IMF warns of serious consequences of corruption on global economy – 04/10/2019

The International Monetary Fund advises countries like Argentina to make a budgetary adjustment "growth promoter" create a buffer against the slowdown in the global economy and warns of the serious effects of corruption in global growth.

As part of the Spring Assembly of the IMF and World Bank that kicked off this week in Washington, the body presented its report on Wednesday. "Financial Monitor", in which he badyzes the state of global fiscal policies and warns against its risks. This year, the report focuses on corruption.

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"Global expansion has moderated. Growth is expected to slow in several major advanced economies and major emerging markets (China, the euro area, the United States), but will remain dynamic in many areas (India and sub-Saharan Africa). Downside risks have risen, mainly due to unresolved trade tensions, growing uncertainty about policies and volatility in financial markets, "says the report, which also warns of financial and financial conditions. concerns about the sustainability of public finances have increased the costs of debt.

In this panorama, the report adds, "fiscal policy should be cautious in order to maintain a balance between growth and sustainability objectives". And he says that in cases "where it is still important to improve market access (Argentina), there is still a need for a fiscal adjustment that promotes growth in order to mitigate debt vulnerabilities and create a margin of protection that can be deployed against a deep deceleration. "

Under the agreement signed with the IMF, Argentina has promised to have a zero budget deficit this year and the agency has recently indicated the need for further adjustments because the perception of the tax has decreased. The report predicts that the government will reach this year's target of 0% and that there will be a surplus of 1.1% by 2020.

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The report then focuses on corruption. Without mentioning specific cases, he warns that "corruption – the abuse of the public service to his advantage – distorts state activities and undermines progress towards sustainable and inclusive economic growth. Corruption helps some to avoid taxes, while others end up paying more. The loss of tax revenues can also complicate the government's social spending task. In addition, the quality of infrastructure and public services declines when government decisions respond to corruption and nepotism. Finally, Corruption reduces trust in government and can lead to social and political instability. "

The report adds that "the fiscal costs of corruption can be significant for economies at all levels of development, for example, by comparing countries with similar levels of income. Less corrupt governments collect 4% more of GDP in tax revenue than their more corrupt counterparts. "

And they evoked a scenario that seems for the moment far: "If all countries today reduced corruption to the same extent, on average, than those who reduced it during the two years past decades, global tax revenues would be $ 1 trillion higher, this represents 1.25% of global GDP; the benefits would probably be greater given that with less corruption, there would be more economic growth, which would generate even more tax revenue. "

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The report cites cases of countries that have been successful in significantly reducing corruption and have been rewarded with increased tax revenues as a percentage of GDP, such as georgia, 13 percentage points and Rwanda, 6 percentage points.

The report points out that the facts also show that corruption distorts the government's use of public funds: "The least corrupt countries devote a greater proportion of their resources to social spending. The most corrupt countries are spending too much money on road and hospital construction, and their school-age students are getting worse on exams. "

The Fund offers guidelines on what authorities can do to fight corruption:

– Organize a professional public serviceon the basis of transparent and meritocratic hiring and remuneration procedures. And give an example of ethics from the highest spheres.

– invest in high levels of transparency and monitoring externally so that auditing organizations and the general public can exercise effective control.

– Focus on the frequent corruption points such as public procurement, infrastructure, complex goods and services that are difficult to value, natural resources and public enterprises.

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– Prevent domestic companies from corrupting officials abroad, vigorously pursue money laundering and eliminate opportunities to hide the fruits of corruption in opaque destinations.

–Generate more transparency in mining industry (oil and mining) given the presence of high economic rents and the role of major international operators.

– increase international exchange of information fight against tax evasion and investigate and prosecute corruption.