IMF for regular asset inventories of govt officials to combat corruption

In a bid to reduce corruption, the International Monetary Fund (IMF) has recommended that the government conduct an annual inventory of assets belonging to all public officials and update it regularly.

Previously, the multilateral lender had asked the government to collect asset statements from key officials only. Last year, during the signing of the $4.7 billion loan agreement, the government pledged to combat corruption.

"To combat high-level corruption effectively, it is essential to reinforce the asset declaration process for public officials by enforcing sanctions for non-compliance and adopting a standardised approach for the usage and regular updating of the declaration," reads the IMF staff report published on Tuesday after approving the release of the third tranche of the loan.

The Washington-based lender has set conditions for releasing the fourth tranche of loans in December, requiring Bangladesh to maintain net international reserves of $14.9 billion by the end of September and $15.3 billion by the end of December. Further conditions include reaching $16.68 billion by the end of March and $19.44 billion by the end of June next year.

Additionally, the conditions imposed include the collection of tax revenue amounting to Tk478,050 crore by the end of the next fiscal year, withdrawal of remittance incentives, payment of arrears for electricity and fertiliser subsidies, withdrawal of LC margins by June 2025, ensuring electronic fund transactions account for at least 50% of government expenditure, and implementing risk-based supervision for 20 banks by March 2025.

Following the discovery of large illegal assets belonging to former inspector general of police Benazir Ahmed and former National Board of Revenue member Matiur Rahman, nationwide discussion and criticism regarding corruption among government employees have ensued.

Lawmakers from the ruling party are also raising questions about corruption within government ranks and urging stricter measures to combat it.

The IMF emphasised that improving governance and reducing corruption would enhance the business environment. Key priorities include enhancing fiscal and financial governance, increasing transparency, and strengthening policy frameworks. The ongoing digitalization of government services aims to bolster transparency and curb corruption.

With IMF assistance, authorities are modernising anti-money laundering and counter-terrorism financing frameworks, including implementing risk-based supervision tools. Plans are underway to conduct onsite examinations at least five high-risk banks by the end of 2025.

Shaikh Yusuf Harun, former public administration secretary and executive chairman of Bangladesh Economic Zones Authority, told The Business Standard that the IMF, using the term "public officials" broadly, essentially recommended accounting for the assets of all government, semi-government, and autonomous institutions, corporations, and state-owned companies, including the Supreme Court, judiciary, military, officials, and employees.

Former cabinet secretary Ali Imam Majumder also told TBS that there is an established system for accounting for government officials' assets. Officials submit their income and asset statements annually through income tax returns. If the IMF suggests different content or approaches, they will be subject to review.

The IMF's recommendation to digitise government services to reduce corruption is undoubtedly valuable and has already begun implementation in some cases, he added.

Iftekharuzzaman, executive director of Transparency International Bangladesh, told TBS that disclosing the assets of government employees is part of government policy. Upon joining, government employees are required to declare their assets, but updates are often not provided thereafter.

"There have been demands from the public and civil society for this information to be published," he added. "Despite discussions on this issue at various times, there has been no initiative to publish asset information."

"If updated asset information of all government employees is disclosed now, it could help prevent corruption," Iftekharuzzaman said. "However, ensuring accountability is crucial. Legal action should be taken in cases of asset-income mismatches or abnormalities."

In 1979, the provision requiring government employees to submit asset accounts every five years was introduced.

The IMF has projected GDP growth at 6.6% and inflation at 7.2% for the next fiscal year.

Referring to the possibility of increasing foreign exchange reserves in the future, the agency stated that current gross FX reserves cover about 2.5 months of imports. However, under the programme, gross FX reserves are projected to increase to cover 3.6 months of imports by FY27.

Fiscal balances in FY25 are expected to show a small improvement, supported by the policy mix aimed at facilitating the transition to the new exchange rate regime.

The IMF noted that following the exchange rate realignment, gross international reserves are projected to gradually increase in FY25. The current account deficit is expected to widen to 2.5% of GDP in FY25 as measures to reduce imports are lifted. Higher-than-expected exports and remittances could help mitigate the rebound in imports.

While the financial account is expected to remain in negative territory, it is anticipated to shift to a surplus, reaching 3.5% of GDP in FY25, driven by the recovery of inflows from trade credit.

Since FY22, increased subsidy demands from independent power producers and fertiliser suppliers have led to domestic arrears totalling about 1% of GDP. The government has committed to avoiding any new accumulation of net arrears and plans to gradually clear these arrears through transparent transfers from the budget over the next five years.

The IMF suggests discontinuing the issuance of special bonds to commercial banks at below-market interest rates to pay off outstanding debts of electricity and fertiliser companies in lieu of subsidy payments.

The IMF has suggested the formation of asset management companies (AMCs) in the private sector, following international best practices, along with mergers to reduce bad debts.

Government officials plan to discuss the establishment of these AMCs with the IMF and other development partners.