditions. Assessing whether a law has been passed is straightforward. Deciding whether it is being enforced is not. It requires considerable judgement, and thus the IMF will have significant discretion to determine whether Equatorial Guinea is complying with the loan conditions.
Vigorous enforcement of the IMF-mandated anticorruption legislation could put many senior government officials in prison, and they will thus do everything possible to blunt enforcement. The Fund must insist the government make steady, measurable progress on enforcement, and if it does not, suspend loan disbursements until it does. Continued disbursements in the face of perfunctory enforcement would defeat anticorruption conditionality, neutralizing a powerful new weapon in the corruption fight.
The measures the anticorruption community can take to help prevent this outcome are detailed below. Continue reading