Managing Director Christine Lagarde at a meeting with CSO representatives at the October 2012 IMF-World Bank Annual Meetings in Tokyo (photo: IMF)
Consultation Process
The consultation marks the first time the institution has sought the input of such a broad range of stakeholders in connection with planned revisions to the Fiscal Transparency Code and related Manuals and Processes.
Fiscal transparency—defined as the clarity, reliability, frequency, timeliness, and relevance of public fiscal reporting and the openness to the public of the government’s fiscal policymaking process—is considered a critical element of effective fiscal management.
Interested parties are being asked to submit their comments by February 10, 2013 after which time submissions will be posted on the IMF website.
After this first round of consultation, the IMF will prepare a revised draft of the Code of Good Practices and Manual on Fiscal Transparency, which will form the basis for a second round of consultation in Spring 2013. The IMF plans to submit final versions of the new Code and Manual to its Executive Board for approval and publication in late 2013.
Fiscal transparency and fiscal management
Fiscal transparency helps make sure governments’ spending and taxation decisions are informed by an accurate assessment of the current fiscal position, the costs and benefits of any policy changes, and the potential risks to the fiscal outlook.
Fiscal transparency also provides legislatures, markets, and citizens with the information they need to make efficient financial decisions and to hold governments to account for their fiscal performance and their use of public resources. Finally, fiscal transparency facilitates international surveillance of fiscal developments and helps mitigate the transmission of fiscal spillovers between countries.
Current state of fiscal transparency
In a recent policy paper, Fiscal Transparency, Accountability, and Risk, the IMF reviewed the state of fiscal transparency in the wake of the recent crisis. While considerable progress has been made in enhancing the coverage, quality, and timeliness of public fiscal reporting since the late 1990s, the review found continued weaknesses in governments’ understanding of their underlying financial position and risks to that position.
These shortcomings in transparency are due to a combination of gaps and inconsistencies in existing fiscal reporting standards, delays and discrepancies in countries’ adherence to those standards, and a lack of effective multilateral monitoring of compliance with those standards.
Need for revitalized fiscal transparency effort
To address the shortcomings in fiscal transparency standards, practices, and monitoring arrangements, the IMF paper recommended revisions to fiscal transparency standards, including the IMF’s Code of Good Practices and Manual on Fiscal Transparency, to broaden the institutional coverage of fiscal reports, recognize a wider range of flows, assets and liabilities, and to incorporate new standards for fiscal forecasting and risk management.
The IMF paper also called for the existing fiscal transparency Report on Observance of Standards and Codes to be replaced with a more analytical, modular, and graduated approach to evaluating countries’ fiscal reporting practices and outputs.
The online call for comment launched today is part of a wider comprehensive consultation process that will include meetings with a number of external stakeholders, including international organizations, governments, standard setting bodies, academics, and civil society groups.
