Washington, London- The International Monetary Fund has warned of the rising social and economic costs of corruption on the world economy on the eve of an international anti-corruption summit hosted by London.
A recent estimate put the annual cost of bribery at around $1.5 to $2 trillion, roughly 2 percent of global GDP, said the IMF in a report issued on Wednesday.
The paper, Corruption: Costs and Mitigating Strategies, identified four building blocks to fight corruption. They are the consolidation of transparency, enhancing the rule of law, de-regulation and simplification of the work of state employees, and the establishment of a clear legal framework by developing a cadre of competent public officials who are independent of both private influence and political interference.
“While the direct economic costs of corruption are well known, the indirect costs may be even more substantial and debilitating, leading to low growth and greater income inequality,” said IMF Managing Director Christine Lagarde.
“Corruption also has a broader corrosive impact on society. It undermines trust in government and erodes the ethical standards of private citizens,” she wrote in an essay published by the global lending agency.
“Both poverty and unemployment can be symptoms of chronic corruption,” she stated.
“Given the potential impact of corruption on macroeconomic stability and sustainable economic growth, the IMF has been actively engaged in helping our members design and implement anti-corruption strategies,” Lagarde added.
She urged governments to strengthen the rule of law and increase transparency in order to discourage those offering bribes and those accepting them. She also said it was important to liberalize and deregulate economic activity in order to remove the lure of corruption.
The IMF’s report came as London gears up to host the international summit on corruption under the auspices of Prime Minister David Cameron on Thursday.
The focus of discussions at the summit will be the Panama Papers leaks, one the world’s biggest scandals of the century.
The issue of global corruption has gained momentum after the leak of millions of confidential documents from a Panamanian law firm. The Panama Papers showed how some of the world’s richest people hide assets in shell companies to avoid paying taxes.