Bribery and corruption cost the world economy as much as US$2 trillion every year, money that instead could be used to fight poverty, create jobs, and protect the environment. A new report by the International Monetary Fund says the money lost to corruption every year is 2% of the global GDP.
IMF chief Christine Lagarde says the direct economic costs of corruption are clear. But the indirect costs may be even worse “leading to low growth and greater income inequality.
It undermines trust in government and erodes the ethical standards of private citizens, she said this week in London.
Lagarde says investors look for countries whose public officials are high on the integrity list because they want assurances they will not have to constantly pay bribes.
The IMF defines corruption as an abuse of public office for private gain.” But it also includes tax evasion and arbitrary tax exemptions that give citizens little incentive to pay taxes themselves. Bribery and corruption weaken banking systems and shut people out of the financial markets.
The IMF also says the social and environmental costs of corruption are significant, leading to poorly enforced regulations, more pollution, and destruction of natural resources.
The report recommends nations adopt international standards for fiscal and financial transparency to fight corruption and make the threat of prosecution for such crimes credible. It also calls a free press a key player in uncovering the problem.