Making trillion-dollar stimulus and safety nets work for all: essential steps we can take now

by Sanjay Pradhan, Chief Executive Officer of the Open Government Partnership— Jul 24, 2020

This blog post is co-published with the Open Government Partnership here.

A societal imperative

The magnitudes are staggering. To tackle the unprecedented healthcare emergency and lockdowns necessitated by COVID-19, governments are mobilizing the biggest stimulus and safety net packages we have seen since World War II. Governments and international institutions have announced at least $20 trillion in spending thus far in response to COVID-19. In the G20 countries, $6.3 trillion has been provided in fiscal support so far, representing 9.3 percent of G20 GDP. Germany’s fiscal and monetary stimulus is in excess of 40 percent of GDP! South Africa’s first round fiscal stimulus package is 10 percent of GDP. In Africa, over $114 billion in aid is needed to finance governments’ COVID-19 stimulus packages, of which half has been mobilized. These efforts dwarf the response to the 2008 global financial crisis.

Komari Komari | Shutterstock

Millions of lives and livelihoods are at stake. Rescue packages in each country have a different mix of fiscal, monetary and regulatory measures. Across countries they include massive procurements of life-saving medical supplies and medicines that touch the lives of all citizens; safety nets for millions of vulnerable people; subsidies and credits to protect jobs for thousands of micro, small and medium enterprises (MSME); and major infrastructure investments, tax and regulatory incentives to provide employment for millions. For instance, Nigeria’s $6 billion package aims to provide a safety net for 30-60 million vulnerable households, job protection for half a million in 50,000 MSMEs, and employment for over a million through rural roads projects. Effectiveness of these surpluses is not just of profound economic and social significance – it is a moral imperative. It is also a vital opportunity for governments to build back and sustain citizen trust, which had plummeted to historic lows prior to the pandemic.

But history also tells us that when money moves as fast as in the COVID-19 response there is a risk of corruption, capture, and failure to reach those who need help the most. And we have already seen early signs of these with COVID-19 funds in developed and developing countries alike. In Brazil, federal prosecutors have launched more than 400 investigations into suspected cases involving COVID-19 funds. In Colombia, 14 of the country’s 32 governors are suspected of corruption involving emergency COVID-19 funds.  In the U.S., the incredibly wealthy L.A. Lakers franchise valued at $4.4 billion received $4.6 million from the payroll protection program targeted to small businesses.

Even prior to the pandemic, the track record of many countries is that public spending does not reach many of the intended beneficiaries; the funds “leak”. For instance, 70 percent of the recipients of Sri Lanka’s Samurdhi program for the poor were in fact not poor. Simply scaling up existing safety net programs may not ensure that vulnerable groups receive vital COVID-19 assistance.

The open government approach

To mitigate these risks and achieve their vital goals, an open governance of these massive stimulus and safety nets is essential. Openness, which enables citizens, civil society, businesses to shape programs and “follow the money.” This offers a unique approach by combining government transparency with the active participation of citizens, civil society and oversight institutions to ensure that funds achieve their intended purposes.

This is a central thrust of what government reformers and civil society activists have sought to accomplish through the Open Government Partnership (OGP) over the past decade. The reforms they have co-created and implemented provide excellent innovations and learning which can be applied to COVID-19 stimulus and safety net packages.  For instance:

  • Through Italy’s Open Coesione Platform, the government disclosed details of one million projects supported by 100 billion euro of EU financing and then launched a massive public information campaign to empower citizens, including high-school students, to be on-the-ground monitors of projects.
  • Through the Philippines’ Open Roads Initiative in 2014, the government disclosed details of road expenditures, often geo-coded. Citizens and civil society carried out social audits on the existence and condition of roads, and the formal audit institution used the citizens’ social audits to mandate a government response, saving $300,000 per ghost road identified.
  • Through the Citizen Eyes and Ears mobile app in Kaduna, Nigeria, the government discloses the geo-location of publicly funded projects and citizens upload photos and feedback on these projects which go directly to the Governor’s office and State Legislature for corrective action.

Stages of design and implementation of stimulus & safety nets

These open government approaches can be applied to different stages of design and implementation of COVID-19 stimulus and safety nets packages. They offer an unprecedented opportunity to start to rectify societal inequities that have been laid bare by the pandemic and build a more just recovery. This can’t happen without a transparent and inclusive process.

Open decision-making. To begin with there must be total transparency in the decision-making process. Government needs to be open about who gets the money (including tax and regulatory exemptions), how that was decided and where the funds are coming from. It is vital to ensure that the stimulus policy-making process is evidence-based and inclusive, particularly to amplify the voice of historically marginalized groups and others facing added vulnerabilities due to COVID-19. Any interested member of the public should be able to inform those decisions directly, and the lobbying that accompanies policy and budgetary processes should be made open for all to see through transparent registers like those Chile and Ireland have instituted. Transparency in company ownership can provide oversight over whether bailouts, public contracts or regulatory exemptions are getting captured by the politically connected. Any company registered offshore, not paying their taxes, or undermining other social obligations should not receive support, as Denmark and Canada have instituted.

Open aid.  The terms of the billions of dollars in grants and loans to finance COVID-19 response and recovery from International Financial Institutions such as the World Bank and IMF, and other incurred debt, should be made open. All financial flows should be disclosed according to aid transparency best practices, along with specific targets of what they are intended to accomplish and who they seek to reach. This will start to balance the necessary focus thus far on mobilizing international aid with now an equally concerted attention on how well the money raised is being used to achieve its intended purposes.

Open budgets.  Following an open decision-making process on who the target for support is and where the money is coming from, ministries of finance need to disclose their expenditures, including emergency COVID-19 spending, in regularly updated open data, as the U.S. did for the $800 billion Recovery and Reinvestment Act of 2009. This already poses a challenge because the Open Budget Survey (OBS) for 2020 highlights that three-quarters of the 117 surveyed countries do not have sufficient levels of budget transparency according to the basic minimum standards set in accordance with international norms.

Transparency and oversight of safety nets and MSME support.  Beyond overall budget transparency, transparency in safety nets and engagement and oversight by groups representing the least resilient and those hardest hit by the pandemic can ensure that these funds actually reach the intended beneficiaries. For instance, the Philippines government has released a $4 billion “social amelioration package” for COVID-19. But ensuring these precious resources are not siphoned by corruption and actually reach the targeted 18 million vulnerable — senior citizens, people with disabilities, pregnant women, indigent indigenous people, and the unemployed — will require transparency, participation and oversight on who is eligible and a citizens’ grievance redressal mechanism, mediated by the vigilant Filipino civil society and overseen by formal accountability institutions. Similarly, transparency and monitoring by business associations is needed to ensure that support in stimulus packages reach targeted MSMEs. This is a key emerging focus in the design and monitoring of South Africa’s package where smaller MSMEs in distress could not access the initial credit guarantee scheme.

Open contracts.  Governments also need to ensure that all procurement processes are open and competitive – from the tender to execution. Yet less than one-third of countries have taken steps to publish contracting data. This poses a particular risk of price gouging and corruption in times of COVID-19, even jeopardizing lives. As New York desperately struggled to acquire ventilators, it paid – through an opaque contract – a whopping $69 million for 1,500 ventilators at triple the retail price; tragically, none were even delivered.  Open contracting and open spending empowers citizens, journalists and civil society to follow the money and become the government’s eyes and ears on the ground. For instance, in Paraguay and Colombia, the government publishes emergency contracts as open data that civil society monitors, including by tracking price differences for COVID-19 supplies. For public contracts in stimulus packages more broadly (e.g., for infrastructure projects), open contracting can save money, fight corruption and spur economic activity.  Through Ukraine’s open contracting platform over two years, citizens flagged 14,000 violations, the government saved $1 billion, 82% of entrepreneurs reported reduced corruption, and there was a 50% increase in contract bids, including from MSMEs.

Formal oversight institutions.  At the heart of an open government approach is a partnership of government with citizens, civil society and accountability institutions. Formal oversight, audit functions and whistleblower protections are essential. All stimulus spending should be audited by independent institutions, and regular reports made to parliament. In this regard, there are important opportunities for audit institutions to collaborate with civil society in value-for-money audits or following the money, such as the Philippines’ Commission of Audit using citizens’ social audits under the Open Roads Initiative.  Where corruption is uncovered, prosecutions should be made. Where nefarious political influence is suspected, the media should be free to report.

Participation & monitoring by citizens, civil society & businesses.  Beyond formal oversight mechanisms, government, civil society and business associations need to shape and monitor packages to ensure that they have the desired impact. This means grassroots groups monitoring infrastructure projects, checking that those vulnerable households eligible for safety nets and cash transfers get their support (while respecting right to privacy), and informal sector businesses who may not be on the government’s radar receive targeted MSME support. A particularly important imperative is to empower civil society groups representing the marginalized and vulnerable groups to amplify their voice in shaping and monitoring COVID-19 safety net programs.  In Africa, the Follow the Money network of civil society organizations is tracking COVID-19 related spending, including aid flows, to ensure it is reaching those it is intended to help. These youth civil society organizations are also leveraging social media and digital technology to solicit beneficiary feedback.

Where civil society uncovers corruption, waste or poor implementation government must commit to address those deficiencies quickly to close the feedback loop. Only then will governments be able to earn or sustain citizens’ trust.

Civic space & media freedoms.  For corruption and waste to be uncovered, the protection of civil liberties, basic freedoms of the press, and access to information must be sacrosanct. Unfortunately, many countries have gone in the opposite direction by shutting down civic space, and restricting freedom of information. It is imperative to roll these back for effective design, implementation and monitoring of COVID-19 programs.

A call to action:  the essential steps

For all of these measures to happen, we need a campaign in every country to monitor trillions or billions of dollars for millions of people, to ensure stimulus and safety net packages achieve their tremendous promise and imperative of saving lives and livelihoods. This requires complementary and mutually reinforcing actions by governments, civil society, business associations, accountability institutions, and international donors. Our call to action for each stakeholder group is summarized in this graphic. As citizens all over the world have been mobilized around curbing COVID-19 contagion, there is an unprecedented opportunity to now channel that attention and mobilize citizens and citizen groups to shape and oversee packages that will directly impact their lives. Indeed, with so many lives and livelihoods and such massive resources at stake, we need collective, collaborative leadership – a coalition of stakeholder groups to join forces and ensure that stimulus and safety nets flow through open governments, open budgets and open contracts through to the “last mile” of service delivery. If we do this, we won’t just ensure an effective COVID-19 response – we will build back a better governance system that will institutionalize openness and citizen oversight, sustain citizen trust by putting citizens at the heart of governance, and produce a more fair and just society for better times to come.

 

 

3 comments:

  1. Brilliant piece.
    To be candid, a good portion of stimulus funds by the IMF and other organizations would leak away before getting to their destination due to mismanagement and corruption. This would very likely be more common among developing nations.

    Hint: I am a Nigerian, I have a clue what I’m talking about [Notwithstanding the Kaduna state example].

    Please find my own approach to the solution in the link below:

    https://www.linkedin.com/feed/update/urn:li:activity:6691560148655198208/

  2. Good Sanjay. Nearly all of these massive programs you describe here have some measure of international support: IFI, EU, and so on. Why not develop some standard open budgeting language and a set of financing targets for transparency monitoring (which could include either direct civil society support or bilateral partner based as part of their membership obligations in the iFIs) using your checklist above, that all such support incorporates? Properly explained, finance ministries, audit offices, and parliaments would also want to know where this money (and any debts) are going too, so if it can be done on a consensual basis, so much the better. More transparency would also turn up the targeting mistakes, bottlenecks, and vulnerable groups being missed by these operations, which is already a problem and will get worse.

  3. Excellent, insightful essay about the need for transparency and oversight in monitoring expenditures of government funds for stimulating the economy in the face of Covid-19. Every government should set up an INDEPENDENT unit in the inspectors general/auditor general’s office to undertake this responsibility staffed with qualified individuals. The funding bill should make explicit provision for the establishment of these units with adequate budget so that funds go to the target groups and purposes. This should be followed up with a full formal evaluation of the intervention program using OECD criteria to establish accountability for results and what can be learned from these stimuli.

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