Good Governance Lessons from IMF/WB Spring Meetings

How can governments cope with migration, trade tensions, food insecurity, or climate change with poor governance?  These questions were at the heart of many sessions at the annual International Monetary Fund and World Bank Spring Meetings last week in Washington. I was fortunate to attend numerous sessions, augmented by watching webcast replays.
My takeaways on sustainable development, good governance, and government digital transformation have been collected in 3 blog entries. This includes summary takeaways followed by takeaways from each session. Webcast replays are embedded.

Context

Top 10 Good Governance Takeaways

Country governance limitations hold back progress. Good governance seems to be the never-ending story of academic papers, annual reports, protests, and revolution. There seems to be an underlying narrative theme in the Western press that emerging economies deserve to remain poor because citizens and governments elect to be corrupt. (That view seems to forget that the supply side of corruption often comes from advanced countries.)
My objective was to see through the Groundhog Day of recurrent governance themes at international events like this. To uncover practical advice beyond assertions of governance “best practices”.

  1. Governance is not a zero-sum game: governance problems leak across borders creating fragile conditions, such as increasing migration and ethnic conflict
  2. Country ownership critical: advisors are there to assist, and governments need to set the governance reform agenda based on the cultural context, recognizing that there can be more than one way to succeed
  3. Good governance is difficult: even the International Financial Institutions have experienced governance challenges, most recently around organizational change management at the World Bank
  4. Governance is a long-term reform: sustainable effective governance reform, beyond initiatives designed to look good to improved practices, takes decades, and requires persistence
  5. Medium term perspective: governance reform benefits from a medium-term approach to give time for impact, learning, and improvement
  6. Break silos: holistic perspectives across government, and integration with development partners that is coordinated improves reform outcomes
  7. Fiscal transparency enabler: fiscal transparency including economic plans, budgets, revenue, debt, and spending information, provides confidence in reform with citizens, businesses, civil society and development partners
  8. Citizen engagement: the idea of mainstreaming citizen engagement, enabled by fiscal transparency, was not discussed in any depth even though people-centred governance was mentioned as was need to shift to service-oriented approaches – perhaps a missing opportunity
  9. Governance structures and practices important: independence, competence, oversight, audit, and data transparency are important ingredients to improve institutional governance
  10. Technology helps: digital technologies are ideal to create transparent, accountable, and engaged government

The World Uncertainty Index


This session introduced the Economic Policy Uncertainty Index that currently includes 40 countries. IMF staff took material from the Economist Intelligence Unit to track global uncertainty. Some takeaways:

  • Text mining algorithms were used by looking at synonyms of “uncertainty”, meaning that the results track perception
  • Growing uncertainty and increasing number of uncertainty shocks (Brexit, trade tensions, migration, climate disasters, populism etc.) challenges policymakers and medium-term planning approaches

Central Bank Governance


This session focused on good governance practices for central banks. Governance failures in Angola ($500M fraud), Liberia (unauthorized printing of money), and Moldova ($1B fraud) central banks were compared to similar situations in the private sector. Some takeaways:

  • Governance structures including organization, independence, competence and oversight critical in central banks
  • Need for risk-based approaches in governance to focus more effort at higher risk activities and less effort at lower risk
  • Effective audit is associated with good governance to better identify risk and uncover governance deficiencies
  • There doesn’t appear to be a formula for calculating the most effective extent of central bank independence from governments, and the independence of boards for oversight
  • These governance and risk management lessons apply to almost all government organizations

Rising Corporate Market Power and its Macroeconomic Effects


This session summarized an IMF Study that examined the economic impact of market domination. This is somewhat timely given the domination of many Internet giants. Some takeaways:

  • Market domination results in higher markups and less investment in innovation
  • Dominant firms have increasing influence on governments in an era of devolving governance, privatizations and public-private partnerships
  • Higher markups and an increasing influence on government policy through lobbying is associated with a negative impact on citizen wellbeing

Medium-Term Revenue Strategy: An Effective Approach to Improving Revenue Mobilization

This session focused on medium-term revenue strategies to effectively increase government revenue including tax reform. Some takeaways:

  • Medium-term approaches to budgeting (MTBF), expenditures (MTEF), performance (MTPF) and sectors (MTSS) have become mainstream in the development narrative, so revenue strategies are necessary for holistic approaches to policy
  • Effective governments align debt, revenue and spending policies and practices particularly for resource-rich countries and those that are heavily indebted

Capacity Development: Building Institutions and Beyond

  • Capacity building represents about 1/3 of what the IMF does, but requires country ownership and coordination – although unclear on how that works
  • Institutional building takes decades to have significant positive outcomes especially to change norms and close the gaps between legislated processes and actual practices
  • There is often more than one way for capacity building, needs to adapt to social and cultural context
  • Sequencing is critical, where governments should not try to do too much, with capacity building focused on talent management and staff retention

Preventing Conflict, Promoting Peace


This panel examined some of the drivers of state fragility and effective post-conflict policy. Some takeaways:

  • Poverty, climate change, and inequality were sited as major drivers for conflict
  • Large governance interventions funded by donors are often less effective than smaller people-centred interventions focused on the cultural context
  • Aligning governments, donors, and NGOs in post-conflict situations is difficult because of inability to gain aggregative effects from siloed interventions

Curbing Corruption by Improving Economic Governance in the Middle East and Central Asia

  • Regulatory simplification and fiscal reform are anti-corruption tools, especially to improve trust in government
  • Transparency, and the use of e-governance systems provides foundation for accountability, while enables
  • Public service operating government financial management in many countries is not merit-based, not accountable to citizens, so talent management and reduced political interference part of governance reform
  • State-Owned Enterprise, resource revenue, local government, and business transparency is also important in reducing corruption
  • Need for a more systematic approach to anti-corruption beyond individual efforts, particularly looking at the supply side and how money is laundered

Managing Capital Flows: What is the Right Policy Mix?


This session focused on central bank interventions and macroeconomic management. The panel discussed highly technical issues augmented by anecdotes from the financial crisis. Relevant governance takeaways include:

  • Central bank trust through transparency is needed for effective interventions
  • Policy is complex considering monetary policy, capital controls, and exchange rates, and the need to align with national goals
  • Conventional thinking and conventional policy often changes during crisis situations

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