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

IMF Blog, July 3, 2013

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

Author: Min Zhu
Date: July 3, 2013
Motivation: The global economic crisis highlighted the need for more reliable data on fiscal outcomes, credible forecasts of fiscal prospects, and comprehensive assessment of fiscal risks.
Action: The IMF has presented a revised draft of its Fiscal Transparency Code and seeks public feedback.

Improvements over the last two decades:
- Until the early 1990s, most countries’ fiscal data covered only the central government’s budget.
- Now, over 40 percent of countries report fiscal statistics for the whole of the general government (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).
- Nearly a quarter publish balance sheets of their financial assets and liabilities.
Persistent shortcomings:
- Coverage, quality, timeliness, and relevance of published fiscal data remain inadequate.
- Reported fiscal outcomes are often unreliable when first reported (example: Greece and other countries where pre-crisis debts and deficits were poor indicators of public finances).
- Budgets and fiscal forecasts frequently fail to provide credible information about fiscal prospects and sometimes are not presented on the same basis as fiscal accounts or statistics used to judge government performance.
- Few governments publish good information on fiscal risks they face, including risks to public finances created by the financial sector.

Aims:
- Set demanding standards for coverage, reliability, and timeliness of information on fiscal outcomes.
- Require budgets to provide a comprehensive overview of fiscal prospects and ensure comparability with fiscal accounts and statistics.
- Emphasize analyzing, disclosing, and managing a wide range of fiscal risks, including those created by the financial sector.
Institutional link:
- The revised Code provides the basis for a new Fiscal Transparency Assessment, which replaces the old fiscal ROSC (Report on the Observance of Standards and Codes).

Purpose: Evaluate whether a country’s fiscal data present a complete and reliable picture of its fiscal situation, outlook, and risks.
Improvements over old ROSCs:
- A more accessible summary of a country’s strengths and weaknesses regarding fiscal transparency.
- More quantitative assessment of the gaps in a country’s reported fiscal data.
- A prioritized and sequenced set of recommendations for how to address a country’s most pressing transparency issues.
Piloting and feedback:
- The new Assessments have been piloted in three low-income, emerging, and advanced countries.
- Feedback from the countries has been positive and has helped improve the draft Code.

The IMF invites review and comments on the draft Fiscal Transparency Code to further improve it.

IMF blog post by Min Zhu, July 3, 2013.