Will an IMF Loan End Equatorial Guinea’s Grand Corruption? Part II

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.

Equatorial Guinea has agreed to enact legislation by March 2020 making all the offenses listed in the U.N. Convention Against Corruption a crime. Its enforcement strategy appears in a document issued as a precondition for loan approval, “Good Governance and Anticorruption Action Plan” (Spanish versionEnglish version). There the government pledges to:

1) improve the “capacity (e.g., budget, personnel, training) of the anti-corruption prosecutor’s office;”

2) strengthen “the capacity of criminal courts to allow them to act against corruption offenses;” and

3) provide “the anti-corruption prosecutor’s office with the capacity to seek and provide legal assistance for international cooperation . . . to pursue corruption and related money laundering cases. . . .”

The Action Plan also promises to create “a comprehensive asset declaration regime for senior public officials, their family members and associates.” The purpose is not only to make it easier to detect corruption but to also “prevent conflict of interests by high-public [sic] officials.” All “high-level officials” will be required to publicly disclose their income and all assets, whether held in Equatorial Guinea or abroad and whether held in their own name or the name of another. The filings will be reviewed and non-filers sanctioned. If the system does not meet its objectives, it will be revised “in agreement with IMF staff.”

The English version of the Action Plan states the income and asset declaration regime will be fully implemented “in the coming two to three years.”  The Spanish version is silent on the deadline. The loan documents do not say which version controls in the event of a conflict.

In interviews after the loan was approved, the IMF’s lead negotiator said the government must implement the income and asset declaration regime.  But in the government’s Memorandum of Economic and Financial Policies, where it formally told the IMF what it would do in return for the loan, it pledged only to “endeavor to implement [a regime] by June 2021” (¶24).  Read with the omission of a deadline for implementation in the Action Plan’s Spanish version, this suggests the government’s commitment to implementing an asset disclosure regime may not be as firm as the IMF believes it to be.

Indeed, there are reasons to be skeptical about the government’s commitment to anything beyond passing new laws. In its economic memorandum and the accompanying cover letter, the government carefully refrains from unequivocally promising to implement any anticorruption reforms beyond enactment of a new anticorruption law.  The closest it comes to promising more is a passage in the economic memorandum where saying it “is fully committed to implementing policy reforms to . . . reduce corruption (¶8).  But no deadlines or specific steps are provided.

The absence of an unequivocal commitment to fully implement the promised anticorruption reforms may have left some IMF board members doubting the government’s seriousness about combating corruption.  That would explain why, at the December board meeting where the loan was approved, Equatorial Guinea’s representatives issued a formal statement reassuring the Fund of the government’s commitment:

“The authorities of Equatorial Guinea are mindful that advancing good governance and transparency and fighting corruption are essential prerequisites for fostering strong and inclusive growth. . . .  In this regard, they reiterate their intention to implement steadfastly their Good Governance and Anti-Corruption Action Plan. . . .” (¶17).

The statement may also have been a response to a letter a coalition of international and Equatorial Guinean NGOs had sent the board before it met on the loan.  Pointing to a record of harassing and sometimes jailing anticorruption activists as well as other actions casting doubt on the government’s commitment to the corruption fight, the coalition had urged the board not to approve the loan until the government took several tough, no nonsense measures to control corruption,  Measures that would leave no doubt about its commitment.

The provisions in the loan documents along with the assurances offered at the board meeting were enough however to overcome qualms board members might have had about the government’s will  to combat corruption. Perhaps just to be sure, though, in the press release explaining its rationale for approving the loan, the board cited “a key component” in the loan, “the implementation of the governance and anti-corruption plan.”

Anticorruption activists should throw their support publicly and vocally behind strict enforcement of the loan conditions. They should lobby IMF member governments, urging them to press Fund staff and the board to hold Equatorial Guinea to its commitments and demanding that if it fails to meet them, further loan disbursements be withheld until it does. One or more organizations should begin monitoring the government’s progress in complying the loan’s anticorruption conditions, issuing reports timed to coincide with the IMF’s periodic review of the government’s progress in keeping its promises.

The anticorruption community should also —

1) Ask the IMF whether the deadline for implementing the income and asset declaration regime in the English version of the Action Plan is binding and whether the government’s statement that it will “endeavor” to implement it by June 2021 signals any backsliding on its commitment. There is no reason why it should take a year to write a decree requiring public officials to complete a form listing what they own and what they earn and another year to post the forms on the web.  As it did with a similar provision in an Afghanistan loan, the Fund should push for early implementation of the asset declaration regime.  If the government needs help, plenty of donors can provide it.

2) Publish an analysis of where Equatorial Guinea’s law falls short of what UNCAC requires. The analysis will make plain whether the anticorruption legislation the government has promised to enact in March to bring its law into compliance with UNCAC does in fact do so.

3) Ask Equatorial Guinea to disclose publicly the periodic reports on its progress in meeting the loan conditions it has promised to provide the IMF, the World Bank, and other donors.  Civil society groups can then compare what the government claims with what its analyses show.

4) Organize a conference on compliance with the loan conditions in Equatorial Guinea and establish a system allowing citizens to file anonymous reports about compliance.  The conference would review with civil society organizations and citizens what the government has agreed to in return for the loan and what they should expect it to do.  Monitoring compliance is the responsibility of all Equatoguineans, and the government should not only not object to citizen monitoring but welcome it, for it will help the government meets its commitments to the Fund.  If it were to refuse to approve such a conference or interfere with a compliance reporting system, that would be powerful evidence it has no intent fulfill its obligations to the Fund.

6) Remind IMF staff and board members on a regular basis that, before extending the loan, they had agreed that if the government fails to control corruption, it would not be able to comply with the overarching condition of the loan and indeed all IMF loans – the maintenance of “macroeconomic stability” that sets “the stage for sustained, high-quality growth” and, in countries like Equatorial Guinea, “reducing poverty.”  This the central mission of the Fund, and any time it compromises that objective, it calls its legitimacy into question.

The IMF’s recognition that “pervasive and organized” corruption keeps a nation from realizing “sustainable, inclusive economic growth” marked a major stride forward in the community of nations’ willingness to tackle poverty within its ranks. Anticorruption activists should do everything possible to ensure the Equatorial Guinea loan does result in a step backward.

1 thought on “Will an IMF Loan End Equatorial Guinea’s Grand Corruption? Part II

  1. Pingback: ¿Acabará el préstamo del FMI con la gran corrupción en Guinea Ecuatorial? Parte II. Richard Messick. GAB | The Global Anticorruption Blog | asodeguesegundaetapa.org

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