Washington, DC
:
The Executive Board of the International Monetary Fund (IMF) concluded
the Review of the Implementation of the Framework for Enhanced
Engagement on Governance.
On April 4, 2023, the Executive Board of the International Monetary Fund
(IMF) discussed the staff papers on the “Review of the Implementation ofthe 2018 Framework for Enhanced Fund Engagement on Governance”. The review
covers implementation of the policies on governance detailed in “Framework for Enhanced Engagement on Governance” (the “2018 Framework”) and in “The Role of the IMF in Governance Issues: Guidance Note,” adopted by the Executive Board in 1997 (1997 Governance Policy).
In April 2018, the IMF Executive Board adopted a “Framework for Enhanced
Engagement on Governance” (the “2018 Framework”) to promote more
systematic, effective, candid, and evenhanded engagement with member
countries regarding corruption of macro critical dimensions and governance
vulnerabilities linked to corruption. The 2018 Framework comprises four
elements: (i) a systematic assessment of the nature and severity of
governance vulnerabilities and of corruption with respect to all members;
(ii) an assessment of the economic impact of the governance weaknesses that
have been identified; (iii) the provision of policy advice in circumstances
where IMF’s engagement is justified; and (iv) an assessment of governmental
measures to prevent private actors from offering bribes to foreign
officials or providing services that enable such officials to conceal
proceeds of their corrupt acts.
At the time of the adoption of the Framework in 2018, the Executive Board
called for a formal review of the implementation. An Interim Update
conducted in July 2020 found that implementation of the 2018 Framework was
well underway. In addition, in May 2021 and May 2022, updates on the
implementation status of governance measures committed under COVID-19
Emergency Financing were published. This Review of the Implementation of
the 2018 Framework for Enhanced Fund Engagement on Governance finds that
Fund engagement on governance and corruption issues has been broadly
systematic, candid, effective, and evenhanded and, based on its findings,
makes proposals to further improve implementation of the 2018 Framework.
The Review papers also discuss some challenges and obstacles and provide
concrete proposals to strengthen engagement in these areas in line with the
objectives of the 2018 Framework, continuing to be guided by
macro-criticality and core expertise of the Fund.
Executive Board Assessment
[1]
Executive Directors welcomed the opportunity to review the implementation
of the 2018 Framework for Enhanced Fund Engagement on Governance, and
broadly agreed with the staff’s proposals. They considered that the 2018
Framework has made the Fund’s engagement more candid, systematic, and
effective, while acknowledging that there remain areas for improvement.
While many Directors also considered that the 2018 Framework has made the
Fund engagement more evenhanded, many other Directors expressed lingering
concerns about evenhandedness.
Directors welcomed the systematic assessment of the full membership of the
Fund under a robust, centralized, interdepartmental process to identify
corruption vulnerabilities and governance weaknesses linked to corruption
in the six state functions most relevant to economic activity. Going
forward, Directors called for further analysis on the effectiveness of the
Fund’s engagement in these areas.
Directors recognized the increase in candid discussions of many identified
corruption and related governance vulnerabilities in Article IV staff
reports, underpinned by specific policy advice over the three-year
surveillance cycle. However, they noted the limited coverage of some areas
such as market regulation.
Directors acknowledged that the proportion of governance-related conditions
in Fund-supported programs has increased, with conditionality aligned with
programs goals. They considered compliance rates for governance-related
benchmarks to be somewhat disappointing—albeit similar to those for other
structural benchmarks in areas outside of governance. Directors supported a
final stocktaking of the implementation of governance safeguards during the
COVID-19 emergency financing, with a few Directors noting the uneven
implementation of these commitments. In this context, Directors supported
updating guidance on the use of governance commitments in emergency
financing.
Directors called for further efforts to ensure a fully evenhanded
implementation of the 2018 Framework and address concerns by many Directors
regarding evenhandedness. While Directors noted that the staff’s analysis
found no evidence of systematic biases, many Directors found the results
insufficient to draw conclusions. Directors also noted that only 13
countries have volunteered for the Fund to assess their frameworks for
combatting transnational aspects of corruption—a number still below
expectations—which may contribute to perceptions that the Fund’s engagement
on governance issues is not sufficiently evenhanded.
Directors welcomed the Fund’s expanded work on governance issues in
capacity development (CD), including leveraging existing CD and
establishing new forms of delivery, particularly governance diagnostics.
They encouraged further speeding up of strategic integration and alignment
of CD to country-specific policy advice.
Directors noted that achieving a lasting reduction in corruption is a
challenge and that implementation is constrained by limited capacity and
vested interests. As such, Directors considered the Fund’s continued robust
engagement on these issues to be crucial whenever macro-criticality can be
established.
Directors supported staff proposals to strengthen implementation in line
with the objectives of the 2018 Framework, guided by macro-criticality and
core expertise of the Fund, while stressing the need for prioritization and
phasing of the proposals, given competing demands under the tight budgetary
environment.
Directors supported staff proposals to update more regularly the
centralized assessment of the membership, allowing staff to refresh
qualitative information and track improvements or backsliding in the
implementation of policy advice, and to improve the consistency of coverage
across the six state functions, including by exploiting synergies with
other work streams. Directors encouraged other jurisdictions to volunteer
for the assessment of transnational aspects of corruption and agreed that
efforts should continue to sustain and deepen the coverage of this
exercise.
Directors endorsed enhancing effectiveness of the engagement and addressing
key obstacles identified by strengthening external interactions and
internal processes, including efforts to enhance ownership and support for
reforms, and particularly encouraged strengthening political economy
analysis. Directors supported further developing targeted CD in response to
increasing demand from authorities, leveraging governance diagnostics to
inform engagements, implementing practical measures to enhance interactions
and collaboration with other international organizations and civil society,
fine-tuning staff guidance on governance safeguards in emergency financing,
and establishing mechanisms to improve monitoring of the implementation of
governance-related Article IV recommendations. In addition, Directors
supported further integration of governance and anti-corruption with other
Fund priorities such as Fragile and Conflict affected States (FCS), climate
change, and digitalization/GovTech. Directors also generally supported
deepening the work on rule of law and anti-corruption issues and building
upon the increasing role of supreme audit institutions (SAIs) in supporting
anti-corruption efforts. They concurred that achieving sustained mitigation
of corruption requires a tailored and sequenced approach mindful of
implementation capacity constraints and political economy realities.
Directors looked forward to an update from the staff on the implementation
of the Framework in two to three years, and for a review by the Executive
Board within five years.
