Taking on Corruption

Friday, February 24, 2006

THE WORLD Bank's board faces a decision on debt relief today that has broad ramifications for development. The Congo Republic, a small oil state, hopes to win approval of a reduction in its debt , and by some measures it may deserve that. Under the rules governing debt relief, a country whose debt is worth 2 1/2 times its government revenue qualifies for forgiveness, and a team from the International Monetary Fund has determined that Congo meets this standard. But Congo's corrupt government keeps part of its oil revenue from showing up on its books, raising questions as to whether it deserves forgiveness. The World Bank's president, Paul D. Wolfowitz, rightly argues that debt relief should be delayed. The governments that sit on the bank's board, including African representatives and the Europeans who often support them, should accept Mr. Wolfowitz's position.

Congo's efforts to hide oil revenue have been amply documented. The British watchdog group Global Witness has described a network of shell companies established to keep money away from creditors. KPMG, the auditor of Congo's state oil company, has refused to sign off on its accounts three years running. In a memo explaining the finding that Congo met the test for debt relief, the International Monetary Fund concedes that "oil revenues continue to be diverted for other uses and do not reach the treasury." Congo's supporters on the World Bank's board argue that the country has met the objective test for debt relief and should not be kept waiting. It's hard to take this seriously.

Mr. Wolfowitz's proposed remedy is moderate. He suggests that Congo should adopt measures to reduce oil corruption, a position with which even Congo's defenders concur. But rather than having this trigger an immediate and irrevocable $2 billion worth of debt relief, Mr. Wolfowitz wants Congo to implement the anti-corruption measures for three years before getting full debt reduction. In the meantime, relief would flow into a carefully monitored poverty-reduction fund. This would allow Congo to reap some development benefits while maintaining incentives to fight corruption, at least for three years. Given that Congo is benefiting in the meantime from high oil prices, this hardly seems draconian.

The larger issue behind this fight is the seriousness with which donors are willing to take on corruption. Big strides have been made over the past decade in acknowledging that corruption is a problem, but, too often, corrupt countries have been indulged by donors. If Congo's allies on the World Bank's board get their way today, the see-no-evil faction will have won. Better to proceed slowly on Congo -- and send a needed wake-up call to other corrupt countries.

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