The International Monetary Fund is recommending countries undertake a series of reforms, including tackling corruption, in order to promote not only higher economic growth, but also growth that is more inclusive of various parts of the population.
In a report released Wednesday, the IMF cites the challenges economies face from shifting demographics, the rapid changes in technology and an increasing amount of integration among economies around the world.
It says many countries with advanced or emerging economies are having to contend with stresses of aging populations on health care and public pension systems, while in many developing nations the issues that must be confronted are job creation and infrastructure upgrades for rapidly urbanizing populations.
Battling corruption is one area in which the IMF sees potential for international cooperation to make a difference, along with climate change and taxing multinational companies.
The report calls for governments to combat instances of national companies bribing officials in other countries, to be aggressive in anti-money laundering efforts, and to reduce the number of ways individuals or companies can use opaque methods to hide the gains of their corruption. It particularly cites the need to increase transparency in sectors such as oil and mining, where companies often operate abroad.
On the more local scale, the IMF highlights the dangers of corruption to the economy. Among them are allowing some people to evade taxes while others pay higher amounts, governments losing revenue they need for spending on public projects, undermining the quality of infrastructure projects driven by bribes or nepotism, and eroding people's trust in a way that can lead to social or political instability.
"Corrupt activities can lead to leakages of public money. Governments will collect less tax revenues and pay too much for goods and services or for investment projects. But the cost of corruption is larger than the sum of the lost money: distortions in spending priorities undermine the ability of the state to promote sustainable and inclusive growth."
The report says that among countries with similar income levels, those that take steps to stamp out corruption see a boost in revenue, with the least corrupt governments collecting 4 percent more of their Gross Domestic Product in taxes. It points to the example of Georgia, which in 2003 enacted reforms and saw a 13 percentage point jump in tax revenue relative to GDP.
Addressing corruption, according to the IMF, is dependent on the political will to make the necessary changes, including those that involve developing solid public institutions and promoting accountability.
The report recommends developing strong, professional civil service sectors with hiring based on merit and leaders playing a vital role in setting examples of clean governance. It says governments should value transparency and invite independent, external scrutiny to their operations, while focusing on areas such as infrastructure, natural resources and public procurement that are the most often involved in corruption.
