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IMF Urges Countries to Curb Corruption

international monetary fundThe International Monetary Fund (IMF) has asked countries to focus on tackling corruption countries as it would improve their economic stability and boost growth and development.

IMF has released a paper on the issue ahead of the UK government-sponsored anti-corruption summit in London which takes place in London this week. The IMF will be a part of this summit.

The IMF estimates the annual cost of bribery to be around $1.5 trillion to $2 trillion which is approx. 2 percent of the global gross domestic product.

Christine Lagarde, the Managing Director of the IMF stated that while the direct economic impact of corruption was clear, the indirect cost of corruption was even more substantial and included low growth, lost tax revenue and higher income equality.

According to the IMF, countries need to develop strong legal processes, transparency, a credible prosecutorial framework as well as a de-regularized economy to counter it. The IMF called corruption one of the most important issues of current times as confirmed by numerous global surveys. Corruption was a problem for economies at every stage of development and governments worldwide were struggling to address the concerns of their citizens as shown by the numerous corruption scandals that have come to light across the world.

The IMF cited the recent case of Panama Papers to highlight the incidence of using opaque corporate mechanisms to evade laws and conceal wealth.

In a statement, the IMF said,

At a time of rising inequality in income and wealth, there is moral outrage that the rich and powerful are abusing the system to their own advantage. In several countries, citizens have taken to the streets and are sending a powerful signal to their leaders that they can no longer tolerate corruption

According to the institution, such diversion of funds leaves less money available for investments into public utilities of health care, education and infrastructure. The IMF added that although bribes are justified as a lubricant for keeping the system moving, corruption actually often discourages investment and consequently increasesthe country’s lending costs.

Lagarde added that considering the significant impact of corruption on economic growth and macroeconomic stability, the IMF was working with member countries to develop and implement anti-corruption measures. Lagarde also stated that whenever a government official is granted discretionary power over a decision involving an economic endeavor, a risk exists that the power will be misused for personal benefit.

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