New Kid in Town: the IMF’s Changed Approach to Anti-Corruption and its Global Implications

The IMF’s new approach to anti-corruption, encapsulated in its 2018 Framework for Enhanced Engagement on Governance, is a critical development for international anti-corruption efforts which necessitates more analysis. The 2018 framework commits the IMF to a much more direct and active role in anti-corruption reform with the Fund increasingly requiring countries to adopt anti-corruption measures as conditions for borrowing. While the IMF’s use of conditionality has been studied in a variety of contexts in the past, its post-2018 policy on anti-corruption has received scant attention, other than an internal review. This paper will explore the factors which influenced this major policy change, bring new evidence on how the IMF is countering corruption, and set out the opportunities and risks the IMF’s new role implies for anti-corruption efforts. The paper focuses particularly on the relevance of the new approach for low- and middle-income countries facing the systemic challenge of state capture. In such contexts, where sustained progress in addressing corruption is difficult to achieve and captor groups are strongly incentivised to block reforms, IMF conditionality on anti-corruption is potentially transformative but equally highly contentious. IMF agreements are a classic example of a ‘two-level game’ in international politics, where negotiations occur bilaterally between the Fund and the recipient government, but also engender shifts in bargaining strategies among domestic elite groups (Putnam, 1988). Drawing on analysis of IMF loan agreements, Fund policies and evaluations, in-country governance diagnostics, and interviews with stakeholders at the Fund and connected institutions, the paper will be organised into three parts. Part I explores why the IMF has embarked on this new direction and the different facets of its internal policy debate. It applies process tracing to analyse the events which led to the 2018 Framework, considering the underlying tensions and dilemmas which working on corruption presents for the institution. Part II investigates how the Fund is countering corruption through analysis of data on trends in corruption-related conditionality in borrower countries. It identifies the types of anti-corruption reforms promoted by the Fund, the principal geographic locations of this work, the mechanisms through which reforms are enforced, and initial evidence on levels of country compliance. Part III considers the overarching implications, drawing preliminary conclusions about the advantages, limitations and risks inherent to the IMF’s new engagement in this domain and presenting early findings from research in Sri Lanka and Zambia on the impact of IMF anti-corruption conditionality at critical moments of reform opportunity. The research provides original insights into the consequences of the IMF’s new policy at global and national levels.