IMF crackdown on corruption in projects

Kenya’s currency plunged by as much as 20 per cent as a result of the move, reports from Nairobi said. Kenyan President Daniel Arap Moi reacted with outrage at the move, describe it as “purely political”.

The IMF moves follows the repeated assertions in recent days graft by both IMF Managing Director Michael Camdessus and World Bank President James Wolfensohn against the pervasive graft in developing countries. They had promised to act against it.

According to the new guidelines, “financial assistance from the IMF… could be suspended or delayed on account of poor governance… if there is reason to believe it could have significant macro economic implication that threaten the successful implementation of the program, or puts in doubt the purpose of the use of IMF resources”.

India was recently ranked fifth in a list of corrupt nations by Transparency International, an anti-corruption advocacy group. In the 1980s, then Prime Minister Rajiv Gandhi had estimated that only about 15 per cent of the money marked for development actually reached the end user in India. New Delhi is one of the biggest clients of the multilateral institutions having borrowed close to $ 50 billion over the years.

Transparency International vice-president Frank Vogl welcomed the IMF move saying it’s long overdue that multilateral organisations involved in financing developing countries place on par with macro policies the basic soundness of government institutions with which they are dealing.

“The cut off (to Kenya) sends a signal because the guidelines are being issued at the same time,” Vogl said.

Although the new guidelines say the IMF should not “interfere in domestic or foreign politics,” the IMF and World Bank’s increasing assertiveness is bound to seen in some quarters as intrusiveness which may directly interfere in governance. For instance, the guidelines call for IMF employees handling particular countries to point out the economic consequences of corruption.