Fiscal Transparency, ROSCs and Budget Execution

1. Fiscal Transparency, ROSCs and Budget Execution World Bank Seminar Washington DC April 9, 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: • Roles and responsibilities of and within government should be clear • Comprehensive reliable information on fiscal activities should be available to the public • The processes of budget preparation, execution, and reporting should be open • Integrity of information should be assured

4. 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

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

6. Build a dynamic partnership... IMF/MDBs Government Civil Society Financial Analysts Public Investors

7. 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

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

9. 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

10. 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.

11. 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

12. ROSC Program

13. 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;

14. Addressing poor data quality... • Establish standard fiscal reporting (GFS) • Getting basic reconciliation right • Move to accrual basis reporting (GFSM 2001) • Adoption of international accounting standards (IPSAS) at an appropriate pace Transparency code emphasizes disclosure of data relevant to macrofiscal policy; accounting emphasizes point of recognition of assets and liabilities.

15. 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