The Malta Independent 27 May 2024, Monday
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Panama Papers: Bribes eat up $2 trillion in global economy - finance leader

Associated Press Thursday, 12 May 2016, 10:05 Last update: about 9 years ago

A global finance leader asserts that as much as $2 trillion, or 2 percent of the global economy, in bribe money courses through developing and developed countries each year, undermining economic growth and diminishing basic services most needed by the poor.

"Corruption has a pernicious effect on the economy," the International Monetary Fund's managing director, Christine Lagarde, wrote in an essay published Wednesday by the global lending agency, one day before an anti-corruption summit in London. The summit is being attended by Prime Minister Joseph Muscat.

Lagarde said corruption hinders domestic and foreign investment and leads to less social spending on education and health care, which mostly hurts the poor. The $2 trillion value for bribes is an IMF estimate.

In addition to the economic costs, corruption has broader "corrosive impacts" by undermining trust in government and eroding ethical standards, Lagarde added.

The issue of global corruption has gained momentum after the leak of millions of confidential documents from a Panamanian law firm. The Panama Papers showed how some of the world's richest people hide assets in shell companies to avoid paying taxes.

The London conference Thursday was expected to draw politicians from 40 countries and representatives from the IMF and the World Bank. Lagarde's essay comes days after hundreds of economists urged world leaders to abolish tax havens, saying they benefit rich individuals and multinational corporations and increase inequality.

Lagarde urged governments to strengthen the rule of law and increase transparency in order to discourage those offering bribes and those accepting them. She also said it was important to liberalize and deregulate economic activity in order to remove the lure of corruption.

"The key objective is to develop a cadre of public officials who are ... independent from both private influence and political interference," Lagarde wrote.

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