Preventing misallocation or misuse of peacebuilding funds – Effective measures

07/2023 | Maureen Moriarty

Originally posted in Swisspeace’s à propos issue number 181: “Financing Peace — What are the priorities?”


Sustainable Development Goal (SDG) 16, Peace, Justice, and Strong Institutions, is about promoting peaceful and inclusive societies, providing access to justice for all, and building effective, accountable, and inclusive institutions at all levels. Currently, there are approximately 110 armed conflicts worldwide. High levels of armed violence and insecurity have a destructive impact on a country’s development and prospects for peace.

The work of peacebuilding has always been underfunded in comparison to need. Financing comes mainly through (international) donors who provide important resources to individual organizations and projects. The problems with this approach, including fragmentation, short-term financing, limited local ownership and prioritizing donors’ agenda, have been well-documented. In any case, in a post-pandemic, resource-constrained environment, experts, policymakers, and practitioners must come to terms with the fact that peacebuilding will need to be delivered with fewer financial resources. Peacebuilding is primarily a national challenge and responsibility. Ideally, citizens, with support from their governments, co-create the foundations of lasting peace. But what happens when government actors divert huge sums of money from their national budgets or engage in kleptocracy to enrich themselves, their associates, or even transnational criminal actors? First, there are often not enough funds to provide basic services such as education and health, provide jobs and livelihoods, ensure food security, and realize human rights. This helps create the conditions for conflict to thrive. Second, these abuses of power thrive upon and become embedded within conflict-affected state contexts, whether characterized by intergroup tensions, political violence, or armed conflict.

Mozambique’s Hidden Debts Scandal is a prime example of how financial corruption can plunge a country more deeply into poverty and fragility. The scandal involves former Mozambique Minister of Finance Manuel Chang, bankers in Europe, businesspeople based in the Middle East, and senior politicians and public servants in Mozambique who conspired to organize a USD 2 billion loan to Mozambique – an incredible 12% of GDP of one of the poorest countries in the world. The loan was kept hidden. None of the borrowed money, except bribes, went to Mozambique, and there were no services or products of benefit to the Mozambican people. The knock-on effects of such a huge corruption scandal have already cost Mozambique at least USD 11 billion – nearly the country’s entire 2016 GDP – and almost 2 million people have been pushed into poverty. If Mozambique is forced to service this debt, there is USD 4 billion more to pay, on top of future damaging impacts.

The Hidden Debts Scandal was provoked by political conflict, a culture of impunity, fiscal and economic crises, public sector debt, and corruption. Serious impacts are projected to continue, including weaker governance, weaker institutions, less democracy, more political conflict, and flight of public investment, all leading to greater poverty. In other words, corruption in general and financial corruption specifically fuel a mutually reinforcing vulnerability to conflict and weaken prospects for peace.


Understanding Anti-Corruption Efforts and the Need for Practical Action

A recent online conversation amongst anti-corruption experts observed at the 20th anniversary of the United Nations Convention against Corruption (UNCAC) has been marked, among other things, by a growing body of research that attempts to understand why recent anti-corruption reforms in many countries have failed. Various factors are being discussed, such as the type of political regime, political will, and historical context. Anti-corruption expert Alexey Konov used the phrase “inattention to reality” as a high-level diagnosis, which was acknowledged by further experts as impactful and accurate, highlighting the necessity to make anti-corruption efforts tangible. The work conducted by SOAS-ACE (Anti-Corruption Evidence), Mushtaq Khan, and Pallavi Roy revolves around the serious consideration of reality and the contextual landscape of power, interests, and potential leverage points for effective action. Their approach fosters the successful implementation of practical anti-corruption action at the appropriate level(s) by, with, and through citizens in partnership with government and state institutions.


Curbing Financial Corruption and Illicit Financial Flows

With this in mind, it is time to take a straightforward view of how financial corruption and illicit financial flows (IFFs) impact peacebuilding and to develop a pragmatic approach to curbing them, particularly where government corruption is at the source of IFFs, and their will to address it is low, despite rhetoric to the contrary.

Financial corruption, defined here as opacity in the global financial system and the actions such opacity enables, is often a major aggravator of conflict. The link between peace and illicit financial flows is made explicit in SDG Target 16.4 to significantly reduce illicit financial flows, strengthen the recovery and return of stolen assets, and combat all forms of organized crime.

The work and funding of peacebuilding require a two-fold approach. First, advanced economies must pull their weight in the fight against financial corruption. This includes closing any loopholes, legal and otherwise, that enable IFFs’ and corrupt leaders and actors to find a safe haven that perpetuates financial secrecy.  Transparency International and Global Financial Integrity provide guidance and resources to donors and development and peacebuilding actors to do their part to ensure their work contributes to closing these loopholes in the development and implementation of projects. Second – and this is where deep contextual knowledge of the power, interests, and potential leverage points for action becomes important – reforms to curb financial corruption must be implemented within states. Again, organizations like CMI U4 can provide research and practical guidance. Reforms in auditing and financial controls, budgeting, private sector engagement, procurement, public service delivery, tax and revenue collection, and ensuring natural resource extraction financially benefits host communities are just a few examples of how illicit financial flows can be curbed and anti-corruption impacts “through the back door” are achieved.


Challenges and Path Forward

A backlash against and resistance to disruptions in IFFs and the beneficiaries of financial corruption is inevitable. The principles of localizationconflict sensitivity, and thinking and working politically operationalized practically will help ensure better “attention to reality.”

The proliferation of intergroup tensions, political violence, or armed conflict requires peacebuilding solutions. These solutions involve many actors working on many dimensions of conflict and peace, including institution building, infrastructure, humanitarian, land, and governance, to name a few. Resources are needed to fund peace, yet financial corruption and the opacity it creates drain countries, including advanced economies, of the financial resources to achieve transformative peacebuilding.

Evidence-based learning is needed to inform progress toward SDG 16. The role of financial corruption in facilitating conflict has not been studied sufficiently. Nor have positive examples for addressing it with peacebuilding impacts been systematically investigated. Yet, maintaining our focus on conflict sensitivity and localization can encourage and facilitate anti-corruption reforms that ensure peacebuilding funds get to where they’re most needed.

Maureen Moriarty

Maureen Moriarty

Senior Associate, Land and Human Security

About this article

This blog was originally written for Swisspeace’s à propos issue number 181: “Financing Peace — What are the priorities?”

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About the author

Ben Miller

Maureen Moriarty, PhD has 25 years of experience in international development and currently serves as a Lecturing Fellow at Duke University’s Center for International Development and the Duke/UNC Rotary Peace Program.

Her specializations include land and resource governance and conflict sensitivity. As a practitioner she has worked in Russia, Ukraine, Sri Lanka, Colombia, Haiti, Liberia, Mozambique, Thailand, Myanmar, Kosovo, Tanzania, Somalia, Burundi, and Kenya, among others. Maureen’s recent research and practice focuses on corruption at the intersection of land, human security, transnational organized crime, resource governance, and associated financial crimes. She is the co-author of a JTIP funded 2 year study in Mozambique examining the links between high level corruption, illicit forest activity, and vulnerability to forced labor and human trafficking.

She is a US delegate to the European Forum on Urban Security Working Group on the Roots and Impacts of Transnational Organized Crime, holds a certificate in AML/CFT, and is currently pursuing a CAMS Certification (Certified Anti Money Laundering Specialist) with specializations in Anti-Corruption, Bribery, and Investigations.