War on cor­rup­tion

The Pak Banker - - FRONT PAGE -

There is a world­wide trend against cor­rup­tion and cor­rupt prac­tices both in the public and pri­vate sec­tors. The In­ter­na­tional Monetary Fund has now adopted a frame­work for en­hanced en­gage­ment in gov­er­nance and cor­rup­tion that aims at a more sys­tem­atic, even-handed, ef­fec­tive and can­did en­gage­ment with mem­ber coun­tries. The re­vised good gov­er­nance guide­lines, which take ef­fect on 1st July, fol­low a re­cent re­view of the IMF's 20-year-old policy frame­work which con­cluded that the Fund had some­times em­ployed eu­phemisms when dis­cussing cor­rup­tion in mem­ber coun­tries. Un­der the new guide­lines ap­proved by the IMF board re­cently, the Fund will dis­cuss good gov­er­nance con­cerns in all eco­nomic re­views of mem­ber coun­tries.

The IMF has in­tro­duced cer­tain non-dis­crim­i­na­tory clauses in the new frame­work. For in­stance, the Fund will dis­cuss good gov­er­nance con­cerns in all an­nual eco­nomic re­views of the mem­ber coun­tries, mean­ing that no coun­try, what­ever its quota strength in the Fund, will be spared this scru­tiny. Also, the new policy aims to tackle how rich coun­tries con­trib­ute to cor­rup­tion in the de­vel­op­ing world by fail­ing to pre­vent bribery and money laun­der­ing or by al­low­ing anony­mous cor­po­rate own­er­ship. It has also been made clear that the IMF will not in­ves­ti­gate spe­cific in­stances of cor­rup­tion. Rather, it will fo­cus on the strength of key eco­nomic in­sti­tu­tions; fis­cal and cen­tral bank gov­er­nance, mar­ket reg­u­la­tion, the rule of law and poli­cies on money laun­der­ing and coun­ter­ing ter­ror­ism fi­nanc­ing. This clause is meant to avoid crit­i­cism of in­ter­fer­ence in a coun­tries' in­ter­nal af­fairs.

IMF Managing Direc­tor Chris­tine La­garde re­cently said that "we know that cor­rup­tion hurts the poor, hin­ders eco­nomic op­por­tu­nity and so­cial mo­bil­ity, un­der­mines trust in in­sti­tu­tions and causes so­cial co­he­sion to un­ravel". How­ever, the IMF of­fi­cials do not ex­pect the new policy to lead to more strin­gent con­di­tions on loans, which go to a mi­nor­ity of the Fund's 189 mem­ber coun­tries. In this re­spect, the Fund will also rely on the find­ings of out­side trans­parency cam­paign­ers who have crit­i­cised the ex­is­tence of tax and cor­po­rate havens in ad­vanced economies as a con­duit for il­licit fi­nan­cial flows to and from poorer coun­tries.

As per ex­pert anal­y­sis, a fall of 25 notches on a cor­rup­tion index could cut as much as 0.5 per­cent­age points of a coun­try's an­nual growth.It is reck­oned that the IMF's new guide­lines would help min­imise the men­ace of cor­rup­tion and pro­mote good gov­er­nance in the mem­ber coun­tries to a great ex­tent. Un­der the new guide­lines, not only bor­row­ing poor coun­tries will be closely mon­i­tored but the new policy frame­work will also en­sure that the Fund will hold all the mem­bers to the same stan­dards - some­thing that the IMF had not al­ways done.

Need­less to say, IMF's new policy frame­work will have a great im­pact on Pak­istan's econ­omy. As we know, many coun­tries in­Asia and Latin Amer­ica are busy work­ing out strin­gent new anti-cor­rup­tion re­forms at the be­hest of the IMF to get the lat­est in­stal­ment of the aid pack­age. Pak­istan may also be re­quired to ap­proach the IMF for its as­sis­tance in the not too dis­tant fu­ture if the cur­rent ac­count deficit con­tin­ues to widen and for­eign ex­change re­serves con­tinue to de­cline at the present rates. The new policy frame­work of the IMF cou­pled with the present ef­forts of NAB and the apex court would hope­fully go a long way to re­duce cor­rup­tion and ac­cel­er­ate the growth process. Cor­rup­tion has badly dam­aged Pak­istan's econ­omy and it is time we took strict mea­sures to elim­i­nate the men­ace.

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