IMF Flags Dangers of Corruption to Economic Development

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The International Monetary Fund (IMF) has pointed out corruption as a virus that undermines the growth of an economy and human population in general.

Unlike the World Bank that is concerned with infrastructural and other social developments in member countries, the IMF, which comprises 189 member countries, is involved with lending; working to foster global monetary cooperation, securing financial stability, facilitating international trade, and reduce poverty around the world.

At its just-ended Spring Meetings in Washington, D.C., according to a dispatch, the IMF in its Fiscal Monitoring message emphasized that, “the abuse of public office for private gain distorts the activities of the state and ultimately takes a toll on economic growth and the quality of people’s lives.”

The content of IMF’s message also intoned that corruption weakens key functions of the public sector, including the ability to collect taxes or to make expenditure choices in a fair and efficient way.

Concerning bribes, the IMF says that “if, in exchange, civil servants facilitate tax evasion or corrupt politicians provide ad hoc tax breaks for some people or firms, others will end up facing higher tax rates, and the government may be unable to generate enough revenue to pay for productive spending.”

In furtherance, the world finance body said with bribes, the quality of public services and infrastructure likewise suffers when project selection reflects opportunities for kickbacks or nepotism.

“Bribery of foreign officials by multinationals and the use of opaque financial centers, or secrecy jurisdictions to hide corrupt gains or to evade taxes add a global dimension to the challenge,” IMF says.

It also cautioned that, by contributing to growing inequality, corruption undermines trust in government, and can lead to social and political instability.

“The widespread acknowledgement that tackling corruption is critical for macroeconomic performance and economic development has led to its inclusion in the United Nations Sustainable Development Goals and promoted several initiatives, including the Framework for Enhanced IMF Engagement in Governance,” it added.

The IMF said with global growth slowing and uncertainty rising, fiscal policy should prepare for potential downturns — balancing stabilization and sustainability objectives, and put more emphasis on reforms to foster long-term inclusive growth in a fast-changing global economy.

It further noted that shifting demographics, rapid technological progress, and deepening international economic integration bring challenges.

Therefore, it said to remain effective, fiscal policy needs to adapt to those key trends reshaping the global economy; stressing that where there is limited budgetary room, such adaptation will have to occur through inclusive and growth-friendly budget recomposition.

The world body of financial experts then noted that international cooperation to improve taxation of multinational companies, and to tackle climate change and corruption could amplify and spread the reform gains.

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