Consultation on IMF’s Revised Draft of the Fiscal Transparency Code
Last Updated: July 10, 2013
The IMF thanks all NGOs, academia, think tanks, private sector, governments and individuals who have provided written comments during the on-line consultation period on the revised draft of the Fiscal Transparency Code. The on-line process officially ended on August 30, 2013. Please find below the comments submitted during July 1, 2013 – August 30, 2013. If you have any questions, please send an e-mail to IMFconsultation@imf.org.
iscal transparency – defined as the comprehensiveness, clarity, reliability, timeliness, and relevance of public reporting on the past, present, and future state of public finances – is vital to effective fiscal policy-making.
First published in 1998 and last updated in 2007, the IMF’s Code of Good Practices on Fiscal Transparency and accompanying Manual and Guide are centerpieces of the global architecture of fiscal transparency norms and standards. The Code also provided the framework for the fiscal Reports on Observance of Standards and Codes (ROSCs) which assessed adherence to the Code’s principles and practices. Since 1999, the IMF has conducted 111 Fiscal ROSC assessments in 94 countries.
In a recent policy paper entitled Fiscal Transparency, Accountability, and Risk, the IMF reviewed the state of fiscal transparency in the wake of the recent crisis. The paper highlighted the critical importance of fiscal transparency to countries’ fiscal credibility and performance.
While there have been steady improvements in the coverage, quality, and timeliness of fiscal reporting since the late 1990s, the recent crisis also highlighted significant gaps in governments’ understanding of their underlying fiscal positions and the risks to those positions, even in advanced economies. This was demonstrated, for example, by the emergence of previously unreported fiscal deficits and debt, as well as the crystallization of large contingent liabilities to the financial sector.
The crisis also revealed shortcomings in the existing range of international norms and multilateral instruments for evaluating fiscal transparency practices. In particular, these instruments did not always identify the key fiscal reporting weaknesses that contributed to, or exacerbated, the fiscal impact of the crisis.
The IMF paper therefore proposed a series of improvements to existing international fiscal transparency standards and monitoring arrangements, including the IMF’s Fiscal Transparency Code and ROSC.
Through an initial consultation during December 2012 – February 2013, the IMF gathered feedback from governments, civil society, academics, market participants, and the public on the IMF’s existing fiscal transparency norms, guidance, and evaluation instruments. This feedback has been reflected in the draft of the revised Code being presented in this consultation round.
The structure and content of the revised Fiscal Transparency Code differ from the 2007 version in a number of important respects. In particular:
- Greater focus on reported outputs. Many of the principles of the 2007 Code focused on the clarity of the legal, institutional, and procedural arrangements for fiscal reporting. This procedural focus was reflected in its four pillar structure: (i) clarity of roles and responsibilities, (ii) open budget processes; (iii) public availability of information, and (iv) assurances of integrity. The revised draft Code retains the majority of these principles but reformulates them to focus on the quality of fiscal reports themselves as a more objective basis for evaluating the degree of effective transparency. This greater output focus is incorporated into the architecture of the revised Code which is organized around three key dimensions of fiscal disclosure: (i) fiscal reporting; (ii) fiscal forecasting and budgeting; and (iii) fiscal risk analysis and management.
- Updated fiscal transparency principles. The Code’s principles have also been updated in light of the lessons of the crisis, feedback from the initial consultation, and developments in international standards such as the IMF’s Government Finance Statistics Manual (GFSM) and International Public Sector Accounting Standards (IPSAS). These have been reflected in new or revised principles in areas such as (i) the institutional coverage of fiscal reports; (ii) provision of balance sheet information; (iii) frequency of fiscal reporting; (iv) disclosure and management of contingent liabilities; (vi) fiscal oversight of sub-national entities and public corporations; and (vi) consistency between forecast, in-year, and year-end fiscal data.
- Graduated practices. Whereas the 2007 Code provided a single standard of good practice in each area, the revised draft of the Code provides, for each principle, a description of three differentiated practices: (i) basic practice which would be considered as a minimum achievable by all countries; (ii) good practice which would require more developed institutional, human, and technological capacities; and (iii) advanced practice which would entail full compliance with relevant international standards and be in line with the current “state-of-the-art.”
- Quantitative fiscal transparency indicators. To foster more rigorous analyses of the comprehensiveness of country’s fiscal disclosure practices and the magnitude of any gaps in published fiscal data, the revised Code incorporates quantitative fiscal transparency indicators. These include measures of the coverage of fiscal reports, credibility of fiscal forecasts, and size of unreported contingent liabilities.
- Coverage and complementarity with PEFA: The Code has also been revised to enhance its focus on fiscal transparency issues critical to macroeconomic policymaking and to improve its complementarity with other multilateral diagnostic tools in the fiscal area, in particular the Public Expenditure and Financial Accountability (PEFA) assessment framework. Compared with the 2007 version, the revised draft Code places greater emphasis on the analysis and management of fiscal risks. At the same time, the 2007 Code principles related to, for example, public sector employment, procurement, and internal audit procedures do not appear in the revised draft Code as these more managerial issues are the subject of specific performance indicators within the PEFA framework.
In addition to providing an updated standard for fiscal disclosure, the revised Code, once finalized, also provides the basis for a new Fiscal Transparency Assessment (FTA), which will replace the fiscal ROSC. These assessments are currently being piloted in a number of low-income, emerging and advanced countries, the results of which are being used to refine further the principles and practices in the revised draft of the Code. Learn more about the new assessment and hear feedback from countries that participated in the FTA pilots.
Questions for Consultation
We are seeking your comments on the format and structure of the draft revised Fiscal Transparency Code. While we welcome feedback on any aspect of the Code, we are specifically interested in your feedback on the following issues:
- Compared to the 2007 Code, the revised draft Code focuses more on the quality of reported information than on the clarity of reporting procedures. Do you support this change in emphasis? Does the revised draft Code strike the right balance?
- Do the revised draft Code’s principles adequately reflect the most important aspects of fiscal transparency and complement other multilateral evaluation frameworks in the fiscal area such as PEFA? What principles should be added, dropped, or reformulated?
- Do the descriptions of basic, good, and advanced practice under each principle provide a well-sequenced path towards full compliance with the respective fiscal transparency principle and relevant fiscal transparency standards? Are the different levels of practice appropriately calibrated and sufficiently differentiated?
- Do the quantitative fiscal transparency indicators provide relevant measures of the magnitude of any gaps in a country’s reported fiscal data? Which indicators should be added, dropped, or modified?
The IMF’s Communications Department (COM) will receive the comments and post a summary of them. Senders can request for their comments to be private. Any interested stakeholder can submit their input through the following channels:
- E-mail: IMFConsultation@imf.org
- Fax: +1 202 623 6220
When submitting your comments, via fax or email, please include the following information so that your comments are registered: name of sender; organization you represent; address; country; phone number; and e-mail address.
Comments should be submitted no later than August 30, 2013.
Next Steps after this Consultation
The feedback received during this consultation will inform the final version of the revised Fiscal Transparency Code, which the IMF plans to submit to its Executive Board for approval and publication before year’s end.
The IMF will also be updating its Fiscal Transparency Manual and Guide on Resource Revenue Transparency in light of revisions to the Fiscal Transparency Code and other changes in standards and practices in this area.These will also be the subject of a public consultation in late 2013 and finalized in 2014.