Good governance is essential to countries' continued economic prosperity

Pages18-19

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Good governance has been found to have a direct impact on economic efficiency and growth, which the IMF promotes as part of its mandate.

Although the IMF has traditionally focused on encouraging countries to correct macroeconomic imbalances, reduce inflation, and implement market reforms, it has increasingly found that countries must adopt broader institutional reforms if they are to establish and maintain private sector confidence and lay the foundation for durable economic growth.

The responsibility for governance issues lies primarily with the national authorities, and the IMF has supported their willingness and commitment to address such issues. The IMF has contributed to good governance through its policy advice, technical assistance, and dissemination of codes and best practices aimed at strengthening institutions and systems and the functioning of markets. Through its technical assistance, the IMF * helps improve the management of public resources through reforms of public sector institutions (the treasury, the central bank, public enterprises, and the official statistics function), including such administrative procedures as expenditure control, budget management, and revenue collection; and

* supports the development and maintenance of an open and stable economic and regulatory environment-- for example, price systems, exchange and trade regimes, and banking systems and related regulations-- conducive to efficient private sector activities.

In July 1997, the Executive Board adopted guidelines for the role of the IMF in governance issues (see the IMF website: www.imf.org). The IMF would pay greater attention to governance issues, in particular throughPage 19

* a more comprehensive treatment, in the context of Article IV consultations and IMF-supported programs, of those governance issues that fall within the IMF's mandate and expertise;

* a more proactive approach in advocating policies and the development of institutions and administrative systems that eliminate opportunities for profit seeking, corruption, and fraudulent activity in the way public resources are managed;

* an evenhanded treatment of governance issues in all member countries; and

* enhanced collaboration with other multilateral...

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