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.