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Strengthening the Foundations for Fiscal Policymaking: A New Fiscal Transparency Code

In the last two decades, countries have come a long way in shedding greater light on their public finances. The global economic crisis has reminded us, however, that we need to do more to ensure fiscal policymaking is based on reliable data on fiscal outcomes, credible forecasts of fiscal prospects, and a comprehensive assessment of fiscal risks. Working with civil society, governments, and others, the IMF has just presented a revised draft of its Fiscal Transparency Code, and we would like to know what you think of it so we can improve it further. You can comment here.

An improving but incomplete picture of public finances

There is no doubt that the last two decades have witnessed important improvements in fiscal transparency. For example, until the early 1990s, the fiscal data of most countries covered only the central government’s budget. Now, over 40 percent of countries report fiscal statistics for the whole of the general government: that is, both central and subnational governments. A decade ago, the vast majority of countries provided information only about the government’s cash inflows and outflows. Now, about a third provide some accrual-based information (based on when claims arise, not when money changes hands), and nearly a quarter publish balance sheets of their financial assets and liabilities.

Yet, as the recent crisis has demonstrated, the coverage, quality, timeliness, and relevance of published fiscal data remain inadequate.

A new draft Fiscal Transparency Code and Assessment

Our new draft of the Fiscal Transparency Code aims to address these issues. It sets demanding standards for the coverage, reliability, and timeliness of information on fiscal outcomes; requires budgets to provide a comprehensive overview of fiscal prospects and be comparable with fiscal accounts and statistics; and emphasizes the importance of analyzing, disclosing, and managing a wide range of fiscal risks, including those created by the financial sector.

The revised Fiscal Transparency Code also provides the basis for a new Fiscal Transparency Assessment which replaces the old fiscal ROSC (Report on the Observance of Standards and Codes) and evaluates whether a country’s fiscal data present a complete and reliable picture of its fiscal situation, outlook, and risks. These new Assessments improve on the old ROSCs by providing:

The new Assessments have now been piloted in three low-income, emerging, and advanced countries. Feedback from the countries has been positive and has helped us improve the draft Code. I hope you will have a look at our new draft Fiscal Transparency Code and give us your own feedback so we can improve the Code further.