Integrity in IMF COVID-19 financing

Recommendations to the IMF

1. In the future, commitments need to have stronger, more specific and more consistent wording on usability, publication format, regularity and location. They need to take into account how people in the country access and use the information to improve the emergency response.

Where the IMF suggests wording on commitments to governments, or maintains standard guidelines, we argue that this needs to be more ambitious. Nearly all the governments we considered here were capable of more on procurement transparency and beneficial ownership than their commitments implied. The IMF should work with OCP and Open Ownership to develop their guidance, but as a starting-point, we suggest the following minimum requirements:

• Usability: governments should state that they will work with observers and CSOs to understand which data fields are most useful for analysis of the government’s contracting (for example, unit prices; consistent descriptions of items purchased; delivery schedules) and clearly communicate these requirements to buyers.
• Format: if a government is already publishing according to Open Contracting Data Standard (OCDS) or the Beneficial Ownership Data Standard (BODS) then emergency disclosure should follow the same format. As a minimum, governments should commit to publishing in CSV in emergencies. Non-emergency commitments should set OCDS or BODS as longer-term goals.
• Regularity and timeliness: commitments should set out schedules for data publication.
• Location: data should be collected and published in a single location, clearly signposted on, for example, a finance ministry’s website. Where possible, it should be published in well-known portals already used to disclose data.

More advanced commitments - especially for commitments that have longer timeframes than in emergencies - should include plans to allocate additional resources to support data disclosure to answer concerns that procurement agencies will be given more responsibilities without the capacity to implement them. Governments might also lay out how they plan to oversee and incentivise departments to release high-quality data, including sanctions for poor performance.

To support this, the IMF should publish a glossary clarifying the meaning of key teams in open contracting and beneficial ownership commitments. This is especially important in the case of beneficial ownership, where the relative novelty of the field means that many of the key concepts are ambiguous for government officials and CSOs.

Finally, commitments should be co-created as much as is possible in an emergency. In some cases, we noted that procurement authorities had not been consulted when finance ministries made commitments. CSOs, too, had been working with procurement authorities to encourage emergency data disclosure, but were not included as observers as the IMF negotiated commitments with governments. A small time investment to further understand the local context of data disclosure and use will significantly strengthen the commitments. Co-creation during non-emergency financing, meanwhile, should be carefully planned and treated as a high priority.

2. The IMF should invest in sustained follow-up on implementation that incentivises and encourages meaningful, lasting reform. Convening multi-stakeholder groups with a clear role for civil society is a good way to do this. This is not a call for conditionality per se but for better follow up that benefits government and citizens.

Even where commitments are broad, follow-up with governments is crucial. As we noted above, in some cases, both procurement departments and local CSOs were not aware of their government’s commitments to the IMF, restricting the commitments’ influence and urgency. The IMF should therefore help foster spaces for updates on implementation from finance ministries and procurement authorities.

Civil society organisations and international agencies should also be invited to participate as observers who can track implementation and report on the quality and utility of the data that is being disclosed. We found that where there are strong relationships between CSOs and procurement agencies, procurement officials regularly heard about how data is being used and know where to focus their improvements. The IMF should therefore identify those CSOs who are capable of engaging with government in each country and help provide them with the tools to do so.

Multi-stakeholder groups also provide the opportunity to build networks of transparency champions across government, and help mitigate against stagnation and regression during political changes. We found that elections and political instability were key barriers to implementation in certain countries, particularly when it came to commitments with longer timeframes. In Ecuador, one of our research partners expressed concern that an audit planned for mid-2021 could be threatened by upcoming elections taking place in April. [34] Then in the Kyrgyz Republic protests ousted the prime minister in October 2020. While we also heard that an upcoming constitutional referendum and parliamentary elections may distract the government from implementing the new legislation on open contracting and beneficial ownership. [35]

The IMF should look to quickly engage with newly elected governments to remind them of their commitments, adjust them - if needed - and encourage further progress by demonstrating their usefulness and importance. This needs to go alongside working with local CSOs and other interested parties to keep them aware of changes and help them monitor progress.

Without further follow-up by the IMF and other organisations there is a risk that any reforms introduced in the past year will be superficial: the IMF has to beware of box-ticking exercises. Research partners in Afghanistan and the Kyrgyz Republic mentioned this in relation to beneficial ownership in particular. They voiced concerns over whether new requirements to publish suppliers’ beneficial owners would have any significant impact on patronage networks in each country. In many countries, including these two, there is widespread local knowledge of which politicians, political parties and officials control large local companies. To capture this knowledge in official data disclosures will be a huge challenge: it will require radical political change, one interviewee said. [36]

Kleptocratic political economies are sustained by complex incentives and relationships. While the scope of this report did not allow us to fully touch on this issue, we do recommend that at a minimum the IMF follows up and monitors governments’ deployment of the concept of beneficial ownership. Again, involving CSOs in this monitoring by introducing them to resources provided by international transparency advocates and encouraging them to promote best practice will be invaluable.

Another box-ticking risk is that countries have published one set of COVID-19-related data within a few months of the IMF commitment, but have then not followed up with regular publication. In Afghanistan, the Ministry of Finance has published only one ‘quarterly report’ including contracting information, in October 2020. [37] Malawi, too, seems to have published a single Excel file without follow up. [38]

Transparency on COVID-19 purchasing should be seen as a springboard to further reform, rather than a one-off event. CSOs can help push procurement agencies to continue to publish at regular intervals. When good relationships are established, as we have seen, CSOs can actually help incentivise governments to publish as well as help the IMF more easily follow up on commitments that have been made.

3. The IMF should foster best practice by providing governments with clear technical guidance, resources and lessons from open contracting and open ownership reforms around the world, including support for peer learning.

Governments need to be persuaded that pushing forward successful open contracting and open ownership reforms is indeed possible, even in challenging political environments. To counter the unproductive narrative that change in these areas is simply too difficult, the IMF should publish best practice resources, drawing upon a range of international case studies and peer learning opportunities. Importantly, these resources should be available in local languages, and in an open access format, so that governments and CSOs alike can use them to inspire their agendas for reform.

For example, the IMF could point to already established best practice playbooks such as those created by Open Ownership, the Open Contracting Partnership, [39] the OECD and other best practice organisations. This will provide governments with practical advice about publishing data, how to improve data quality, and how to encourage the use of data. Working with international organisations already operating in these spaces will be crucial to ensuring the use of common language and concepts.

To accompany these resources, the IMF also needs to help procurement authorities working towards implementing commitments access tailored support. This is especially the case when governments make commitments swiftly, without necessarily consulting implementing agencies, and so there is a mismatch between those agencies’ resources and responsibilities. We acknowledge that IMF teams responsible for promoting commitments on open contracting and beneficial ownership may themselves have limited capacity to offer tailored advice. But they retain the scope to help connect governments with other organisations, such as Open Contracting Partners, Open Ownership, World Bank, and the OECD – as well as local CSOs – to ensure that procurement authorities on a local and national level are given the technical support they need. This should be seen as an integral part of follow-up to any commitments, emergency or otherwise.

4. The IMF should ensure that it has a consistent definition of beneficial ownership to which commitment-holders should refer.

As we have described above, some countries in this research are seemingly citing single directors or legal owners as suppliers’ beneficial owners rather than naming any indirect owners or controllers. This indicates that there is a lack of proper understanding of what beneficial ownership actually means. Malawi’s PPDA, for example, names a ‘beneficial owner’ and a ‘shareholder’, both of whom are often the same person.40 No information about the nature or extent of ownership or control is included.

Given the relative low maturity of beneficial ownership data disclosure across the world, such cases are perhaps to be expected. As more countries begin to disclose beneficial ownership data, however, the risk of ambiguity around the nature of any disclosed owners will grow. If the IMF regularly begins to include requirements on beneficial ownership transparency in its financing packages, it will need to understand how to match up local data systems and practices with international best practices and standard definitions. Open Ownership can provide extensive resources here, [41] but we recommend that they are also directly consulted during negotiations where possible.

5. The IMF should consider how to better incentivise data disclosure, which will also benefit its own economic surveillance.

In Nepal, interviewees commented that their government’s commitment was likely seen by authorities as a broad statement of allegiance to the principles of transparency and accountability. That is, it lacked measures that would actually result in departments publishing data. [42] This fed into a wider theme across our research: in many places, open contracting data disclosure is a legal requirement, but there are few sanctions that are applied in practice when departments do not publish. In response to this, interviewees touched on a range of ways to positively encourage publication. These include:

• publicising departments’ disclosure rates to highlight good and bad performers (if such competition is deemed productive);
• publicising governments’ performance as a whole, possibly in the form of global indices (though caution is required here: there is a risk that indices can be gamed without encouraging meaningful reforms, or create unnecessary competition between countries);
• tying the ability to progress along the procurement process to publishing data from previous stages: for example, by releasing treasury funds for payments only when the details of the contract have been disclosed;
• crafting narratives about open contracting and beneficial ownership transparency that help assuage politicians’ and officials’ fears that data disclosures will only be used to punish them by CSOs and journalists. Leaders can use transparency to demonstrate the good work they are doing and optimise the delivery of public works, goods and services to make the most of public funds. Moreover, seeing global examples of success along with other countries’ learnings will positively encourage reform (see recommendation 5 for more detail). [43]

Not all of these suggestions will be possible when commitments are being negotiated during an emergency. Nevertheless, helping governments develop such mechanisms should be an important element of the IMF’s follow-up work. For non-emergency financing mechanisms, more time can be taken to design these incentive structures. We therefore recommend that these areas are a focus during non-emergency times, so they are in place when an urgent situation does arise. This will allow the IMF to leverage previous work that has been done in these across beneficial ownership and open contracting.

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