Fiscal Transparency, ROSCs and Budget Execution Marco Cangiano IMF-FAD

1. Fiscal Transparency, ROSCs and Budget ExecutionMarco CangianoIMF-FAD World Bank Seminar Washington DC November 5, 2003

2. TOPICS • Rationale for transparency • ROSC process • Key findings • Linkages with GFS and accounting standards

3. Structure of the Code The Code is based on four general principles: • 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

4. The Code’s Vertical Structure The Code is organized in a hierarchy of principles and practices, which progressively define good practice in fiscal transparency: • 4 general principles • 10 specific principles • 37 good practices

5. 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

6. Promotion depends on many groups... • IFIs and bilateral support of government • Financial analysts concern with transparency • Civil society concern with public information and participation

7. 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

8. 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

9. ROSC procedures • Questionnaire and self-assessment • Staff review and assessment • Country review • Publication • Article IV and ROSCs

10. 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

11. 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.

12. http://www.imf.org/external/ IMF at Work/Reports on the Observance of Standards and Codes (ROSCs) • 54 countries have completed fiscal ROSCs • 48 are published on the IMF website • Some focus on emerging market countries—but a wide range covered

13. Standards & Codes http://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

14. 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;

15. 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.

16. 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