Corruption and fraud in agricultural and energy subsidies: identifying the key issues

Government subsidy programs, like many areas of government expenditure, are at risk of corruption and fraud that cost taxpayers millions of dollars. The extent to which these two factors affect subsidy policy is difficult to fully estimate because it is not commonly detected or reported to official sources. Precise figures are difficult to obtain, and governments are also often unwilling to publicize occurrences of fraud and corruption out of fear of bad publicity or public concern at their lack of oversight.

Research by the Global Subsidies Initiative (GSI) into subsidies often identifies issues relating to fraud and corruption. Because certain actors can generate substantial amounts of illegal money, they often resist reform and calls for greater transparency. The GSI is concerned that fraud and corruption are not being sufficiently addressed in order to remove what may be a significant barrier to subsidy reform.

This policy brief focuses principally on fraud and corruption involving subsidy programs in the energy and agricultural sectors. It will define these problems and give examples of affected subsidy programs. It will also identify and discuss a number of factors that influence how vulnerable subsidy programs are to abuse. The brief concludes with a set of policy  recommendations to policy-makers on how to design subsidy policies that minimize opportunities for fraud and corruption.