Burma and Somalia have been jointly ranked by Transparency International as the world's most corrupt countries.
A young Burmese boy seeks refuge in Thailand
The index is based on perceptions of public sector corruption in 180 countries and territories.
There is strong correlation between poverty and corruption, said Huguette Labelle, chair of the watchdog.
At the bottom of the table, ahead of Somalia and Burma, were Iraq, Haiti, Uzbekistan and Tonga.
Denmark joined Finland and New Zealand at the head of the table, which was compiled by the Berlin-based watchdog. Forty per cent of the countries where corruption is perceived as rampant were classified by the World Bank as low income countries, Transparency International said.
"Despite some gains, corruption remains an enormous drain on resources sorely needed for education, health and infrastructure," Ms Labelle said.
TEN MOST CORRUPT STATES
Last year, Haiti headed the rankings.
Among those countries whose corruption score had worsened over the past year were Thailand, Austria and Jordan, Transparency International said.
Scores were significantly higher in several African countries in the 2007 index, with Namibia, South African and Swaziland making progress in the fight against corruption.
Gainers were also concentrated in Eastern Europe, with improvements in Croatia, Czech Republic and Romania testament to the impact of the European Union accession process on corruption.
Burma, also known as Myanmar, has consistently ranked among the world's most corrupt countries.
The southeast Asian country is ruled by a military junta which has suppressed almost all dissent.
Tens of thousands of monks and civilians have staged anti-government protests in recent weeks. On Wednesday, Burmese police used batons and tear gas to beat back monks and other demonstrators in Rangoon as a new march began at the city's holiest shrine.
TEN LEAST CORRUPT STATES
Somalia has been without an effective central government since a military regime collapsed in 1991.
Years of fighting between rival warlords combined with famine and disease have led to the deaths of up to one million people.
Transparency International said that top scores enjoyed by wealthy countries in Europe, East Asia and North America, did not mean that these places could rest on their laurels.
Corruption often has an international dimension that implicates top scorers, the watchdog said.
Global financial centres play a central role in allowing corrupt officials to hide their ill-gotten gains and bribe money often originates from multinationals based in rich countries.
The UK was ranked in joint 12th place with Luxembourg as one of the least corrupt countries.