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Code of Good Practices on Transparency in Monetary and Financial Policies—Transmittal to Interim Committee and Update on Supporting Document, International Monetary Fund, SM99/228, September 17, 1999.
This paper was prepared for the Second Annual Meeting of the Anti-Corruption Network for Transition Economies, held at the OECD Center for Private Sector Development in Istanbul, Turkey, on November 2-3, 1999; it also appears on the web page of the Network. The authors are grateful to John Odling-Smee, Jorge Marquez-Ruarte, and Oleh Havrylyshyn, as well as to colleagues from the External Relations, Fiscal Affairs, and Policy Development and Review Departments of the IMF for helpful suggestions, and to Anna Unigovskaya for research assistance.
Tanzi (1998) provides several definitions of corruption and discusses factors that promote corruption.
Commonwealth of Independent States
A study by Gupta, Davoodi, and Alonso-Terme (1998) has found a strong correlation between corruption and an increase in income inequality.
A survey by a resident representative office of the IMF in a CIS country suggested that “informal payments” to various officials accounted, on average, for almost 40 percent of total enterprise expenses during the first year of operation.
See also Gray and Kaufman (1998), who refute the argument that corruption and bribery can “lubricate” a rigid administration by illustrating that where corruption is high, firms’ managers spend more time with government bureaucrats, as corruption fuels the growth of excessive and discretionary regulations.
The IMF’s work in the transition economies of Central and Eastern Europe is not covered here.
Frequency should be interpreted cautiously. For example, a high figure in a given policy area may indicate the repetition of unimplemented measures in successive programs.
IMF programs typically contain the following types of conditionality: prior actions, which need to be in place for the program to be approved by the IMF’s Executive Board; quantitative macroeconomic performance criteria, which call for compliance with quantitative targets for selected variables on specified dates; and structural performance criteria or benchmarks, which specify a timetable for the implementation of structural measures.
To preserve confidentiality, countries are identified by letters rather than by name.
The budgetary arrears problem was also tackled through the evolution of fiscal programming practices, as arrears often reflected unrealistic budgets, which contained over-optimistic revenue forecasts and spending obligations that could not be financed.
For example, two separate sets of corruption indicators (outlined in Table 4) developed by Transparency International and The Freedom House, respectively, generally show lower levels of corruption for those transition economies in Central and Eastern Europe and the former Soviet Union that began their economic reforms earlier and made greater progress, although the relationship is less apparent for the CIS countries, where reforms have generally had a shorter history.
In the area of tax policy, for example, IMF technical assistance has generally aimed at simplifying, increasing the efficiency, and reducing the discretionary elements of tax systems in order to limit the scope for corruption.
The Code of Good Practices on Fiscal Transparency and the Code of Good Practices on Transparency in Monetary and Financial Policies are available through the IMF’s external website.
Referred to as the Special Data Dissemination Standard (SDDS).
“Offsets” refer to the offsetting of tax arrears against expenditure arrears.
Notably, the further strengthening of bankruptcy laws and procedures; enforcement of contracts; protection of shareholder rights; improvements in (and better adherence to) the legal and regulatory framework for foreign investment; and promotion of an independent judiciary and court system.
Including downsizing, strengthening incentives, building administrative capacity, and reforming institutions to increase accountability and reduce arbitrary practices.
Simple average of EBRD transition indicators covering enterprise reform, financial sector reform, and market and trade reform. The indicator ranges from 1 (least reformed) to 4 (most reformed).
The index refers to perception of corruption ranging from 10 (highly clean) to 0 (highly corrupt).
Corruption indicators ranging from A (least corrupt) to D (most corrupt); the period covered is from January 1997 through March 1998.
As part of a broader benchmark to enhance cooperation between State Customs and State Tax Inspectorate