Since the adoption of the 2018 Framework for Enhanced Engagement on Governance the IMF has placed greater emphasis on governance and corruption issues both in its policy dialogue and financial program design. It has also increased support to member countries to strengthen their capacities. The IMF’s April 2019 Fiscal Monitor stressed the importance of building strong fiscal institutions to address corruption. With a myriad of opportunities for funds to leak in the public sector, understanding the vulnerabilities in the fiscal environment is crucial to design reforms that reduce the mismanagement of public resources and corruption more generally.
An IMF report published in 2021 examined how countries in the Middle East, North Africa and Central Asia region have grappled with governance issues in recent years. This report showed that governance and anti-corruption reforms are needed to ensure a stronger, greener, and more inclusive economic recovery after the Covid-19 pandemic. Such reforms can lead to higher tax revenues, better education outcomes, and more efficient public investment.
This report highlighted some progress in the region, notably Tunisia whose government has made it easier for citizens to access the public budget and monitor spending, and Jordan which regularly publishes reports on the government’s counter-corruption efforts. However, there is still much work to do. Citizens and businesses across the region continue to see weak governance and corruption as serious problems that hold back economic and social development.
In March 2023, the IMF’s Middle East Center for Economics and Finance (CEF) in collaboration with its Fiscal Affairs, Legal and Finance Departments, delivered the first in-person course on “Building Institutions to Fight Corruption” for Arab countries.[1] The course followed similar courses delivered to sub-Saharan African countries in 2020 and 2022. It was attended by a wide range of institutions, including finance ministries, central banks, Prime Minister’s offices, revenue authorities, and anti-corruption agencies. The course provided an opportunity for peer learning. Participants appreciated the wide range of governance issues covered and the discussions enabled them to exchange experiences and country examples on these topics.
The course aimed to set out a road map for identifying and addressing vulnerabilities to corruption in the PFM cycle. It promoted an understanding of the mechanisms and strategies that need to be in place to prevent corruption, including through strengthened fiscal governance, transparency, and accountability. The agenda included sessions on both revenue and expenditure management. Central banks’ potential contribution to corruption vulnerabilities through monetary financing and quasi-fiscal activities was also covered. In addition, the course presented indicators and red flags that can alert policymakers and oversight agencies to possible governance challenges and weaknesses, as well as the potential macro-fiscal implications and costs of corruption. It included practical examples and case studies from a range of countries and proposed potential reforms.
Participants’ interventions during the course underscored the perception that the region is one of the most vulnerable to corruption and the least transparent in the world according to many international rankings. This has serious implications for macroeconomic stability, social justice, and the overall development of the region. The course highlighted the need for strong anti-corruption reforms to address these corruption vulnerabilities.
Participants were asked to prepare an anti-corruption strategy for their countries. Cultural factors were identified as a major constraint on progress. In many countries corruption is heavily embedded in the political and administrative structures and procedures. Leadership from the highest political levels is an essential ingredient to reform, but often lacking in the region.
While every country needs to follow its own path, the following reform priorities were identified for the region:
- Strengthen the legal framework and mechanisms to enforce anti-corruption regulations.
- Strengthen the independence of oversight bodies – national legislatures and supreme audit institutions - to allow them to safeguard the use of public resources.
- Strengthen central banks’ autonomy and governance arrangements, including through legislative reforms, to curtail monetary financing and prohibit quasi-fiscal activities.
- Improve transparency and accountability by expanding access to information, establishing stronger institutions for financial reporting and the oversight of public finances, and reforming state-owned enterprises.
- Simplify public finance rules and regulations and enforce them fairly. For example, countries can reduce corruption by modernizing tax codes and cutting red tape.
- Strengthen anti-corruption laws and regulations by adopting international conventions and good practices (e.g., UNCAC) and enforcing them.
- Enhance the use of digital tools to supply information and deliver government services to citizens - automated processes and information visibility and access play a potentially powerful role in discouraging corruption.
[1] CEF is the Fund’s regional training center for Arab countries in Kuwait. The course was attended by 33 participants and seven participants who joined remotely. 16 countries were represented - Algeria, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, West Bank and Gaza, Saudi Arabia, Somalia, Sudan, Syria, and Tunisia. There were 14 speakers and seven guest speakers. The course was conducted over a period of five days and included 14 lectures, three case studies, and other interactive activities.
