Debt relief, aid and accountability in the wake of Covid-19

This article is written by Richard Dion, an independent consultant focusing on governance, communications and regional development based in Germany and former regional director for EITI.

While we’re not over the hill yet, Covid-19 has at least had the considerable attention and policy response that it deserves in OECD countries.

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With that, many OECD countries are now playing a key role in helping to reduce its spread in developing countries, which are still at risk despite lower infection rates.

__ Accountability remains just as elusive as it was a generation ago.__

In late March, the IMF and its member states took a first step and wrote off the debt of some of the world’s most poorly governed countries under the IMF’s revamped Catastrophe Containment and Relief Trust (CCRT). The $500 million USD of grants helped these countries to cover their IMF debt obligations for an initial phase over the next six months, to allow them to focus more on responding to the Covid-19 crisis.

The G20’s Saudi Presidency in mid-April advocated for an additional $8 billion in relief.

This assistance is crucial in the current environment. However, the international community should be under no illusion about the need for dramatically better governance in resource-rich countries receiving aid in the coming months.

The spectre of accountability

Muted progress has been made in many resource-rich countries through the Extractive Industries Transparency Initiative (EITI), which publishes data regarding extractive resource revenues and is now being implemented in over 50 countries. However, there is much still to do. If transparency is to see, accountability is to see results.

In many countries where the EITI standard has been implemented, accountability remains just as elusive as it was a generation ago.

According to Transparency International’s Corruption Perceptions Index (CPI), the recipient countries of the IMF’s debt relief have doggedly high governance challenges. The CPI ranking for some recipient countries includes (with the bottom country ranking of 180 being Somalia) Central African Republic (153), Chad (162), Democratic Republic of the Congo (168), Guinea-Bissau (168), Haiti (168), Liberia (137), Mali (130) and Tajikistan (153). The CPI, the just-released Bertelsmann Transformation Index, and the just-launched Berggruen Governance Index offer a relatively balanced view and a glimpse into the inner workings of governments.

A large effort regarding debt relief was necessary, with many resource-rich countries, which often are reliant on income from extractive industries, reeling even further due to plunging oil and other mineral prices.

When such a large amount of funds is funnelled to a very small circle of government elites, the absolute minimum that citizens in both countries can demand is a thorough public accounting of those funds.

However, G20 countries can also benefit from debt relief. For example, this is also an opportunity to make tangible headway in transparency and accountability, which is in the G20’s interest for a number of reasons:

• Allocating funds better can improve the effectiveness of aid and save lives in the short-term;
• G20 citizens will be pressing for a transparent accounting of aid money, particularly because the EU will have its own internal budget challenges in regards to its own economic stimulus packages;
• Improving the effectiveness of aid could also counter rising nationalist sentiments in individual European countries, which have been gaining ground since Europe’s migrant crisis in 2015;
• Governance in many African countries remains a serious challenge and has been for decades. If now is not a time for leverage, then when?
• A proper accounting of health assistance could become a “force-multiplier”, leading to more accountability in other sectors of the economy (i.e. infrastructure).

When such a large amount of funds is funnelled to a very small circle of government elites (sometimes through banks in third countries), the absolute minimum that citizens in both countries can demand is a thorough public accounting of those funds. In comparison to the enormous sums involved, this type of accounting constitutes a very small and very prudent upfront investment, which regrettably, has not been implemented enough.

Coupling debt relief with some of the following proposals could help to ensure more accountability in the wake of considerable financial assistance:

• Each recipient country should name a specific "health czar” and “economic czar" - with overall responsibility (and accountability) for the aid;
• The recipient countries should create ministerial committees to oversee the funding and disbursement following agreed-upon plans (with international observers);
• The assistance should be contingent on mandatory public reporting (weekly at least), via a dedicated website and public radio in each country, (all information in an accessible format — both digital and analogue. This is a great opportunity for citizens to learn and to bolster trust in government services);
• The funding should come in phased delivery, beginning with the most urgent needs and then following key milestones;
• Countries should register conflicts of interest for those receiving contracts, with a list of the firm’s beneficial owners (the actual persons owning 5% or a firm’s interests) of recipient organisations;
• If any questionable behaviour or delay should arise, for example in customs approvals, it should be handled at the most senior level (Minister or President if need be);

Every penny counts in a pandemic

To help developing countries, the EU could share its own lessons learned about what worked and did not work in various member states over the last three months — policies of closing down the economy, closing schools, and what constitutes an essential worker. Any lessons learned should include policies on how to dampen price gouging.

Accountability goes both ways and knows no borders, particularly in the wake of a pandemic

The United Nations, specifically the World Health Organization (WHO), should play a strong role. However, too much aid channelled through the WHO or other UN agencies could undermine the capacity of ministries of health. WHO should be supporting programmes, not running them. Any economic assistance should have the same approach.

The film noir classic, "The Third Man", focuses on the distribution of fake penicillin in post-World War II Austria. In the final scene on top of a ferris wheel, Orson Welles’s character Harry Lime, asks his old friend Holly Martins, played by Joseph Cotton, about the temptation and the human impact of corruption. Referring to the people below, he says:

"Would you really feel any pity if one of those dots stopped moving forever? lf l offered you 20,000 for every dot that stopped, would you really, old man, tell me to keep my money? Or would you calculate how many dots you could afford to spend?”

Every time someone takes, someone else has given. Accountability goes both ways and knows no borders, particularly in the wake of a pandemic. Every penny counts — together we can not only ensure that assistance is provided timely and with impact, but also that longer-term it will increase accountability in both supply and demand of development assistance. — Richard Dion

(Picture credit: Unsplash)