Journal Issue

Picture this: How corruption holds countries back

International Monetary Fund. External Relations Dept.
Published Date:
January 2003
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Widespread corruption and poor governance are serious problems in many countries. They cut into government revenues and lead to wasteful spending, thereby weakening a country’s economy and eroding the public’s confidence in its institutions and policies. The IMF has been promoting good governance in member countries by supporting economic policies and structural reforms that limit the scope for siphoning off funds, pushing for transparency in public sector financial transactions, providing technical assistance to improve public resource management, and conducting policy research. A book recently published by the IMF includes staff studies on the impact of corruption on economic performance. Some of the notable findings of the book (Governance, Corruption, and Economic Performance, edited by George T. Abed and Sanjeev Gupta, 2002) are presented here.

Social indicators are worse where corruption is high

Note: Sample consists of 59–73 countries; period averages. 1985–97.

Source: Chapter 10.

Tax revenue is lower in more corrupt countries

Value-added tax efficiency ratio1

Citation: 39, 4; 10.5089/9781451951998.022.A009

Note: Sample consists of 83 countries; period averages. 1990–98. Source: Adapted from Chapter 8

1 The value-added tax efficiency ratio ranges from 0 to 1. The higher the ratio, the more productive the VAT system.

1 The corruption index ranges from 0 (highly clean) to 10 (highly corrupt).

2 The Gini coefficient is a measure of the inequality of income distribution in a society. (0 being perfect equality and 100 being complete inequality).

Transition economies that have made more progress on structural reform tend to be less corrupt

Corruption index

Citation: 39, 4; 10.5089/9781451951998.022.A009

Note: Sample consists of 25 transition countries; period averages. 1994–98.

Source: Adapted from Chapter 18.

Decentralization of taxation and spending improves governance

Corruption index

Citation: 39, 4; 10.5089/9781451951998.022.A009

Note: Sample consists of 75 countries; period averages. 1980–98.

Source: Adapted from Chapter 13.

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