2020 has given the world another record for the books: in response to COVID-19, international financial institutions (IFIs) have mobilized unprecedented levels of lending for health and economic programs. While the current extraordinary circumstances may merit extraordinary levels of international financial support, the potential for misuse is an issue of concern as well. Previous experiences demonstrate that, without proper controls, some portion of the financial assistance may end up in the offshore accounts of those who need it least.
Beyond corruption, emergency aid can also be manipulated for political purposes. Absent oversight, authoritarian-minded leaders take advantage of loan-financed projects to reward friends, punish enemies and otherwise expand their political power.
An additional area of concern centers on the rising levels of debt distress. With debt at its highest volume in 50 years -- and triple 2008 levels -- today’s decisions regarding loan obligations will compromise governments’ ability to undertake social and economic programs in the future. The social cost of the debt burden can be devastating: even before COVID-19, 64 countries spent more on debt service than on health care. Debt crises exact a particularly high toll on women, implying additional unpaid care tasks, higher rates of lay-offs and cuts to services.
As the national institution most closely linked to constituent demands, legislatures have a vital role to play in debt deliberation and oversight. In most countries, however, parliaments have found themselves sidelined during loan approval processes. In some cases, the problem lies in the legal frameworks: a 2013 study found that only 59% of legislatures had legal authority to approve loan agreements. Moreover, the creditors’ own working methods center on the executive branch, further exacerbating an imbalance of powers.
Another relevant area of parliamentary responsibility is the conduct of scrutiny or oversight aimed at holding the government to account for the implementation of debt-financed projects and sound management of their repayment. When COVID-19 hit, IMF President Kristalina Georgieva called on countries “to do what it takes” to expedite loan processes, “but keep the receipts.” However, many loan agreements lack the conditionality necessary for effective oversight. A Transparency International (TI) review found that of 85 countries’ IMF agreements, 20 lacked any measurable anti-corruption provision.
On a number of occasions over the last 20 years, parliamentarians have lobbied for recognition of their “right and obligation to be fully involved in development and scrutiny” of lending to their countries. In the COVID-19 context, Members of Parliament have continued to request increased involvement, including to ensure that projects address the needs of women and other underrepresented populations.
From the earliest days of the pandemic, there has been a tendency to frame COVID-19 decisions in oversimplified binary terms, such as public health versus economy; or lockdown versus personal choice. The question of parliamentary engagement in the pandemic response has suffered from a similar binary trap. The choice between (executive branch) expediency versus (parliamentary) oversight is a false one. The best answer lies somewhere in between.
It’s up to parliaments to develop nimble procedures for policymaking and oversight, appropriate to an emergency context. And, it is up to the lenders -- both IFIs and creditor nations -- to develop agreements that reinforce, rather than subvert, the role of parliaments as the elected and representative bodies; charged with acting as a check and balance on executive authority. Without these measures, it’s not just public health that takes a hit under COVID-19, but long-term democratic health as well.
Author: Kristen Sample is the Director of NDI's Democratic Governance team.