Abstract
The Role of the Fund in Governance Issues - Review of the Guidance Note - Preliminary Considerations - Background Notes
Note VI. Survey of Mission Chiefs on the Role of the Fund in Governance Issues—a Summary of Results1
A. Background
1. A survey of Fund mission chiefs was conducted in January 2017 on the role and the effectiveness of the Fund on corruption issues.2 The short questionnaire sought to bring out mission chiefs’ experience on working with the authorities as well as their views on the candor, evenhandedness and effectiveness of Fund engagement, the usefulness of the governance and corruption indicators and the need for more guidance in this area of work.
2. The response rate was 31 percent or 70 mission chiefs.3 Figure 1 below summarizes the statistics on the respondents’ countries by region, income level, and the type of engagement with the Fund, which are broadly representative of the Fund membership. It also summarizes the level of corruption assessed by the mission chiefs for their countries.4

Responses by Mission Chiefs (MC): Basic Information
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Responses by Mission Chiefs (MC): Basic Information
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Responses by Mission Chiefs (MC): Basic Information
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Main Findings:
Areas of corruption encountered
3. Fund mission chiefs encountered corruption issues in their work most frequently in the areas of fiscal and legal/judicial system.
Mission chiefs who considered corruption to be widespread in the fiscal sector reported weakness in the areas of expenditure (e.g., procurement fraud, off-budget transactions; 91 percent of respondents) and revenue management (e.g., tax evasion, tax fraud; 79 percent of respondents). Thirty-five percent of the respondents also reported corruption problems in the area of natural resources management
For those who indicated widespread corruption in the legal/judiciary system, the problems were identified in the areas of judiciary (82 percent) and law enforcement agencies (68 percent).
Thirty percent of respondents viewed corruption to be widespread in the real sector. Among these mission chiefs, 71 percent attributed it to malpractices in the state owned enterprises and 53 percent to extractive industries.
Those who identified financial regulation and supervision as problematic cited regulatory capture and interference in financial supervision as the main reasons.
Monetary operations (e.g., FX fraud) and central bank governance (e.g., interference with central bank management and operation) were identified as leading sources of corruption in the monetary sector.
Eleven respondents also indicated that cronyism in the public sector was an important source of corruption in their countries.

Areas/Sectors Characterized by Widespread Corruption
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Areas/Sectors Characterized by Widespread Corruption
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Areas/Sectors Characterized by Widespread Corruption
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Factors behind corruption
4. Mission chiefs highlighted the role of history (including political and cultural background) and the current political climate as factors behind the current state of corruption. Where corruption was macro-critical, 56 percent of respondents attributed it to the country’s political and cultural history and 40 percent to its current political situation (e.g., fragile state). Reliance on extractive industries was also an important factor for 35 percent of respondents and, less so, extreme poverty (17 percent).

Country-Specific Factors Rendering the Country More Prone to Corruption
(Total responses: 52)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Country-Specific Factors Rendering the Country More Prone to Corruption
(Total responses: 52)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Country-Specific Factors Rendering the Country More Prone to Corruption
(Total responses: 52)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Nature of discussion
5. Most respondents reported discussing corruption problems with the authorities, though only around 40 percent included the discussion in staff reports or in other formal ways. Excluding the 17 countries where corruption was assessed as not being an important issue, 78 percent of respondents indicated that they discussed the issues with the authorities directly, with slightly more than half of this group documenting the discussion in a country report (41 percent). A similar percentage of respondents (79 percent) indicated that corruption issues were addressed indirectly with the authorities—in the context of economic policies that could strengthen economic governance while also reducing the scope for corruption (e.g., AML/CFT, bank bail-outs, tax collection and PFM reform, judiciary system, fiscal and statistical transparency, and evenhanded treatment of SOEs and other enterprises). In cases where corruption was relevant but was not discussed with the authorities (11 cases), it was mostly due to lack of information (73 percent) or expertise (55 percent); the authorities’ perceived sensitivity (45 percent); or because the respondents felt that the issue was not an area of the Fund’s core mandate (36 percent).

Direct Discussions with the Authorities on Corruption Issues
(Total responses: 51)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Direct Discussions with the Authorities on Corruption Issues
(Total responses: 51)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Direct Discussions with the Authorities on Corruption Issues
(Total responses: 51)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Indirect Discussions with the Authorities on Corruption Issues
(Total responses: 53)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Indirect Discussions with the Authorities on Corruption Issues
(Total responses: 53)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Indirect Discussions with the Authorities on Corruption Issues
(Total responses: 53)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Reasons for not Discussing Corruption Issues with the Authorities
(Total responses: 11)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Reasons for not Discussing Corruption Issues with the Authorities
(Total responses: 11)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Reasons for not Discussing Corruption Issues with the Authorities
(Total responses: 11)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
6. Most did not feel uncomfortable discussing corruption issues with the authorities. Nearly half of the respondents indicated that they were comfortable or very comfortable discussing corruption issues, while 37 percent expressed no strong view either way. Only 15 percent responded that they were uncomfortable or very uncomfortable, and the reasons for their discomfort were similar to the responses to the question on why they did not discuss corruption with the authorities (i.e., lack of information, lack of expertise, high sensitivity of the authorities on this issue).5

Ease of Discussing Corruption Issues with the Authorities
(Total responses: 70)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Ease of Discussing Corruption Issues with the Authorities
(Total responses: 70)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Ease of Discussing Corruption Issues with the Authorities
(Total responses: 70)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
7. Several responses gave examples of indirect language that they used in staff reports to discuss corruption. Examples include:
need for a level playing field
efficiency of public spending
enhancing expenditure framework
implementation problems
asset recoveries
governance issues
transparency and accountability
enhancing business climate/environment and
improving AML-CFT.
What determines the nature of engagement?
8. A large majority of respondents (81 percent) felt confident or very confident in deciding whether corruption in their countries merited discussions. This judgment is influenced by a wide range of factors. The most widely cited consideration (84 percent of respondents) was direct data and information on the impact of corruption, such as loss of revenues or wasteful spending. However, more than half of mission chiefs also take into account high profile corruption cases (57 percent) and third-party indicators of corruption (52 percent). A not insignificant group also take into account media coverage in general (39 percent).

What Helps You Decide Whether to Engage with the Authorities on Corruption?
(Total responses: 69)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

What Helps You Decide Whether to Engage with the Authorities on Corruption?
(Total responses: 69)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
What Helps You Decide Whether to Engage with the Authorities on Corruption?
(Total responses: 69)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Indicators
9. According to the survey, published corruption indicators produced by the World Bank and Transparency International (TI) are the most widely used. The World Bank’s Doing Business Indicator and TI’s Corruption Perception Index were used by 68 and 57 percent of the MCs, respectively. Other World Bank indicators such as Worldwide Governance Indicators and Country Policy and Institutional Assessment and the World Economic Forum’s Global Competitiveness Index were also widely used. MCs also acknowledged the many challenges of relying on these indicators. Many of them viewed the indicators as too blunt to be useful in formulating country-specific advices. They also noted that the indicators are based on inputs from limited respondents and that there are problems in the methodologies and data used to compile them.
Collaboration with other agencies
10. Direct cooperation with other institutions on corruption issues was limited. Fifty-eight percent of respondents working on countries with corruption problems consulted with the World Bank regularly (at least once a year) when developing Article IV advice or program conditionality for combating corruption. About 42 percent consulted with the Bank on an as needed basis. Forty-three percent consulted regularly with other institutions, while 35 percent did so on an as-needed basis.6 The most frequently cited reasons for not consulting with other organizations more frequently were: (1) corruption was not a core mandate of the Fund; and (2) other organizations did not provide clear and realistic solutions to the problem. In some countries, the World Bank was not active, and in some, the MCs felt that since corruption status did not change frequently in a country, there was no need to consult with them regularly. Over 90 percent of respondents consulted with other IMF departments, however; most frequently with LEG (63 percent of MCs), FAD (46 percent), and SPR (37 percent).

Governance/Corruption Indicators
(Total responses: 69)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Governance/Corruption Indicators
(Total responses: 69)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Governance/Corruption Indicators
(Total responses: 69)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

The Biggest Challenges to the Use of External Indicators of Corruption
(Total responses: 69)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

The Biggest Challenges to the Use of External Indicators of Corruption
(Total responses: 69)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
The Biggest Challenges to the Use of External Indicators of Corruption
(Total responses: 69)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Frequency of Consultation with the World Bank
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Frequency of Consultation with the World Bank
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Frequency of Consultation with the World Bank
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Frequency of Consultation with Other Organizations
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Frequency of Consultation with Other Organizations
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Frequency of Consultation with Other Organizations
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Surveillance versus program work
11. While the advice given by staff on the approaches to tackle corruption are the same under surveillance or in a program context, mission chiefs found that a program provides certain advantages (71 percent of MCs). MCs viewed that program conditionality provides a lever, and allows for more concrete, granular and targeted action/advice, leading to more traction as opposed to staff advice in the context of surveillance. Respondents considered the most effective approaches for tackling corruption are through greater transparency in public policy implementation (68 percent), followed by modernizing and strengthening legislation and regulatory frameworks (60 percent), reinforcing internal controls within government (56 percent), promoting freedom of information, independent media, unconstrained civil society organization (43 percent), and strengthening anti-corruption agencies and commitment to pursue prosecution (38 percent). About 1/3 agreed that the short- to medium- term horizon within which the macroeconomic impact of corruption is supposed to be assessed was realistic. About 1/5 disagreed, while the remainder had no strong views either way.
Perception of evenhandedness
12. Mission chief responses concerning evenhandedness skew toward the negative. While 41 percent of mission chiefs responding took no position on the subject, only 10 percent of MCs agreed that the Fund treated each member evenhandedly, and none strongly agreed with this statement. On the other hand, 9 percent felt strongly that the Fund was not evenhanded in addressing governance or corruption in the member countries and an additional 26 percent expressed more qualified support for that position. Among the roughly 1/3 who viewed the Fund as not evenhanded, 46 percent said the Fund was more lenient towards countries from certain regions. Forty-six percent also indicated that staff and management tended to overlook corruption problems in countries from upper income groups, in particular, in advanced economies. Twenty-five percent felt that corruption/governance issues were more often raised in UFR cases than during surveillance. Thirty-three percent said that the treatment of corruption issues varied country by country, that it depended on the mission chief, the department’s views, and whether there were pressures to engage in a program.

Most Effective Approach to Tackling Corruption in Article IV Advice or Program Conditionality
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Most Effective Approach to Tackling Corruption in Article IV Advice or Program Conditionality
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Most Effective Approach to Tackling Corruption in Article IV Advice or Program Conditionality
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Evenhandedness on Corruption Issues
(Total responses: 68)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Evenhandedness on Corruption Issues
(Total responses: 68)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Evenhandedness on Corruption Issues
(Total responses: 68)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Group of Countries Treated not Evenhandedly
(Total responses: 24)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Group of Countries Treated not Evenhandedly
(Total responses: 24)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Group of Countries Treated not Evenhandedly
(Total responses: 24)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Traction and impact
13. The majority of respondents viewed the Fund’s engagement as having helped countries tackle corruption. In countries where corruption is assessed as an issue, 46 (9) percent of MCs agreed (strongly agreed) that the Fund’s involvement in governance and corruption issues had a positive impact on his/her country, 4 (2) percent disagreed (strongly disagreed), and 39 percent had no views either way. Those who were positive about the role of the Fund explained that the Fund played a catalytic role in gathering donor support by highlighting the issue, and that conditionality attached to programs were a useful tool to implement reforms to tackle corruption. Fund TA and follow up missions also helped to highlight the issue and improve the capacity of anti-corruption institutions, while plugging the leakages. Those who were less sanguine about the role of the Fund attributed it to lack of expertise of Fund staff in this area. They were also wary of the low traction from the authorities and the issue of political sensitivity. Some felt raising corruption issues could lead to further political instability in fragile states. Others felt the Fund understated corruption in the financial sector. In particular, the Fund could have more impact by recognizing regulatory capture, which may be common even in advanced countries, as a form of corruption.

Do You Think that the Fund’s Involvement in Governance and Corruption Issues Has a Positive Impact on Your Country?
(Total responses: 54)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Do You Think that the Fund’s Involvement in Governance and Corruption Issues Has a Positive Impact on Your Country?
(Total responses: 54)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Do You Think that the Fund’s Involvement in Governance and Corruption Issues Has a Positive Impact on Your Country?
(Total responses: 54)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Building expertise and guidance
14. The majority of respondents saw the need to develop further in-house expertise and an updated guidance note on corruption. 36 (11) percent of all MCs agreed (strongly agreed) while 17 (4) percent disagreed (strongly disagreed) on the need to develop in-house expertise to deal with corruption issues. Most were familiar at least to some extent with the “The Role of the Fund in Governance issues and the 1997 Guidance Note” (76 percent), and had a clear understanding of what was expected in the coverage of governance and corruption issues in their country (61 percent). However, a majority (57 percent) still saw a need for more specific guidance on how Fund staff should engage on issues of corruption. Most importantly, 78 percent of respondents were interested in learning more on how to design policy advice or conditionality, and 68 percent about how to assess whether corruption has a significant macroeconomic impact or risks in a given country (Figure 18). Many were also keen to learn more about when to advocate policies aimed at eliminating opportunities for rent seeking, corruption and fraudulent activity (46 percent), and how to ensure evenhandedness in treatment across countries (46 percent).

Need for an Updated Guidance Note
(Total responses: 65)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Need for an Updated Guidance Note
(Total responses: 65)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Need for an Updated Guidance Note
(Total responses: 65)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Other issues
15. Respondents provided useful views on the impediments to fruitful discussions, and on how to make Fund engagement more effective in the future. These include:
Difficulties in working with the authorities where powerful political figures/forces are themselves corrupt or hinder the implementation of anti-corruption measures (6 out of total 23 respondents).
Difficulties in working with authorities who are extremely sensitive to this issue and the Fund’s position on corruption can be interpreted as partial to a particular political party (2 respondents).
A need for a structured framework to deal with corruption issues. Such a framework should suggest which governance indicators are reliable, when governance issues are macro-critical, and best practices in improving governance. (3 respondents). Others, however, questioned whether the Fund should delve more into corruption, citing lack of expertise, and mission creep into the domain of other institutions such as the World Bank (4 respondents). Some saw the Fund’s work in building more effective institutions as sufficient to deal with corruption issues and therefore found no need to focus on corruption specifically (2 respondents).
A need for an independent unit within the Fund to focus on corruption issues and engage with countries where corruption is significant. (1 respondent)
A need to work more closely with CSOs and being more upfront and specific in highlighting corruption as an impediment to economic growth in the Fund’s public communications. (1 respondent)

Top Priorities in an Updated Guidance Note
(Total responses: 37)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006

Top Priorities in an Updated Guidance Note
(Total responses: 37)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Top Priorities in an Updated Guidance Note
(Total responses: 37)
Citation: Policy Papers 2017, 005; 10.5089/9781498346481.007.A006
Prepared by Ashvin Ahuja (SPR), Paul Ashin, and Sebastiaan Pompe (both LEG).
The survey was made available electronically to 224 Fund mission chiefs during January 10–27, 2017.
The respondents included the mission chiefs of 11 of the 40 countries that were selected in this stocktaking exercise for more in-depth review of surveillance and UFR staff reports (China, Georgia, Haiti, Honduras, Iraq, Italy, Russia, South Africa, Spain, Turkey, and Uganda). About 5 percent of the respondents provided only partial answers to the questionnaire.
The reporting mission chiefs represented AFR (24 percent), APD (16 percent), EUR (23 percent), MCD (17 percent), and WHD (19 percent). About 19 percent work on advanced economies, 42 percent emerging markets, and 39 percent LICs. About 22 percent work on countries that have financing arrangements with the Fund, and the rest (78 percent) are surveillance-only countries. With regard to level of corruption, “very poor” means an assessment that corruption levels are high, while “excellent” means an assessment that corruption levels are low.
27 out of 70 respondents did not reveal their countries, demonstrating their preference for anonymity. However, a majority of these respondents indicated that they felt comfortable (12 respondents) or neutral (10 respondents) about discussing corruption issues with the authorities.
These organizations included international institutions (e.g., ECB, OECD, UN agencies), regional development banks (AfDB, ADB, EBRD, IADB, CDB), and major donors (EU, DFID, USAID, GiZ). FATF was also consulted on AML-CFT issues.