The Financial Express

Ensuring accountability through transparency in public expenditure in health sector

| Updated: May 31, 2021 21:52:19

Ensuring accountability through transparency in public expenditure in health sector

Governments around the world are playing a crucial role in providing lifelines to people and firms to help combat the pandemic and its economic fallout. To support the effectiveness of these efforts, it is important that such spending should also be subject to transparency and accountability. UNICEF, the Islamic Development Bank (IDB) and also the International Monetary Fund (IMF) recognise these as essential conditions for better governance within the health sector.

In fact, the IMF has now made it clear that liability is essential and that can only be generated through good governance both with regard to expenditure in purchase of necessary health related items and in the running of health institutions or in the obtaining of vaccines to stem the growth and spread of the Covid pandemic. These measures will have to govern the health dynamics if any country is seeking IMF financing during this crisis. This makes sense.

Economists associated with the World Bank, the IMF and also the Asian Development Bank have also reiterated that the matrix of financial assistance also needs to include commitments by concerned Parties to publish pandemic-related procurement contracts and the beneficial ownership of companies awarded with these contracts, as well as COVID-19 spending reports and audit results. It is believed that such an approach will reduce chances of corruption and also possibility of wastage of funds.

In this regard, international financial institutions have also hinted that they have noticed on many occasions funds received are unnecessarily eaten up through travel in the name of gaining greater experience related to health measures in other countries. This is undertaken despite greater advancements through digitalisation.

The measures are tailored to country circumstances and the severity of corruption risks. In addition, all recipient countries commit to undertake a due diligence exercise that is aimed at ensuring that a country's central bank is able to provide reliable information and transparently manage the funds that it receives from the IMF.

Recently, Chady El-Khoury, associated with the Financial Integrity Group in the IMF's Legal Department, Jiro Honda, working in the IMF's Fiscal Affairs Department; Johan Mathisen, part of the IMF's Strategy, Policy and Review Department, and Etienne B. Yehoue an economist at the International Monetary Fund have collectively after careful research come to some important conclusions.

They have noted that it is not easy to address the paradigm related to corruption very easily. Sometimes, one can only see the tip of this iceberg. This generates focus on the existing problem but that does not mean that everything is clear and easily discernible. It has been underlined that addressing corruption might take a long time. In this regard one needs to note that the IMF, having recognised that longer term governance problems associated with corruption is here to stay, drafted a Framework for Enhanced Fund Engagement in 2018, with the specific purpose of addressing issues arising from multi-year IMF lending arrangements associated with the health sectors of IMF member countries. It is quite understandable. One understands that the relevant institutions in the European Union have also been tracking this exercise.

Since the advent of the Covid pandemic in the beginning of January 2020, there has been special focus in this regard on certain regions and countries. Special teams have been created to gather information as to how these countries have been implementing their governance measures in pandemic-related spending.

The group of experts mentioned above as well as others associated with such an exercise has focused on different dimensions. In the case of Dominican Republic, Guinea, Nepal, and Ukraine they have discovered that capacity constraints had contributed to limited progress in the IMF being able to provide capacity development to support implementation.

However, in another area-- regarding the publication of contract information, most of the commitments have or are in the process of being met. This aspect includes collecting and publishing of the benefits that are ensuing to the ownership of contracting companies. This is a movement forward as such a measure will help to deter corruption that could arise through the facilitation of potential conflicts-of-interest involving public officials. This has the connotation where it is required that bidding companies during a tender will have to provide the names of the people with effective control over a company, also known as the "beneficial owners".

This information has to be provided to the procurement agency, which, in turn, must publish it. Implementation of this innovative practice has proven challenging in some cases, with only half of the countries (including Benin, Ecuador, Jordan, Malawi, and Moldova) having implemented this commitment or made substantial progress towards it. However, such commitments made in the context of IMF financing during the pandemic have helped spur some countries, such as Kenya and the Kyrgyz Republic, to adopt this reform on a permanent basis.

After this, comes another relevant dimension. This relates to the important aspect pertaining to audits that need to be carried out on emergency spending. Normally, the deadline for conducting ex-post audits is typically set at 3-12 months after the end of the fiscal year. Some analysts have observed that this time frame makes it too early to assess implementation. However, some countries, such as Jamaica, Honduras, Maldives, and Sierra Leone have already taken early action by conducting risk-based, real-time audits. Where needed, the IMF has stepped up its capacity development to help supreme audit institutions in the designated countries to fulfill their responsibility. They have also supported efforts to ensure that such information is easily retrievable. Such supplementary support definitely helps to reduce corruption and increase accountability.

The IMF and the World Bank also have to take on some other significant challenges. They have to focus on some other aspects associated with accountability and transparency in the crisis response. This also includes broader governance and anti-corruption reforms and how they are progressing in the context of multi-year IMF financing arrangements. Analysts in this regard have referred to reforms that are being undertaken pertaining to fiscal governance in some countries in Africa-- Gambia, Liberia, Senegal and Rwanda, in Ecuador in South America, and in Jordan in the Middle East. Similarly, attention is being paid to revision and improvement of anti-corruption and anti-money laundering frameworks in certain countries in Africa- Angola, Republic of Congo, Kenya and Tunisia. Financial sector oversight and central bank governance has also been of interest in the case of Liberia in Africa and Ukraine in Europe.

These efforts that are being undertaken in these countries should act as a mode of guidance for public expenditure and use of loans undertaken in Bangladesh by the institutions associated with our health sector and also by those companies who are having an interactive engagement with such institutions.

We need to remember that transparency and accountability are major factors in the crisis response to this ongoing pandemic response. They are important for all countries, regardless of their income level-- developing or developed. We also need to remember that such an approach towards governance is a matter of course and commonplace in many countries like Norway and Sweden who are not essentially busy trying to obtain IMF financing to resolve their health issue problems.

However, one needs to draw attention to the fact that some countries publish comprehensive spending information on dedicated transparency portals as in Colombia, Costa Rica, France, and Peru. Others, such as South Korea, conduct frequent external audits to verify pandemic-related spending. Some are also developing clear guidelines for emergency procurement, such as Spain. There is also Romania which is trying to detect conflicts-of-interest by analysing beneficial ownership data and financial disclosures of senior public officials. The United Kingdom and the United States are generally ahead in terms of ensuring accountability but lack of required governance is also sometimes coming to the surface with regard to the activities of some pharmaceutical companies and their socio-metric overlap with politicians. This has also been seen in several countries in South Asia, the Middle East and SouthEast Asia.

We need to remember that during these difficult times sustained country engagement on governance and anti-corruption will be necessary to support effective implementation of reforms undertaken during the pandemic and beyond. We have to go beyond anti-corruption to address fiscal governance, financial sector oversight, central bank governance, market regulation, rule of law, and anti-money laundering frameworks. There is no other option.

Once we agree on such a required paradigm, within our country, we can then seek required technical assistance and training facilities for implementing the necessary good governance measures for capacity development. We also need to remember that efforts to improve governance will also depend on high-level political ownership of reforms, international cooperation, and a joint effort with civil society and the private sector, among other stakeholders. This will not be easy but it is possible.

Muhammad Zamir, a former Ambassador, is an analyst specialised in foreign affairs, right to information and good governance.

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