Fiscal Transparency, ROSCs and Budget Execution

Marco CangianoIMF-FAD

Fiscal Transparency, ROSCs and Budget Execution

Marco CangianoIMF-FAD

World Bank SeminarWashington DCNovember 5, 2003

TOPICS

Rationale for transparency

ROSC process

Key findings

Linkages with GFS and

accounting standards

Structure of the Code

• Institutional clarity: government’s role and the way its agencies interact

• Commitment to make comprehensive information available to the public

• Open processes of budget preparation, execution, and reporting

• Assurance of integrity of information by strong oversight

The Code is based on four general principles:

4 general principles 10 specific principles 37 good practices

The Code is organized in a hierarchy of principles and practices, which progressively define good practice in fiscal transparency:

The Code’s Vertical Structure

Why Transparency?

Improved transparency is seen as a necessary basis for improving efficiency and effectiveness of fiscal management:

• Better information will make government more accountable and lead to better fiscal policies

• Transparency will be reinforced by financial markets—which will provide further incentives for sound fiscal policies

Promotion depends on many

groups... IFIs and bilateral support of

government

Financial analysts concern with

transparency

Civil society concern with public

information and participation

Growing impact of

transparency assessments Governments identify internal

management reform priorities

Rating agencies/market analysts

use fiscal ROSCs

Civil society use fiscal ROSCs and

use code to make assessments

IMF Objectives and tools

Promote principles and good

practice --Code and Manual

Integrate with Fund surveillance

--ROSCs*

Build incentives & improve

practices --technical assistance

& outreach

* Reports on Observance of Standards and Codes

ROSC procedures

Questionnaire and self-

assessment

Staff review and assessment

Country review

Publication

Article IV and ROSCs

ROSCs play a central role

Dialogue with member countries on importance of transparency Links with Fund programs and TA from Fund and others Publication signals a commitment to improve transparency

But need to coordinate....

Many agencies assess standards or related aspects Duplication, inefficiency, high country costs, information overload Clarity of agency objectives Sustained, focused efforts.

54 countries have completed fiscal ROSCs

48 are published on the IMF website

Some focus on emerging market countries—but a wide range covered

http://www.imf.org/external/ IMF at Work/Reports on the Observance of Standards and Codes (ROSCs)

Standards & Codeshttp://www.imf.org/external/standards/index.htm

62 countries have completed fiscal ROSCs

Most are published on the IMF website

Includes all G7, most Eastern European and CIS countries, and many Latin American countries

Key findings to date….

Most ROSC participants are taking some steps to improve transparency

Around 60 percent of market access countries are participating

A range of common problems identified

Poor fiscal data quality Off-budget activity Tax expenditures and discretionary tax

administration Poor definition of intergovernmental relations

See http://www.imf.org/external/np/pdr/sac/2003/030503.htm International Standards: Strengthening Surveillance, Domestic Institutions, and

International Markets (SM/O3/86) Supplement 2;

GFSM 2001

• GFSM 2001 is an improved framework for collection and dissemination of government statistics.

• The focus will be on advantages and limitations of the framework for economic analysis of government operations and for budget management.

GFSM 2001

Synchronized with national accounts—1993 SNA Integrates flows and stocks—a balance sheet approach Cash plus reporting—initially cash, but progressive move to accrual basis reporting Will link with international accounting standards