## FISCAL TRANSPARENCY INITIATIVE: INTEGRATION OF NATURAL RESOURCE MANAGEMENT ISSUES — EXECUTIVE SUMMARY

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### Purpose and main decision request
- Integrates into the Fiscal Transparency Code (FTC) a new fourth pillar (Pillar IV) on natural resource revenue management, completing the pending update to the IMF’s FTC as set out by staff in 2014.
- Board asked to approve the revised four-pillar FTC as a basis for carrying out subsequent Fiscal Transparency Evaluations (FTEs).
- Staff plans to prepare, in FY2020, an accompanying second volume of the 2018 Fiscal Transparency Handbook (FTH) to guide FTEs in resource-rich countries and as a reference on fiscal transparency for natural resources.
- Document date: December 28, 2018.

### Rationale: why dedicated Pillar IV
- Non-renewable natural resources pose particular fiscal transparency and governance challenges because of:
  - large potential rents that make the sector prone to revenue leakages (e.g., from corruption);
  - large-sized investments that place a premium on investor certainty;
  - heavy involvement of large multinationals and state-owned enterprises;
  - the volatile and uncertain nature of revenues that make disclosure and mitigation of fiscal risks key for effective fiscal management.

### Structure and scope of Pillar IV
- Pillar IV is complementary to Pillars I–III and focuses on:
  - resource rights and ownership;
  - resource revenue mobilization;
  - resource revenue utilization;
  - resource activity reporting and disclosure.
- Pillars I–III focus on fiscal reporting; fiscal forecasting & budgeting; fiscal risk analysis & management.
- The revised FTC updates Pillar III principle 3.2.6 on natural resource reporting to reflect international practice on asset valuation.

*International Monetary Fund — Executive Summary (pp122818fiscal-transparency-initiative-integration-of-natural-resource-management-issues - EXECUTIVE SUMMARY).*

---

### PILLAR IV: PRINCIPLES, PRACTICES, AND KEY REQUIREMENTS

### Dimension 4.1: Resource Ownership and Rights
- Principle 4.1.1 Legal Framework for Resource Rights
  - Clarity and comprehensiveness of legal framework defining ownership and exploration/extraction rights; full publication of the legal framework; absence of impediments to disclosure of non-commercially sensitive information.
- Principle 4.1.2 Allocation of Resource Rights
  - Open and clear procedures for allocating resource rights; reporting on rights awarded; applies to competitive and non-competitive allocation processes.
- Principle 4.1.3 Disclosure of Resource Rights Holdings
  - Disclosure of resource rights holdings including beneficial owners and corporate structures (e.g., chains of intermediaries).

### Dimension 4.2: Resource Revenue Mobilization
- Principle 4.2.1 Fiscal Regime for Natural Resources
  - Well-defined and published rates and bases for all fiscal instruments; transparency extending to tax legislation and project-specific fiscal terms; governments should publish or disclose project-specific contracts, licenses and agreements.
  - Contract disclosure emerging as a norm: of the 52 countries included in Figure 4, 29 countries have published contracts and licenses; three additional countries have a legal commitment to publish contracts and licenses but have not yet done so.
- Principle 4.2.2 Resource Revenue Administration
  - Effective revenue administration despite fragmentation across ministries and agencies; clear collection, audit and compliance procedures; published interpretations to increase predictability and improve revenue collection performance.

### Dimension 4.3: Resource Revenue Utilization
- Principle 4.3.1 Resource Revenue Forecasting
  - Forecasting framework must be credible and transparent with accountability mechanisms; publication of forecasts by revenue instrument under different price and extraction scenarios; disclosure of forecasting assumptions and methodology; yearly reconciliation of forecasts with actual revenue figures.
  - Figure references: Resource Revenue and Price Volatility (2000-2016); Commodity Price Indexes (2016=100); Average Resource Revenue (Percent of GDP).
- Principle 4.3.2 Budget Integration of Resource Revenue
  - All use of revenues that accrue to the general government should be allocated through annual budgets.
  - Part of annual resource revenue may be saved for stabilization purposes and future generations consistent with fiscal policy objectives (IMF 2012c).
  - Any expenditure funded by resource revenue should be appropriated through regular budget processes.
  - Where a public corporation collects resource revenue, transparency around the flow of these funds to the budget is fundamental; dividend policies should guide transfers where public corporations receive resource revenue.
- Principle 4.3.3 Natural Resource Funds
  - Funds used for savings, stabilization, and asset management should have clearly stated objectives aligned with fiscal policy; full integration with the budget and reporting in budget documentation; preferable no extra-budgetary expenditure except operational; management under clearly established rules and governance; regular reporting and externally audited annual financial statements.
  - Figure reference: Natural Resource Fund Assets (2015/16).

### Dimension 4.4: Resource Activity Disclosure
- Principle 4.4.1 Reporting and Audit of Resource Revenues
  - Clear, sufficiently detailed reporting on resource revenue receipts by governments; coverage of all significant receipts from natural resource corporations; annual reporting and timely in-year reporting (preferably monthly); annual data externally audited; coverage includes central and subnational government revenue, extrabudgetary funds, and cashflows to public corporations; capture payments in cash and in kind; report project-level revenues where feasible.
  - IMF reporting template consistent with Government Finance Statistics Manual 2014 adopted by EITI (IMF 2017b).
- Principle 4.4.2 Reporting by Resource Corporations
  - Require companies to report all payments to government, including payments in kind, on a project-by-project basis where possible; disclosure extends to any corporate entity, including state-owned enterprises; reconciliation of government collections and company payments in line with the EITI standard to detect erosion or leakage.
  - Legal provisions requiring global disclosure by resource corporations exist in more than 30 countries, including the European Union, Norway and Canada.
- Principle 4.4.3 National Resource Corporations (NRCs)
  - NRCs require clearly defined governance arrangements, regular comprehensive consolidated reporting, external auditing, and disclosure of quasi-fiscal spending and procurement contract awards.
  - Figure reference: Worldwide Prevalence of National Resource Corporations.
- Principle 4.4.4 Social, Operational and Environmental Reporting
  - Regular reporting on operational, social and environmental aspects of extractive industry projects; disclosure and management of social and environmental costs; reporting on operations and associated risks to allow governments to assess potential fiscal risks (e.g., unanticipated shutdowns, environmental risks with fiscal implications).

### Modification to Pillar III (3.2.6 Natural Resource Stocks and Flows)
- Move requirement for reporting monetary values of natural resource reserves from “basic” to “good” practice due to valuation complexity.
- Of 21 countries assessed through FTEs for this principle, only two countries published values of their natural resource assets.
- Move practice of reporting sensitivity analysis of extraction scenarios to Principle 4.3.1 (Resource Revenue Forecasting).

*International Monetary Fund — Fiscal Transparency Initiative: Integration of Natural Resource Management Issues (selected Pillar IV content).*

---

### SUMMARY RESULTS FROM FTE PILOTS, OBSERVATIONS, AND APPLICATION

### Pilots, consultations and evidence base
- Pillar IV development informed by existing international norms, lessons from pilot evaluations, and extensive stakeholder feedback.
- Initial draft released December 2014; revised draft released April 2016.
- Five pilot FTEs using Pillar IV conducted since 2014 across a range of resource-rich countries.
- Pilot assessments and empirical evidence referenced via figures and boxes, including:
  - Figure 1: Resource Revenues (2000-2013 and 2014-2017)
  - Figure 2: Petroleum Exports and Revenues in Resource-Rich Countries (2000-2016)
  - Figure 5: Resource Revenue and Price Volatility (2000-2016)
  - Figure 6: Natural Resource Fund Assets (2015/16)
  - Figure 7: Worldwide Prevalence of National Resource Corporations
  - Box 1: Promoting Better Transparency and Governance in National Resource Companies

### FTE scope and outputs
- Pillars I–III formed basis of FTEs in 28 countries to date, of which 24 reports have been published.
- Pilot exercises covered three regions: Peru, Tanzania, United Kingdom, Mexico, and Trinidad and Tobago.
  - A modular assessment undertaken in Trinidad and Tobago; others part of integrated FTEs.
  - Three of these pilot reports have been published.
- Findings across pilots:
  - Countries performed best in defining and allocating resource ownership and rights, and in mobilizing resource revenues.
  - Practices in resource revenue utilization and reporting on resource sector activity lagged behind.
  - Natural resource transparency varies across and within countries.
- Country-type applicability:
  - Exploration Stage Countries (e.g., Tanzania): Pillar IV provides forward-looking guidance; full assessment may be premature (Tanzania did not score Pillar IV practices against the FTC).
  - Established Producers—Non-Resource Revenue Dependent (e.g., Peru, United Kingdom): Pillar IV useful for major transparency issues or authority interest.
  - Established Producers—Resource Revenue Dependent (e.g., Mexico, Trinidad and Tobago): Pillar IV highly relevant; Mexico FTE provided the most complete assessment with petroleum sector considerations permeating all pillars. Trinidad and Tobago used modular approach and augmented Pillar IV with five additional principles from Pillars I–III.

### Key empirical and diagnostic observations
- Reporting of resource revenues and publication of contracts and beneficial ownership information has increased; EITI standard has gained recognition.
- Persistent weaknesses: limited disclosure of fiscal risks and inadequate mitigation; revenue leakages via opaque quasi-fiscal activities and extra-budgetary spending; lack of transparency and procurement inefficiencies in state-owned enterprises; concerns about revenue erosion from transfer pricing.
- Around one-third of IMF members derive important export earnings and government revenues from natural resources based on resource revenues exceeding 1 percent of GDP over 2014-2017.

### Governance and NRCs (Box 1 summary)
- SOEs play important roles in exploration, production, commodity trading, and managing state equity participation.
- Studies and indices cited show higher reported corruption incidents in SOEs in petroleum and mining (OECD 2018); extractive sector vulnerability to corruption (Transparency International); many SOEs have weak governance structures (NRGI 2017a).
- Emerging standards and practices include Transparency International’s 10 Anti-Corruption Principles for SOEs (Transparency International 2017), the 2016 EITI Standard requirements for SOEs, and NRGI guide (NRGI 2018).
- Country examples: Mexico (CNH increasing public disclosure to oversee Pemex); Brazil (Petrobras adopted anti-corruption policies and strengthened controls).

*International Monetary Fund — Fiscal Transparency Initiative: Integration of Natural Resource Management Issues — Section 8. Summary Results of FTE Pilots.*

---

### IMPLEMENTATION, MODULARITY, AND NEXT STEPS

### Modularity and assessment approach
- Pillar IV designed to be used modularly or integrated with Pillars I–III.
- Preferable approach: assess natural resource transparency alongside wider public financial management using all FTC principles.
- Standalone modular Pillar IV assessments useful where extractive industries dominate or where a sector-specific update is warranted.

### Operational next steps
- Publish the full integrated four-pillar FTC.
- In FY2020 complete Volume II of the FTH focusing on natural resource revenue management.
- Further FTEs incorporating Pillar IV will be carried out at the request of IMF member countries.
- Fiscal transparency work remains a key element of the Fund’s surveillance architecture and will continue within FAD’s budget through prioritization.
- Staff will conduct outreach following publication to increase awareness among resource-rich members.

*International Monetary Fund — FISCAL TRANSPARENCY INITIATIVE: INTEGRATION OF NATURAL RESOURCE MANAGEMENT ISSUES (excerpts from the supplied content).*

### EXECUTIVE SUMMARY

### FISCAL TRANSPARENCY INITIATIVE: INTEGRATION OF NATURAL RESOURCE MANAGEMENT ISSUES — EXECUTIVE SUMMARY

### Purpose and main decision request
- Integrates into the Fiscal Transparency Code (FTC) a new fourth pillar (Pillar IV) on natural resource revenue management, completing the pending update to the IMF’s FTC as set out by staff in 2014.
- The Board is asked to approve the revised four-pillar FTC as a basis for carrying out subsequent Fiscal Transparency Evaluations (FTEs).
- Staff plans to prepare, in FY2020, an accompanying second volume of the 2018 Fiscal Transparency Handbook (FTH) to guide FTEs in resource-rich countries and as a reference on fiscal transparency for natural resources.
- Document date: December 28, 2018.

### Rationale: why natural resources require dedicated Pillar IV
- Non-renewable natural resources pose particular fiscal transparency and governance challenges because of:
  - large potential rents that make the sector prone to revenue leakages (e.g., from corruption);
  - large-sized investments that place a premium on investor certainty;
  - heavy involvement of large multinationals and state-owned enterprises;
  - the volatile and uncertain nature of revenues that make disclosure and mitigation of fiscal risks key for effective fiscal management.

### Structure and scope of Pillar IV
- Pillar IV is built around the key dimensions of natural resource management and is complementary to Pillars I–III.
- Pillar IV focuses on:
  - resource rights and ownership;
  - resource revenue mobilization;
  - resource revenue utilization;
  - resource activity reporting and disclosure.
- Pillars I–III focus on:
  - fiscal reporting;
  - fiscal forecasting & budgeting;
  - fiscal risk analysis & management.
- The revised FTC also includes an update to the Pillar III principle on natural resource reporting (3.2.6) to reflect international practice on asset valuation.

### Development process and evidence base
- The development of Pillar IV was informed by:
  - existing international norms in fiscal transparency;
  - lessons learned from several pilot evaluations;
  - extensive stakeholder feedback.
- Pilot assessments and empirical evidence are referenced via figures and boxes in the document, including:
  - Figure 1: Resource Revenues (2000-2013 and 2014-2017)
  - Figure 2: Petroleum Exports and Revenues in Resource-Rich Countries (2000-2016)
  - Figure 5: Resource Revenue and Price Volatility (2000-2016)
  - Figure 6: Natural Resource Fund Assets (2015/16)
  - Figure 7: Worldwide Prevalence of National Resource Corporations
  - Box 1: Promoting Better Transparency and Governance in National Resource Companies

### Use and modularity
- Taken together, Pillars I–IV provide a comprehensive picture of fiscal transparency in resource-rich countries.
- Each pillar can be used modularly in FTEs to examine specific areas and aspects of fiscal transparency.

### Institutional authorship and production
- Approved By: Gerd Schwartz
- Prepared by a staff team from the Fiscal Affairs Department comprising Thomas Baunsgaard, Alpa Shah and Paulo Medas, with contributions from Eliko Pedastsaar, Fazeer Rahim, Jean Francois Wen and FAD external experts Philip Daniel and Rolando Ossowski.
- Research assistance: Victor Mylonas and Alice Park.
- Production assistance: Yasmina Britel and Ana Popovich.

*International Monetary Fund — Executive Summary (pp122818fiscal-transparency-initiative-integration-of-natural-resource-management-issues - EXECUTIVE SUMMARY).*

### 8. Summary Results of FTE Pilots

### 8. Summary Results of FTE Pilots

### Background and Rationale
- The paper updates the IMF’s framework on fiscal transparency for natural resource revenue management and integrates it into the IMF’s Fiscal Transparency Code (FTC) as a new fourth pillar (Pillar IV).
- Fiscal transparency strengthens fiscal policy credibility and governance by providing a comprehensive picture of the government’s fiscal position, outlook, and potential fiscal risks.
- Natural resources raise specific fiscal transparency considerations because of:
  - the one-time opportunity to extract non-renewable resources and the need to benefit current and future generations;
  - the scale of economic rents and vulnerability to corruption;
  - large front-loaded investments and long production periods that demand investor certainty;
  - volatile and uncertain revenues that require transparent forecasting, budgeting, and disclosure of fiscal risks.
- Progress and remaining weaknesses:
  - Reporting of resource revenues and publication of contracts and beneficial ownership information have increased; the Extractive Industries Transparency Initiative (EITI) standard has gained recognition.
  - Weaknesses persist: limited disclosure of fiscal risks and inadequate mitigation, revenue leakages via opaque quasi-fiscal activities and extra-budgetary spending, lack of transparency and procurement inefficiencies in state-owned enterprises, and concerns about revenue erosion from transfer pricing.
- Scope: natural resource fiscal transparency issues remain a core part of IMF advice; in about one-third of IMF members, natural resources provide an important source of export earnings and government revenues (based on resource revenues exceeding 1 percent of GDP over 2014-2017).

### Revised FTC and Pillar IV Integration
- The 2014 FTC introduced a structure of principles built around four pillars; Pillar IV (Resource Revenue Management) is added to address natural resource fiscal transparency within the unified FTC framework.
- Pillar IV is designed to be used alongside Pillars I–III in FTEs for resource-rich countries; in some cases Pillar IV can be applied modularly for in-depth analysis.
- Pillar IV follows the same graduated practice structure as Pillars I–III (basic, good, advanced) to accommodate different country capacities and provide a sequenced reform path.
- A second volume of the Fiscal Transparency Handbook (FTH Volume II) will provide detailed guidance on applying FTC principles and practices for resource-rich countries, complementing the FTH covering Pillars I–III.

### Pillar IV Structure and Coverage
- Pillar IV comprises twelve principles organized by four dimensions:
  - Dimension 4.1: Resource Ownership and Rights
  - Dimension 4.2: Resource Revenue Mobilization
  - Dimension 4.3: Resource Revenue Utilization
  - Dimension 4.4: Resource Activity Reporting and Disclosure (label shown as Risk Analysis & Disclosure / Risk Management / Resource Activity Disclosure / Fiscal Coordination in the FTC figure)
- Key design features:
  - The FTC’s broad scope and graduated practices distinguish it from other instruments that focus on narrower aspects or produce rankings.
  - The FTC aims to help governments understand how specific standards relate to broader fiscal transparency goals and to identify reform priorities.
  - The FTC and FTEs support IMF surveillance and capacity development (CD) and can be used by other stakeholders.

### Pilot FTEs and Consultation Process
- Pillar IV principles and practices were piloted in several FTEs and revised through two rounds of public consultation:
  - Initial draft released December 2014; revised draft released April 2016.
  - Five pilot FTEs using Pillar IV have been carried out since 2014 in a range of resource-rich countries.
  - Appendix II of the paper summarizes stakeholder comments from the consultations.
- The consultations and pilots informed the Pillar IV design and helped refine principles and practices.

### Selected Pillar IV Principles (Dimensions 4.1 and 4.2)
- Dimension 4.1 Resource Ownership and Rights
  - Principle 4.1.1 Legal Framework for Resource Rights
    - Emphasizes clarity and comprehensiveness of the legal framework defining ownership and exploration/extraction rights, full publication of the legal framework, and absence of impediments to disclosure of non-commercially sensitive information.
  - Principle 4.1.2 Allocation of Resource Rights
    - Calls for open and clear procedures for allocating resource rights to ensure efficient and transparent development, with reporting on rights awarded; applies to both competitive (bidding rounds) and non-competitive (first-come first-served) processes.
  - Principle 4.1.3 Disclosure of Resource Rights Holdings
    - Recommends disclosure of resource rights holdings including beneficial owners and corporate structures (e.g., chains of intermediaries) to ensure transparency regarding ultimate ownership.
- Dimension 4.2 Resource Revenue Mobilization
  - Principle 4.2.1 Fiscal Regime for Natural Resources
    - Stresses well-defined and published rates and bases for all fiscal instruments; transparency should extend to tax legislation and project-specific fiscal terms, and governments should publish or disclose project-specific contracts, licenses and agreements.
    - Contract disclosure is emerging as a norm: of the 52 countries included in Figure 4, 29 countries have published contracts and licenses; three additional countries have a legal commitment to publish contracts and licenses but have not yet done so.
  - Principle 4.2.2 Resource Revenue Administration
    - Emphasizes effective revenue administration despite fragmentation across ministries and agencies; clear resource revenue collection, audit, and compliance procedures and published interpretations help increase predictability and improve revenue collection performance.

### Implementation and Next Steps
- The consolidated FTC integrates natural resource revenue transparency within broader public financial management processes and provides a roadmap of graduated practices for countries.
- The FTC and accompanying FTH Volume II will provide detailed guidance and examples of country practices and relevant prevailing international standards to assist countries in implementation and sequencing of reforms.
- The FTC and FTEs are intended to support IMF surveillance, capacity development efforts (including support funded by the Managing Natural Resource Wealth Thematic Fund), and the work of other stakeholders.

*International Monetary Fund — Fiscal Transparency Initiative: Integration of Natural Resource Management Issues — Section 8. Summary Results of FTE Pilots*

### 25.      Pillar IV provides a more in-depth focus on resource revenue forecasting and

### Pillar IV — Resource Revenue Forecasting, Budget Integration, and Resource Activity Disclosure

### Principle 4.3.1. Resource Revenue Forecasting
- Volatility of commodity prices and transmission of shocks to resource revenues require a credible forecasting framework (Figure 5).
- Forecasting framework requirements:
  - Credible and transparent with accountability mechanisms to reduce bias or discretion.
  - Publication of forecasts by revenue instrument under different price and extraction scenarios.
  - Disclosure of forecasting assumptions and methodology.
  - Yearly reconciliation of forecasts with actual revenue figures.
- Figure references: Resource Revenue and Price Volatility (2000-2016); Commodity Price Indexes (2016=100); Average Resource Revenue (Percent of GDP).

### Principle 4.3.2. Budget Integration of Resource Revenue
- Core recommendations:
  - All use of revenues that accrue to the general government should be allocated through annual budgets.
  - Part of annual resource revenue may be saved for stabilization purposes and future generations consistent with fiscal policy objectives (IMF 2012c).
  - Any expenditure funded by resource revenue should be appropriated through regular budget processes.
  - Where a public corporation collects resource revenue, transparency around the flow of these funds to the budget is fundamental.
- Footnote guidance:
  - If a public corporation receives resource revenue (e.g., equity participant), revenue should ultimately flow to the general budget through dividend payments; arrangements should be guided by clear dividend policies. In some cases the public corporation may collect revenue on behalf of the government and pass it on directly.

### Principle 4.3.3. Natural Resource Funds
- Natural resource funds frequently used to support savings, stabilization, and asset management objectives; such funds can accumulate substantial assets (Figure 6).
- Best practice requirements:
  - Clearly stated objectives aligned with overall fiscal policy objectives.
  - Full integration with the budget and reporting in budget documentation.
  - Preferable no extra-budgetary expenditure, except for the fund’s own operational expenditure.
  - Management in line with clearly established rules and governance arrangements.
  - Regular reporting on operations and investment performance, with externally audited annual financial statements.
- Figure reference: Natural Resource Fund Assets (2015/16).

### Dimension 4.4 Resource Activity Disclosure — Principles and Requirements
- General emphasis: clear and comprehensive reporting on natural resource activity.

Principle 4.4.1. Reporting and Audit of Resource Revenues
- Reporting requirements:
  - Clear and sufficiently detailed reporting on resource revenue receipts by governments.
  - Resource revenue covers all significant receipts from natural resource corporations.
  - Annual reporting of revenue data; in-year fiscal reporting should be timely (preferably monthly).
  - Annual data should be externally audited.
  - Reporting coverage should include central and subnational government revenue, revenues to extrabudgetary funds, and cashflows to public corporations through state participation.
  - Data should capture payments in cash and in kind (e.g., barrels of oil or other commodity volumes), and revenues realized from sales of commodity volumes by the government.
  - Revenues should be reported at the project-level where feasible given ring-fence constraints.
- Footnotes:
  - IMF reporting template consistent with Government Finance Statistics Manual 2014 adopted by EITI (IMF 2017b).
  - Resource revenue collections generally audited by the Supreme Audit Institution; Auditor General may contract private auditing firms for specialized audits.
  - Ring-fencing defined as limitation on consolidation of income and deductions for tax purposes across different activities or projects by the same taxpayer.

Principle 4.4.2. Reporting by Resource Corporations
- Requirements and practices:
  - Governments can require companies to report all payments to government, including payments in kind, on a project-by-project basis where possible.
  - Disclosure requirement extends to any corporate entity, including state-owned enterprises, engaging in natural resource exploration, extraction or commodity trading.
  - Reconciliation of government collections and company payments in line with the EITI standard can detect erosion or leakage at the collection stage.
- Observations:
  - Legal provisions requiring global disclosure by resource corporations have emerged in more than 30 countries, including the European Union, Norway and Canada.
  - Application in FTEs: the principle on reporting by resource corporations will be applied on a “global basis” in countries with a high concentration of domiciled international resource companies.

Principle 4.4.3. National Resource Corporations (NRCs)
- Focus:
  - Specific operational and financial reporting practices of NRCs complement Pillar III’s assessment of public corporations.
  - Importance of clearly defined governance arrangements, regular, comprehensive and consolidated reporting on NRC operations and finances, and external auditing.
  - Emerging practice for NRCs to issue regular governance reports.
  - Transparency strengthened by disclosure of quasi-fiscal spending and procurement contract awards.
- Figure reference: Worldwide Prevalence of National Resource Corporations.

Principle 4.4.4. Social, Operational and Environmental Reporting
- Requirements:
  - Regular reporting on operational, social and environmental aspects of extractive industry projects.
  - Disclosure and management of social and environmental costs in production areas.
  - Regular reporting on operations and associated risks to allow governments to assess potential fiscal risks (e.g., unanticipated shutdowns and delays; environmental risks with fiscal implications).

### Principle 3.2.6. Natural Resource Stocks and Flows (Modification)
- Proposed changes to Pillar III:
  - Move the requirement for reporting of monetary values of natural resource reserves from “basic” to “good” practice.
  - Valuation of reserves is intricate, contingent on many assumptions and sound methodology; undertaken by only a handful of countries.
  - Of 21 countries assessed through FTEs for this principle, only two countries published values of their natural resource assets.
  - Move the practice of conducting and reporting sensitivity analysis of extraction scenarios to resource revenue forecasting principle (4.3.1).
  - Recalibration recognizes countries publishing reserve volumes and those publishing values of natural resource assets.

### Observations from Fiscal Transparency Evaluations (FTEs) and Pilots
- Since 2015, draft Pillar IV piloted as part of FTEs in resource-rich countries.
- FTE scope and results:
  - Pillars I-III formed basis of FTEs in 28 countries to date, of which 24 reports have been published.
  - FTE recommendations have informed public debate, supported Article IV and program reports, and provided basis for follow-up CD in the fiscal area.
- Modular vs integrated assessments:
  - FTC designed to allow full assessments and modular assessments of individual pillars; modular FTEs can target pressing transparency issues.
  - Integrated approach likely most suitable for countries with large natural resource revenues.
- Pilot exercises:
  - Five pilot exercises conducted covering three regions: Peru, Tanzania, United Kingdom, Mexico, and Trinidad and Tobago.
  - A modular assessment was undertaken in Trinidad and Tobago; other pilots were part of integrated FTEs.
  - Three of these reports have been published.
- Key pilot findings:
  - Natural resource transparency varies across and within countries.
  - Countries performed best in defining and allocating resource ownership and rights, and in mobilizing resource revenues.
  - Practices in resource revenue utilization and reporting on resource sector activity lagged behind (Figure 8 summarizes pilot results across Resource Ownership & Rights; Resource Revenue Mobilization; Resource Revenue Utilization; Resource Activity Disclosure).
- Country-type observations and applicability:
  - Exploration Stage Countries (e.g., Tanzania): Pillar IV provides guidance; full assessment may be premature. Tanzania’s assessment provided forward-looking guidance for the petroleum sector and did not score Pillar IV practices against the FTC.
  - Established Producers—Non-Resource Revenue Dependent (e.g., Peru, United Kingdom): Pillar IV useful where major transparency issues are identified or of particular interest to authorities.
  - Established Producers—Resource Revenue Dependent (e.g., Mexico, Trinidad and Tobago): Pillar IV highly relevant; Mexico FTE provided the most complete assessment with petroleum sector consideration permeating all pillars. Trinidad and Tobago used a modular approach and augmented the 2016 draft Pillar IV with five additional principles adapted from Pillars I-III to complete the natural resource management picture.

### Box 1 — Governance and Transparency in National Resource Companies (Summary)
- SOEs play important roles in exploration, production, commodity trading, and managing state equity participation.
- Concerns and findings:
  - OECD study indicated SOEs in petroleum and mining sectors had more reported incidents of corruption (OECD 2018).
  - Transparency International highlights the extractive sector as vulnerable to corruption.
  - NRGI resource governance index (NRGI 2017a) shows many SOEs in resource sectors have weak governance structures.
- Emerging standards and practices:
  - Transparency International’s 10 Anti-Corruption Principles (Transparency International 2017) for SOEs.
  - 2016 EITI Standard outlines disclosure requirements and recommendations for SOEs in over 50 participating countries (beneficial ownership, commodity sales, revenue transfers, quasi-fiscal expenditures).
  - NRGI Guide to Extractive Sector State-Owned Enterprise Disclosures (NRGI 2018).
- Country examples:
  - Mexico: CNH increasing public disclosure to oversee Pemex and contract allocations; monitoring compliance with extractive laws and agreements.
  - Brazil: Petrobras adopted anti-corruption policies, strengthened internal controls and reporting, and increased minority shareholder voice following corruption scandals.

*International Monetary Fund — Fiscal Transparency Initiative: Integration of Natural Resource Management Issues (selected Pillar IV content).*

### 43.      The final Pillar IV now provides a comprehensive framework for modular

### pp122818fiscal-transparency-initiative-integration-of-natural-resource-management-issues - 43.      The final Pillar IV now provides a comprehensive framework for modular

### Pillar IV: modular assessments and functionality
- The final Pillar IV provides a comprehensive framework for modular assessments.
- Drawing from the pilot assessments (particularly the assessment for Trinidad and Tobago), the final Pillar IV includes dedicated principles on resource revenue forecasting and on public corporations, improving its functionality in the standalone context.
- Preferable approach: assess natural resource transparency practices in conjunction with an assessment of wider public financial management practices using all of the FTC principles.
- Standalone value: a modular assessment of Pillar IV can provide valuable insights into fiscal transparency across the most critical elements of the resource management chain.
- Use cases for modular Pillar IV assessments:
  - In countries where the extractive industries play a dominant role and justify a more sector-specific focus.
  - As a sector-specific update—to assess progress in a cost-effective way—where a general FTE assessment using the first three pillars has previously been undertaken.

### Next steps and operational plans
- To complete the overhaul of the fiscal transparency initiative, the next steps are:
  - to publish the full integrated four-pillar FTC, and,
  - in FY2020 complete Volume II of the FTH that will focus on natural resource revenue management.
- The fiscal transparency work remains a key element of the Fund’s surveillance architecture and will continue to be accommodated within FAD’s budget through prioritization.
- Further FTEs incorporating the new Pillar IV will be carried out at the request of IMF member countries.
- Staff welcomes interest from countries that wish to undertake an FTE using the new Pillar IV and will conduct outreach activities following the publication of the completed FTC and handbook to increase awareness among resource-rich member countries.

### Appendix I — The Fiscal Transparency Code: high-level principles (overview)
- A. FISCAL TRANSPARENCY PRINCIPLES
  - I. Fiscal Reporting: Fiscal reports should provide a comprehensive, relevant, timely, and reliable overview of the government’s financial position and performance.
    - 1.1 Coverage: fiscal activities of the public sector and its sub-sectors, according to international standards.
      - 1.1.1 Coverage of Institutions: Fiscal reports cover all entities engaged in public activity according to international standards.
      - 1.1.2 Coverage of Stocks: Fiscal reports include a balance sheet of public assets, liabilities, and net worth.
      - 1.1.3 Coverage of Flows: Fiscal reports cover all public revenues, expenditures, and financing.
      - 1.1.4 Coverage of Tax Expenditures: The government regularly discloses and manages revenue loss from tax expenditure.
    - 1.2 Frequency and Timeliness: Fiscal reports should be published in a frequent, regular, and timely manner.
      - 1.2.1 Frequency of In-Year Reporting: In-year fiscal reports are published on a frequent and regular basis.
      - 1.2.2 Timeliness of Annual Financial Statements: Audited or final annual financial statements are published in a timely manner.
    - 1.3 Quality: Information in fiscal reports should be relevant, internationally comparable, and internally and historically consistent.
      - 1.3.1 Classification: Fiscal reports classify information in ways that make clear the use of public resources and facilitate international comparisons.
      - 1.3.2 Internal Consistency: Fiscal reports are internally consistent and include reconciliations between alternative measures of summary fiscal aggregates.
      - 1.3.3 Historical Revisions: Major revisions to historical fiscal statistics are disclosed and explained.
    - 1.4 Integrity: Fiscal statistics and financial statements should be reliable and subject to external scrutiny and facilitate accountability.
      - 1.4.1 Statistical Integrity: Fiscal statistics are compiled and disseminated in accordance with international standards.
      - 1.4.2 External Audit: Annual financial statements are subject to a published audit by an independent supreme audit institution which validates their reliability.
      - 1.4.3 Comparability of Fiscal Data: Fiscal forecasts, budgets, and fiscal reports are presented on a comparable basis, with any deviations explained.
  - II. Fiscal Forecasting and Budgeting: Budgets and their underlying fiscal forecasts should provide a clear statement of the government’s budgetary objectives and policy intentions, and comprehensive, timely, and credible projections of the evolution of the public finances.
    - 2.1 Comprehensiveness: Fiscal forecasts and budgets should provide a comprehensive overview of fiscal prospects.
      - 2.1.1 Budget Unity: Revenues, expenditures, and financing of all central government entities are presented on a gross basis in budget documentation and authorized by the legislature.
      - 2.1.2 Macroeconomic Forecasts: The budget projections are based on comprehensive macroeconomic forecasts, which are disclosed and explained.
      - 2.1.3 Medium-term Budget Framework: Budget documentation includes outturns and projections of revenues, expenditures, and financing over the medium term on the same basis as the annual budget.
      - 2.1.4 Investment Projects: The government regularly discloses its financial obligations under multi-annual investment projects and subjects all major projects to cost-benefit analysis and open and competitive tender.
    - 2.2 Orderliness: The powers and responsibilities of the executive and legislative branches of government in the budget process should be defined in law, and the budget should be presented, debated, and approved in a timely manner.
      - 2.2.1 Fiscal Legislation: The legal framework clearly defines the time table for budget preparation and approval, key contents of the budget documentation, and the powers and responsibilities of the executive and legislature in the budget process.
      - 2.2.2 Timeliness of Budget Documents: The legislature and the public are consistently given adequate time to scrutinize and approve the annual budget.
    - 2.3 Policy Orientation: Fiscal forecasts and budgets should be presented in a way that facilitates policy analysis and accountability.
      - 2.3.1 Fiscal Policy Objectives: The government states and reports on clear and measurable objectives for the public finances.
      - 2.3.2 Performance Information: Budget documentation provides information regarding the objectives and results achieved under each major government policy area.
      - 2.3.3 Public Participation: The government provides citizens with an accessible summary of the implications of budget policies and an opportunity to participate in budget deliberations.
    - 2.4 Credibility: Economic and fiscal forecasts and budgets should be credible.
      - 2.4.1 Independent Evaluation: The government’s economic and fiscal forecasts and performance are subject to independent evaluation.
      - 2.4.2 Supplementary Budget: Any material changes to the approved budget are authorized by the legislature.
      - 2.4.3 Forecast Reconciliation: Budget documentation and any subsequent updates explain any material changes to the government’s previous fiscal forecasts, distinguishing the fiscal impact of new policy measures from the baseline.
  - III. Fiscal Risk Analysis and Management: Governments should disclose, analyze, and manage risks to the public finances and ensure effective coordination of fiscal decision-making across the public sector.
    - 3.1 Risk Disclosure and Analysis: Governments should publish regular summary reports on risks to their fiscal prospects.
      - 3.1.1 Macroeconomic Risks: The government reports on how fiscal outcomes might differ from baseline forecasts as a result of different macroeconomic assumptions.
      - 3.1.2 Specific Fiscal Risks: The government provides a regular summary report on the main specific risks to its fiscal forecasts.
      - 3.1.3 Long-Term Fiscal Sustainability Analysis: The government regularly publishes projections of the evolution of the public finances over the long term.
    - 3.2 Risk Management: Specific risks to the public finances should be regularly monitored, disclosed, and managed.
      - 3.2.1 Budgetary Contingencies: The budget has adequate and transparent allocations for contingencies that arise during budget execution.
      - 3.2.2 Asset and Liability Management: Risks relating to major assets and liabilities are disclosed and managed.
      - 3.2.3 Guarantees: The government’s guarantee exposure is regularly disclosed and authorized by law.
      - 3.2.4 Public Private Partnerships: Obligations under public-private partnerships are regularly disclosed and actively managed.
      - 3.2.5 Financial Sector Exposure: The government’s potential fiscal exposure to the financial sector is analyzed, disclosed, and managed.
      - 3.2.6 Natural Resource Stocks and Flows: The government’s interest in exhaustible natural resource assets and their exploitation is valued, disclosed, and managed.
      - 3.2.7 Environmental Risks: The potential fiscal exposure to natural disasters and other major environmental risks is analyzed, disclosed, and managed.
    - 3.3 Fiscal Coordination: Fiscal relations and performance across the public sector should be analyzed, disclosed, and coordinated.
      - 3.3.1 Sub-National Governments: Comprehensive information on the financial condition and performance of sub-national governments, individually and as a consolidated sector, is collected and published.
      - 3.3.2 Public Corporations: The government regularly publishes comprehensive information on the financial performance of public corporations, including any quasi-fiscal activity undertaken by them.
  - IV. Resource Revenue Management: Government revenues from natural resource exploration and extraction activity should be collected, managed, and disbursed in an open and transparent manner.
    - 4.1 Resource Ownership and Rights: Resource rights should be clearly defined, with open and transparent procedures for their allocation.
      - 4.1.1 Legal Framework for Resource Rights: The legal framework clearly defines resource ownership, rights, obligations, and responsibilities at all stages of natural resource development.
      - 4.1.2 Allocation of Resource Rights: Resource rights are allocated through an open and transparent process.
      - 4.1.3 Disclosure of Resource Rights Holdings: The government maintains an up-to-date public register of resource rights holdings.
    - 4.2 Resource Revenue Mobilization: Resource revenue generation and collection should be governed by clear and published rules and procedures.
      - 4.2.1 Fiscal Regime for Natural Resources: The fiscal regime for revenue generation from natural resource sectors is clear, comprehensive, and governed by law.
      - 4.2.2 Resource Revenue Administration: There are clear and impartial policies and procedures for resource revenue administration, with regular reporting on administration activities.
    - 4.3 Resource Revenue Utilization: Resource revenues should be managed within the budget and macro-fiscal framework in accordance with clear fiscal policy objectives, and any natural resource fund should be operated in a consistent and transparent manner.
      - 4.3.1 Resource Revenue Forecasting: Resource revenue forecasts are based on clearly disclosed assumptions and methodology, on a time horizon consistent with the fiscal policy objectives.
      - 4.3.2 Budget Integration of Resource Revenue: Resource revenues are managed through annual budgets in accordance with clear fiscal policy objectives for the use of volatile and exhaustible natural resources.
      - 4.3.3 Natural Resource Funds: The governance of any resource fund is clearly defined, with regular reporting on fund operations, finances and investment performance.
    - 4.4 Resource Activity Disclosure: Fiscal, operational, environmental and social aspects of natural resource projects should be regularly reported on and published.
      - 4.4.1 Reporting and Audit of Resource Revenues: Resource revenues are regularly reported and audited.
      - 4.4.2 Reporting by Resource Corporations: Resource corporations are required to report on resource revenue payments, which are regularly reconciled with reported government receipts.
      - 4.4.3 National Resource Corporations: The governance of national resource corporations (NRC) is clearly defined, with regular reporting on operations and finances.
      - 4.4.4 Operational, Social, and Environmental Reporting: The government reports regularly on overall sector activity and on the status of major projects, including social and environmental aspects.

### Practice-level description highlights
- The Code describes BASIC, GOOD, and ADVANCED practices for each principle (examples drawn from the Fiscal Reporting and Fiscal Forecasting and Budgeting dimensions are included in the source text).
- Example practice thresholds preserved verbatim (selected):
  - 1.2.2 Timeliness of Annual Financial Statements:
    - Audited or final annual financial statements are published within 12 months of the end of the financial year.
    - Audited or final annual financial statements are published within nine months of the end of the financial year.
    - Audited or final annual financial statements are published within six months of the end of the financial year.
  - 1.2.1 Frequency of In-Year Reporting:
    - In-year fiscal reports are published on a quarterly basis, within a quarter.
    - In-year fiscal reports are published on a quarterly basis, within a month.
    - In-year fiscal reports are published on a monthly basis, within a month.

*International Monetary Fund — FISCAL TRANSPARENCY INITIATIVE: INTEGRATION OF NATURAL RESOURCE MANAGEMENT ISSUES (excerpts from the supplied content)*

### 2.1          Comprehensiveness

### 2.1          Comprehensiveness

### 2.1.1    Budget Unity
- Revenues, expenditures, and financing of all central government entities are presented on a gross basis in budget documentation and authorized by the legislature.
- Budget documentation incorporates all gross revenues, expenditures, and financing by budgetary central government ministries and agencies.
- Budget documentation incorporates all gross revenues, expenditures, and financing by central government ministries, agencies, and extra-budgetary funds.
- Budget documentation incorporates all gross revenues, expenditures, and financing by central government ministries, agencies, extra-budgetary funds, and social security funds.

### 2.1.2    Macroeconomic Forecasts
- The budget projections are based on comprehensive macroeconomic forecasts, which are disclosed and explained.
- The budget documentation includes forecasts of key macroeconomic variables.
- The budget documentation includes forecasts of key macroeconomic variables and their underlying assumptions.
- The budget documentation includes forecasts and explanations of key macroeconomic variables and their components, as well as their underlying assumptions.

### 2.1.3    Medium-term Budget Framework
- Budget documentation includes outturns and projections of revenues, expenditures, and financing over the medium term on the same basis as the annual budget.
- Budget documentation includes the outturns of the two preceding years and medium-term projections of aggregate revenues, expenditures, and financing.
- Budget documentation includes the outturns of the two preceding years and medium-term projections of revenues, expenditures, and financing by economic category.
- Budget documentation includes the outturns of the two preceding years and medium-term projections of revenues, expenditures, and financing by economic category and by ministry or program.

### 2.1.4    Investment Projects
- The government regularly discloses its financial obligations under multi-annual investment projects and subjects all major projects to cost-benefit analysis and open and competitive tender.
- Basic: One of the following applies: (i) the government regularly discloses the value of its total obligations under multi-annual investment projects; (ii) subjects all major projects to a published cost-benefit analysis before approval; and (iii) requires all major projects to be contracted via open and competitive tender.
- Good: Two of the following apply: (i) the government regularly discloses the value of its total obligations under multi-annual investment projects; (ii) subjects all major projects to a published cost-benefit analysis before approval; and (iii) requires all major projects to be contracted via open and competitive tender.
- Advanced: All of the following apply: (i) the government regularly discloses the value of its total obligations under multi-annual investment projects; (ii) subjects all major projects to a published cost-benefit analysis before approval; and (iii) requires all major projects to be contracted via open and competitive tender.

*INTERNATIONAL MONETARY FUND — FISCAL TRANSPARENCY INITIATIVE: INTEGRATION OF NATURAL RESOURCE MANAGEMENT ISSUES*

### 4.2        Resource        Revenue

### 4.2        Resource        Revenue        Mobilization

### 4.2.1   Fiscal Regime for Natural Resources
- Principle: The fiscal regime for revenue generation from natural resource sectors is clear, comprehensive, and governed by law.
- Practices:
  - The fiscal regime defines in publicly available laws, regulations and model contracts/licenses the rates and methodology for calculating the base of all revenue instruments.
  - The fiscal regime defines in publicly available laws, regulations and model contracts/licenses the rates and methodology for calculating the base of all revenue instruments, including variations set out in project-specific contracts, licenses and agreements.
  - The fiscal regime defines in publicly available laws, regulations and model contracts/licenses the rates and methodology for calculating the base of all revenue instruments, including variations set out in project specific contracts, licenses and agreements, and any changes to the regime are made in an open and consultative way.

### 4.2.2   Resource Revenue Administration
- Principle: There are clear and impartial policies and procedures for resource revenue administration, with regular reporting on administration activities.
- Practices:
  - Resource revenue collecting authorities publish annual reports on resource revenue assessment and collection, taxpayer and contractor audit and compliance activities.
  - Resource revenue collecting authorities publish annual reports on resource revenue assessment and collection, taxpayer and contractor audit and compliance activities, and there is a clear and impartial dispute resolution process and annual reporting on disputes resolved and outstanding.
  - Resource revenue collecting authorities publish annual reports on resource revenue assessment and collection, taxpayer audit and compliance activities, there is a clear and impartial dispute resolution process and annual reporting on disputes resolved and outstanding, and there are published rulings and practice notes regarding administration of the fiscal regime.

### 4.3 Resource Revenue Utilization
- Principle: Resource revenues should be managed within the budget and macro-fiscal framework in accordance with clear fiscal policy objectives, and any natural resource fund should be operated in a consistent and transparent manner.

#### 4.3.1   Resource Revenue Forecasting
- Principle: Resource revenue forecasts are based on clearly disclosed assumptions and methodology, on a time horizon consistent with the fiscal policy objectives.
- Practices:
  - Budget documentation includes a forecast of resource revenue by instrument, with disclosure and justification of underlying assumptions.
  - Budget documentation includes a forecast of resource revenue by instrument on a time horizon consistent with the fiscal policy objectives, with disclosure and justification of underlying assumptions, and forecasting methodology.
  - Budget documentation includes a forecast of resource revenue by instrument on a time horizon consistent with the fiscal policy objectives, including sensitivity analysis in alternative price and extraction scenarios, with disclosure and justification of underlying assumptions, and forecasting methodology, as well as forecast reconciliation of the previous year’s resource revenue.

#### 4.3.2   Budget Integration of Resource Revenue
- Principle: Resource revenues are managed through annual budgets in accordance with clear fiscal policy objectives for the use of volatile and exhaustible natural resources.
- Practices:
  - Resource revenues accruing to the general government are remitted to the national budget and subnational budgets (if relevant) or to a natural resource fund and are allocated through the annual budget.
  - Resource revenues accruing to the general government are remitted to the national budget and subnational budgets (if relevant) or to a natural resource fund and are allocated through the annual budget, in accordance with any fiscal policy objectives for managing these volatile and exhaustible resources.
  - Resource revenues accruing to the general government are remitted to the national budget and subnational budgets (if relevant) or to a natural resource fund and are allocated through the annual budget, in accordance with any fiscal policy objectives for managing these volatile and exhaustible resources and with regular reporting on performance against those objectives.

#### 4.3.3   Natural Resource Funds
- Principle: The governance of any resource fund is clearly defined, with regular reporting on fund operations, finances and investment performance.
- Practices:
  - Any resource fund’s governance arrangements and operational rules are specified in legislation, and the fund publishes an annual report on its operations, finances and investment performance.
  - Any resource fund’s governance arrangements and operational rules are specified in legislation, and the fund publishes an annual report on its operations, finances and investment performance relative to strategy and benchmarks. Annual financial statements are externally audited.
  - Any resource fund’s governance arrangements and operational rules are specified in legislation and the fund publishes quarterly and annual reports on its operations, finances and investment performance relative to strategy and benchmarks. Annual financial statements are externally audited.

### 4.4 Resource Activity Disclosure
- Principle: Fiscal, operational, environmental and social aspects of natural resource projects should be regularly reported on and published.

#### 4.4.1   Reporting and Audit of Resource Revenues
- Principle: Resource revenues are regularly reported and audited.
- Practices:
  - The government publishes quarterly and externally audited annual reports on all resource revenues by instrument, in a timely manner, in line with international standards.
  - The government publishes quarterly reports on all resource revenues by instrument, and externally audited annual reports on all resource revenues by project and revenue instrument, in a timely manner, in line with international standards.
  - The government publishes monthly reports on all resource revenues by instrument, and externally audited annual reports on all resource revenues by project and revenue instrument, in a timely manner, in line with international standards.

#### 4.4.2   Reporting by Resource Corporations
- Principle: Resource corporations are required to report on resource revenue payments, which are regularly reconciled with reported government receipts.
- Practices:
  - As required by the government, resource corporations publicly report on resource revenue payments to government by revenue instrument.
  - As required by the government, resource corporations publicly report on resource revenue payments to government by project and revenue instrument which are reconciled with government receipts in line with international standards.
  - As required by the government, resource corporations report on resource revenue payments to government by project and revenue instrument, which are reconciled with government receipts in line with international standards, with no material unexplained reconciliation error.

#### 4.4.3   National Resource Corporations
- Principle: The governance of national resource corporations (NRC) is clearly defined, with regular reporting on operations and finances.
- Practices:
  - The governance arrangements of NRCs are defined in line with international standards in legislation or a published government document. The NRC publishes its budget, and a comprehensive and consolidated annual report in a timely manner.
  - The governance arrangements of NRCs are defined in line with international standards in legislation or a published government document. The NRC publishes an annual governance report, budget, comprehensive and consolidated quarterly and annual reports and externally audited annual financial statements in a timely manner. Reports include details on quasi-fiscal activities undertaken.
  - The governance arrangements of NRCs, including policies on procurement and subcontracting, are defined in line with international standards, in legislation or a published government document. The NRC publishes an annual governance report, budget, comprehensive and consolidated quarterly and annual reports and externally audited annual financial statements in a timely manner. Reports include details on quasi-fiscal activities undertaken, and details of major procurement and contract awards.

#### 4.4.4   Operational, Social, and Environmental Reporting
- Principle: The government reports regularly on overall sector activity and on the status of major projects, including social and environmental aspects.
- Practices:
  - The government reports annually on overall sector activity and on the status of major projects.
  - The government reports annually on overall sector activity and on the status of major projects, and publishes environmental and social impact assessments, and associated management plans and reports.
  - The government reports annually on overall sector activity and on the status of major projects, publishes environmental and social impact assessments and associated management plans and reports, and identifies the fiscal risks associated with operational, social and environmental aspects of major projects.

*International Monetary Fund — FISCAL TRANSPARENCY INITIATIVE: INTEGRATION OF NATURAL RESOURCE MANAGEMENT ISSUES*

### Appendix II. Public Consultations—Key Points

### Appendix II. Public Consultations—Key Points

### Overview
- Sets out key themes and comments from industry and civil society stakeholders during two formal rounds of public consultation.  
- Comments included clarifications and edits to principles, practices and definitions, many of which were addressed in the new pillar.  
- Stakeholders requested further detail on application of Pillars I-III in resource-rich countries and country examples of compliance with each practice; these details and country practices will be elaborated in the accompanying handbook.  
- Guidance on cross-cutting themes such as public participation and stakeholder engagement will be provided in the handbook.

### Civil Society Organizations — Key Points and Recommendations
- Legal Framework:
  - A transparent legal framework requires publication of laws which define the rights, obligations and responsibilities of all those involved in exploration, development, production and sale of natural resources.
- Allocation of Rights:
  - Specify that allocation of all licenses and contracts throughout sector should be through an open and competitive process.
- Oversight Mechanisms:
  - Emphasize auditing and assurance and the role of Supreme Audit Institutions to assess the relevance and reliability of information reported by governments on the exploitation of a jurisdiction’s natural resources.
  - While identified in Pillar I (principle 1.4.2), the qualitative aspect of information is worth reinforcing in Pillar IV.
- Accessibility of Data:
  - Pillar IV should reflect recent developments emphasizing public accessibility of data in machine-readable, open format.
- Public Participation:
  - Pillar IV should include specific practices on public participation in the implementation of fiscal policies, specifically to principles on environmental and social impact analysis; and with respect to the annual report of a Natural Resource Fund.
  - References should be added to public hearings in the legislature, and at the local level where resource extraction takes place.
  - These additions reflect international conventions establishing public participation as a right, and the increasing recognition of the instrumental value of public participation in international fiscal transparency standards.
- National Resource Companies:
  - There should be a separate principle for national resource companies.
  - This should include publication of details of the NRC’s resource sales, audited financial statements compiled according to international accounting and auditing standards with an unqualified audit opinion, key details of governance and senior management arrangements in the Annual Report, and the existence of low-cost mechanisms for redress available to members of the public with respect to the NRC’s operational activities.
- Project Level Reporting:
  - Project level reporting should be a ‘basic’ practice in line with the EITI standard and worldwide reporting requirements in EU, Norway and Canada.

### Industry Organizations — Key Points and Recommendations
- General:
  - The pillar should include an upfront statement of intent that the principles do not favor any particular policy regime, but rather are concerned with evaluating the transparency and accountability of the legal and fiscal regime already in place.
- Allocation of Rights:
  - The reference to “an open and competitive process for the allocation of rights to explore for and extract and trade natural resources,” alongside reference to “evaluation criteria for competitive tenders” implies a multi-party competitive tender process (akin to bids and auctions) which is not the usual practice in mining.
- Company Reporting:
  - The pillar should point to current reporting practices and standards to meet requirements in the pillar, to ensure that costs and burdens on companies and governments are minimized wherever possible.
- Competitive and Proprietary Concerns:
  - Where public disclosure requirements are not applicable comprehensively to all potential investors, disclosures can create major competitive concerns.
  - For countries transitioning or with rules that do not apply to all investors, and where disclosure of only some contracts or payments by some taxpayers could result, the rules should permit disclosures that make the underlying information available but do not compromise competitive positions or proprietary information.
  - In these situations, the rules should embrace summarized reporting that does not disclose individual taxpayer or contract arrangements.

*Source: Appendix II. Public Consultations—Key Points (from supplied content)*

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_Source: https://www.imf.org/-/media/files/publications/pp/2019/pp122818fiscal-transparency-initiative-integration-of-natural-resource-management-issues.pdf_