Governance and corruption issues have taken the center stage in international discussions, especially after the adoption by the IMF in 2018 of a new framework for engagement on governance and corruption. Sound institutions that guarantee integrity in the management of public affairs are critical on the path toward higher and more inclusive growth. Corruption undermines the quality of institutions, weakens the effectiveness of government programs, and compromises social trust in government policies. Indeed, countries around the world that improved their governance systems are reaping a “governance dividend,” and governance-enhancing reformist countries in sub-Saharan Africa include Botswana, Rwanda, and Seychelles. In addition, Liberia, Sierra Leone, and Angola demonstrate that important reforms are possible, including in fragile environments. The importance of good governance has acquired even more importance as countries try to introduce policies to fight the ongoing COVID-19 pandemic. Special attention to governance in an emergency context, including situations associated with conflict, other health crises and natural disasters, is therefore essential. Innovation and new technologies are critical instruments that policymakers can use in their efforts to improve governance and transparency.
International Monetary Fund. External Relations Dept.
This paper presents a description of the Project Analysis Course offered by the World Bank’s Economic Development Institute (EDI). The main objective of EDI is to give individuals a general understanding of all the main elements involved in preparing, evaluating, and executing development projects. At the end of the course, EDI expects graduates to be able to help design project studies or to participate in the overall evaluations on which final decisions are heavily based.
Corruption remains one of the main obstacles to sustainable and inclusive economic development. Its consequences for the functioning of the economy and people’s lives can be large. When prevalent, corruption undermines the core activities of the state through several channels. It distorts fiscal policy and operations, including the collection of taxes and how those taxes are used; hampers central bank operations and financial supervision; weakens the quality of market regulations; and undermines the rule of law. Corruption is particularly harmful for fiscal policy as it undermines the ability of governments to deliver effective policies and services that promote equitable and long-term economic growth. Governments need to invest in comprehensive and persistent efforts to strengthen institutions and adopt aggressive anticorruption strategies.
Ibrahim Ahamada, Mokhtar Benlamine, Ms. Raveesha Gupta, and Mrs. Ruby Randall
As of 2020 Comoros faced governance weaknesses in several areas that are critical for macroeconomic performance, including administrating the civil service, managing fiscal operations, ensuring the rule of law, and implementing AML/CFT measures. Addressing these challenges would help spur inclusive growth and yield significant development gains, including by lowering vulnerability to corruption, increasing revenue mobilization, and reducing the reliance on volatile windfall revenue.
When a country’s system is inefficient and ill prepared, the need to respond quickly to a national emergency can create significant governance vulnerabilities. This chapter considers an approach taken by some countries during the COVID-19 pandemic to acelerate the execution of emergency spending by creating a dedicated fund outside the budget to support the emergency spending. The chapter discusses the benefits of this approach and warns against the risks. Drawing from the experience of these funds, the chapter offers some guiding principles for the creation and operation of special funds, and broader lessons for strengthening PFM systems.
Sebastiaan Pompe, Miss Alice F French, Martin Aldcroft, Camilla Fredriksen, Alain Memvuh, Lara Taylor-Pearce, Daniel Domelevo, Ms. Monique Newiak, and Fazeer Sheik Rahim
This chapter considers supreme audit institutions (SAIs) as a key pillar of accountability in the management and oversight of public funds, notably in emergency settings. It acknowledges that the primary role of SAIs is to ensure the effectiveness and integrity in the use of public resources, and focuses on how SAIs can contribute to the prevention and detection of corruption, including through agile compliance audits ( real- time audits) in emergency settings. The chapter illustrates some of the challenges SAIs face and explores the IMF’s approach to audits. Sub- Saharan African country cases showcase how the role of SAIs in addressing corruption has been strengthened, and a discussion of agile compliance audits in sub- Saharan Africa highlights the role of SAIs in emergency settings.
Ms. Julia Cardoso, Mr. George M Kabwe, and Riaan van Greuning
Good governance arrangements are a critical organizational element for the proper management of financial resources. In the IMF safeguards assessment policy, governance is an overarching theme of the framework used to assess the central banks of all member countries that borrow IMF resources. Information from the assessments provides the IMF Board with assurance that resources used in lending operations will be managed properly. A sound legal framework that safeguards central bank autonomy and establishes strong transparency and accountability practices is the foundation for good governance for central banks. This chapter provides an overview of the safeguards assessment findings on governance arrangements, with a particular focus on sub- Saharan Africa. It also contains preliminary observations on challenges that arose during the COVID- 19 pandemic.
This chapter analyzes interactions between digitalization and big data innovations and institutional quality, and how these interactions influence economic outcomes. It discusses the increasingly important role of e-government in the provision of online public services, the importance of expanding the existing telecommunication infrastructure, and the necessity of enhancing the ability of populations to use e-government services (the “human capital” dimension). The empirical analysis uses data from 132 countries and confirms the potential of these innovations to improve government effectiveness and to reduce corruption through transparency, checks on government officials’ discretionary powers, accurate policymaking, and trust in government. Good sequencing of these innovations can maximize their potential to strengthen government effectiveness. The chapter provides preliminary indications that e-government can boost government revenue mobilization through lower corruption and enhance public spending effectiveness, especially during crises.
This chapter explores the impact of digitalization on corruption perception and trust in tax officials in Africa. The findings are threefold. First, a higher level of digital adoption is negatively associated with the perception of corruption of tax officials. The chapter shows that, on average, the adoption of digital tools is correlated with a reduction of perception of corruption in the tax administration by around 4.3 percentage points. Second, the chapter demonstrates that trust in tax officials is significantly higher in countries with a higher level of digital adoption. Third, the alleviating effect of digitalization on corruption perception is reduced when the government intentionally shuts down the internet, while a successful promotion of Information and Communications Technology (ICT) by the government amplifies the dampening effect of digitalization on corruption perception. The findings of the chapter suggest that African countries should step up digitalization to combat corruption on the continent, while managing the associated risks and challenges. They should avoid intentionally shutting down the internet and instead establish policies to promote the development of ICT.
Marshall Mills, Nelson Sobrinho, and Mr. Vimal V Thakoor
This chapter studies the key channels through which improvements in governance and anticorruption measures can boost macroeconomic performance, particularly long-run economic growth.2 It estimates the relationship between economic growth and both corruption and aggregate indicators of governance, the latter reflecting several dimensions of institutional quality, including not only a measure of corruption, but also voice and accountability, effectiveness of government policies, regulatory framework, and rule of law. It also discusses the extent to which improvements in these areas can benefit governance, including institutions responsible for fiscal policy and monetary and financial management. The empirical and policy discussions focus on developing countries, with a special emphasis on sub-Saharan Africa. The empirical findings suggest that, on average, sub-Saharan African countries lag other regions in terms of governance and perceptions of corruption. The region’s dividend from governance and anticorruption reforms could therefore be particularly high. Historical experience suggests that improving governance and reducing corruption may take considerable time and work, but the large potential payoffs would justify the effort.