The COVID-19 pandemic has exacerbated already staggering levels of economic inequality in many countries around the world. Now there is a real risk that trillions of dollars meant to support those hardest hit by the crisis may be captured by the wealthy, increasing inequality as countries are saddled with public debt for money lost to corruption.
The International Monetary Fund (IMF) has lent US$89 billion to over 80 countries since March. The Fund has sought to ensure that its emergency assistance helps push back on the rising tide of inequality, with IMF Managing Director Kristalina Georgieva giving countries a road-map: invest in health and education, widen safety nets, and ensure access to food; address budget shortfalls through progressive taxation; and cut corruption and wasteful spending.
But there is little in the loan agreements to make governments heed that advice; some even include terms that could actually go against it.
Six months into the pandemic, massive amounts have already been lost due to corruption or malfeasance: Transparency International analyzed media reports about COVID-19 corruption cases and found 19 that included reliable estimates of the public funds involved, spanning 17 countries. In these 19 cases, the total amounted to US$1.1 billion.
In exchange for emergency assistance from the IMF, most governments have committed to abide by basic transparency and good governance measures, such as publishing contracts and conducting independent audits. But given the scale of the losses already incurred, it is worth reflecting on the extent to which the IMF strategy is working. These lessons learned will be crucial for safeguarding public funds and reducing inequality during a long and uncertain period of economic recovery.
Here are three key steps that the IMF can take to ensure that funding reaches those most in need and does not contribute to inequality.