The International Monetary Fund and Revenue Transparency

Comments on the IMF’s "Guide on Resource Revenue Transparency"

February 16, 2005  
William Allan  
Section Chief  
Fiscal Affairs Department  
International Monetary Fund  
700 19th Street, N.W.  
Washington, D.C. 20431  
Dear Mr. Allan,  
Human Rights Watch welcomes the International Monetary Fund’s (IMF) publication of the draft Guide on Resource Revenue Transparency (the Guide) and the opportunity to allow public comment on it. We believe reviews under the Code of Good Practices for Fiscal Transparency (the Code) are a valuable tool in assessing and improving the transparency of government activities. In our view, increased government transparency is essential for citizens to hold their government accountable and in order to improve respect for human rights. The addition of the Guide can help to enhance those efforts. However, we have several recommendations regarding the Guide that we believe will strengthen it as a whole.  

Although the IMF considers the Guide and the Code to be voluntary, we believe that resource-rich governments should regularly agree to a review under them. If a government refuses to do so, it would send a troubling sign that the government is not truly committed to transparency. Under those circumstances, we believe that the IMF should insist upon such a review as a component of any further financial cooperation with that government or as part of a Staff Monitored Program.  
The guide states that government should publicly disclose and explain the implications of its equity participation in a project (p. 29). However, we believe that this will not do enough to enhance transparency. Equity participation in projects by companies linked to government officials or by companies that have questionable backgrounds is a serious problem around the world. These types of companies can be very opaque and can foster corruption. In order to deter such companies from participating in projects and to strengthen public oversight over the use of public resources, the Guide should add a recommendation on equity participation that requires full public disclosure of any equity-based projects in a country; all equity participants in a project; and the beneficial owners of the equity-holding companies.  
We welcome the recommendation that the government publicly disclose natural resource-backed debt and any accompanying contractual risks and obligations (p. 43). Opaque oil-backed debt in some countries places a heavy burden on public finances and creates a significant risk of corruption and mismanagement. In addition to any contractual risks and obligations, the Guide should recommend that the government publicly disclose the intended and actual use of those funds; any fees or commissions paid; the identity and level of financial participation of the lenders; and provide verifiable documentation to show that the government received the full amount borrowed.  
Finally, we strongly encourage the Guide to emphasize public and civil society participation as an essential component of compliance. The Guide should strongly recommend that governments widely consult with the public and civil society; disseminate information to them; and include these actors in any independent oversight bodies to monitor the management of public funds generally and those from natural resources in particular. We also encourage the IMF to consult with the public and civil society when assessing government compliance with the Code or the Guide.  
We hope that you will incorporate these recommendations into the Guide. We look forward to further discussions with you on this issue and that of revenue transparency in general.  
Arvind Ganesan  
Business and Human Rights Program  
Human Rights Watch  

Related Material

The International Monetary Fund's draft Guide on Resource Revenue Transparency

Some Transparency, No Accountability: The Use of Oil Revenue in Angola and Its Impact on Human Rights
Report, January 13, 2004