By Chris Ajaero
Countries must improve economic governance and reduce corruption vulnerability to foster inclusive growth.
This is the consensus take of discussants at a seminar on fiscal reforms at this year’s October meetings.
Fiscal reforms are not easy but are necessary to enhance inclusion and create opportunities, so says Fund boss Kristalina Georgieva. In corroboration, Dimitriy Rozhkov of the Fiscal Affairs Department of the IMF adds that reforms play a critical role in boosting growth, reducing poverty and inequality, and accelerating the transition to higher income status. He, however, notes that sustained efforts with high-level political support are needed to strengthen the anti-corruption and governance frameworks. Corruption and weak governance, he posits, hurt the economy.
Hence, in implementing reforms, governments must address the distortions they cause and their impact on economic growth. The implication is that governments should demonstrate clearly that budgets and processes are open and transparent.
Rozhkov points out that governance reforms are multifaceted and should be targeted to circumstances. He cites Georgia and Rwanda as some of the countries that have made significant progress in terms of using governance reforms to promote economic growth and social inclusion.
For Yuanyan Sophia Zhang of the Asia and Pacific Department of the IMF, governance reforms are critical because they help in resource allocation and broadening of the tax base. When revenues generated through taxation are judiciously utilised by the government, she reasons, there’s less to eliminate tax evasion and avoidance.
