Should International Organizations Like the IMF Require More Anticorruption Conditions on Their Pandemic Emergency Funding?

In response to the unprecedented COVID-19 pandemic, governments across the world are taking emergency measures to secure and distribute necessary medical equipment to hospitals, front-line medical workers, and at-risk groups. Moreover, to respond to the dangerous economic crisis that has resulted from stay-at-home orders and other essential public health measures, national governments have rapidly adopted new fiscal programs and other measures that have pushed trillions of dollars out the door. Multilateral institutions like the International Monetary Fund (IMF) have also stepped in to assist countries that have seen their foreign exchange inflows drying up due to a variety of factors associated with the pandemic (including lower international oil prices, lack of tourism receipts, and declining remittance flows). These countries urgently need for foreign exchange to purchase critical medical supplies and equipment from abroad. The IMF has existing facilities for providing emergency funding to address balance of payments shortfalls in times of emergency (the Rapid Credit Facility (RCF) and the Rapid Financing Instrument (RFI)), and has  already begun providing funding under these programs, with more funds likely on the way. In contrast to other IMF programs, there are relatively few conditions that recipients need to satisfy up front in order to have access to RCF/RFI financing.

The global anticorruption community has been understandably worried about the risks that emergency response funds could be misappropriated or mismanaged, which would impede the collective public health efforts. (See, for example, the pieces collected here and here). For example, Transparency International has pushed for open data publishing on public procurement, and Sarah Steingrüber, the Global Health Lead for CurbingCorruption, recently made the case on GAB for the establishment of oversight task forces and for directing some donor funds to enhancing anticorruption safeguards (i.e. public financial management improvements and CSO funding). With respect to the IMF in particular, a group of 99 civil society organizations (CSOs) sent an open letter to the IMF, pushing back against what they characterized as the Fund’s “retroactive approach” to anticorruption efforts, and instead called for loan conditions that would require recipient governments to (1) receive all IMF funds in a single Treasury account, (2) hire independent auditors within six months of disbursement, (3) publish a procurement plan with names and beneficial ownership information, and (4) repeal or amend laws that prevent groups from safely monitoring government spending.

While nobody seriously questions the importance of reducing corruption and other forms of “leakage” of funds spent to fight the coronavirus and its associated economic dislocation, much of the emerging commentary from the anticorruption community seems to lack a sufficient appreciation of, and engagement with, the trade-offs between controlling leakage and ensuring a sufficiently rapid response. The CSOs’ open letter to the IMF is an illustrative example of the apparent neglect of these trade-offs.

The main difficulty is that conditioning IMF assistance on agreeing to various oversight and transparency measures, some of which will require the enactment of new laws or regulations, will increase the time it will take for recipient countries to receive funds, which in turn will compromise these countries’ ability to make the necessary payments to suppliers. The CSOs’ letter to the IMF acknowledges the “urgency of providing governments the funds they need to effectively respond,” but the letter does not seem to recognize or grapple with the fact that several of the policies the CSOs are advocating—particularly those that would require legislative changes—would necessarily entail delay, especially in contentious political environments. While there is still a great deal of uncertainty about this virus, most epidemiological models indicate that even a one-week delay could have debilitating effects on a public health system. Even if each country were ultimately able to make these commitments, the benefits of these conditions— the likely amount of leakage prevented—may well not be worth the cost when one compares against the human cost of the additional delays that the proposed measures would entail.

Furthermore, even if conditions are easily met and IMF aid is quickly disbursed, it’s an open question whether the recommended conditions are the best solution. Publishing a procurement plan might be a useful exercise to help sketch out what medical supplies and equipment is needed, but in such a dynamic setting, the availability of supplies and concomitant prices are in constant flux. Open data publishing and oversight task forces should be encouraged in countries where these safeguards already exist, but forcing governments to adopt these new policies may be counterproductive when one considers the time and resources these programs would consume.

This is not to say that anticorruption CSOs are wrong to be calling attention to these concerns, and it may be the case that of their proposals, in the IMF open letter and elsewhere, are worthwhile. But it’s important that anticorruption advocates and the broader community acknowledge and discuss the trade-offs here. How much leakage is a given safeguard likely to prevent? If the adoption of such a safeguard is made a condition for the receipt of funds, how quickly will governments be able to meet that condition? How many lives may be lost if financial resources are delayed, or never disbursed at all? Is that cost greater or less than the amount of harm that would be done by the additional misappropriation that is likely to take place if the safeguard is not adopted? These are not easy questions, but that is precisely why they need to be more openly debated.

Some in the anticorruption community appear to be wrestling with these questions more openly than others. For example, several weeks ago Taryn Vian, a Professor at the University of San Francisco working at the intersection of corruption and public health, joined the KickBack podcast where she talked about the trade-off between expeditious procurement processes and tightening our grip on corrupt activity. In many developing countries, public procurement processes feature a lot of intermediate steps (like collecting signatures) that are designed to slow down the process and make sure that all actors are held accountable. Professor Vian worries that too few countries have emergency systems where these intermediate steps can be de-prioritized or eliminated altogether, thus leading to general rollbacks like the ones seen in the Czech Republic and India. Even as anticorruption advocates, like governments and international organizations, are under tremendous pressure to move quickly, it would still be worthwhile to engage in the sort of nuanced balancing that Professor Vian’s discussion exemplifies.

2 thoughts on “Should International Organizations Like the IMF Require More Anticorruption Conditions on Their Pandemic Emergency Funding?

  1. In the IMF emergency financing, countries can make commitments to minimize risks of corruption such as those described in your article. They are safeguards that the country commits to implement, but they do not condition the disbursements. In my reading, civil society’s letter was making a plea for the IMF to consider safeguards, not obstacles. If the funding will be disbursed, where is the trade-off in countries committing to minimize risks of corruption and ensuring the money goes to those in need?
    I highly recommend reading https://www.imf.org/en/About/Factsheets/Sheets/2020/04/30/how-imf-covid19-financial-help-is-used

  2. Hi Jason. Thank you very much for this interesting post. Financial aid from the IMF may be the only option of some poor countries to fight the pandemic. Likewise, in relation to these same countries, pressure from the international community and international organizations may be the only effective anticorruption mechanism. Thus, I think that IMF and similar institutions should enhance the anticorruption conditions on their pandemic emergency funding.

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