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Call for Consultation
Consultation on the draft Resource Revenue Management Pillar of IMF’s Fiscal Transparency Code
The IMF thanks the organizations and individuals who have provided comments during the online consultation on the draft Resource Revenue Management Pillar of IMF’s Fiscal Transparency Code. The online consultation ended on March 15, 2015. Written comments submitted during January - May 2015, are now available. If you have any questions, please send an e-mail to IMFConsultation@imf.org.
Background
The IMF has just released Pillars I to III of the new and revised Fiscal Transparency Code (FTC). As explained in the August 2014 IMF Policy Paper ‘Update on the Fiscal Transparency Initiative’, a fourth pillar on resource revenue management remains to be completed. The four FTC pillars are:
- Pillar I: Fiscal Reporting, in the form of fiscal statistics and accounts, which should offer relevant, comprehensive, timely, and reliable information on the government’s financial position and performance.
- Pillar II: Fiscal Forecasting and Budgeting which should provide a clear statement of the government’s budgetary objectives and policy intentions, together with comprehensive, timely, and credible projections of the evolution of the public finances.
- Pillar III: Fiscal Risk Analysis and Management which should ensure that the risks to the public finances are disclosed, analyzed and managed, and fiscal decision-making across the public sector is effectively coordinated.
- Pillar IV: Resource Revenue Management which should provide a transparent framework for the establishment and use of public revenue from natural resources.
Figure 1: Fiscal Transparency Code Pillars
Pillar IV, which is the subject of this consultation, will complete the FTC by stating principles and practices for each stage of the resource revenue management process for resource-rich countries. It recognizes the need to account for differences in the institutional and legal systems which govern natural resource activity in individual countries, and follows the structure and approach of the first three pillars in measuring the transparency and quality of output rather than processes, and in placing greater emphasis on fiscal risk disclosure and management. It also reflects the importance of changes in commodity markets and the structure of the extractive industries in recent years, and takes into account the development of new natural resource transparency standards and initiatives.
Application of Pillar IV: Resource Revenue Management
The Resource Revenue Management pillar will form part of IMF Fiscal Transparency Evaluations for resource-rich countries, and, like Pillars I to III, it differentiates between basic, good, and advanced practices under each transparency principle to take account of different levels of country capacity, and to formulate useful milestones for improvement in resource revenue transparency. Prior to finalizing Pillar IV, the IMF will carry out several pilot evaluations to field test and adapt as needed the design of the new pillar in resource-rich countries.
While previous application of the 2007 FTC simply adapted the Code’s principles for resource-rich countries, the creation of Pillar IV recognizes the need to include key unique principles which underpin natural resource revenue transparency. Thus Pillar IV provides natural resource focused elements of the fiscal transparency framework that are not already covered by the other pillars, and will be used in conjunction with Pillars I to III to provide a complete picture of resource revenue transparency. In conducting Fiscal Transparency Evaluations (FTEs) for resource-rich countries, all four pillars will be used, with the relevant Pillar I-III principles applied in the context of natural resources. To provide some illustrative examples of how Pillars I to III would be used in the natural resource context:
- 1.1.2 Coverage of Stocks would assess the valuation and reporting on subsoil assets.
- 3.3.2 Public Corporations would look to analyze the reporting outputs and transparency of national resource companies.
Revision to the Guide on Resource Revenue Transparency
The Pillar IV principles and practices will inform the accompanying Guide on Resource Revenue Transparency and Accountability which will constitute the second volume of a revised Fiscal Transparency Manual. The first IMF Guide on Resource Revenue Transparency was published in 2005 and updated in 2007, and accompanied the 2007 version of the FTC. The 2015 revision will align the guide to the new FTC structure, elaborating in detail on the principles of all four pillars of the FTC with respect to their application in the context of resource-rich countries. The new Guide on Resource Revenue Transparency and Accountability will also provide details on prevailing international standards which are relevant to each principle of Pillar IV. The new Guide is intended to be a core international reference on the topic, and seeks to ensure that transparency and accountability in resource revenue management continue to inform the IMF’s efforts to strengthen fiscal surveillance and capacity-building work with respect to Fund’s member countries for which resource revenues are macro-critical.
Public Consultation
The concept and rationale for Pillar IV was, among others, discussed at the IMF-WB launch event: 'The new Fiscal Transparency Code and PEFA Framework', held on October 6, 2014. We are now seeking comments on the draft principles and practices of Pillar IV. While we welcome feedback on any aspect of Pillar IV, we are specifically interested in your feedback on the following issues:
- Do the Pillar IV principles (in conjunction with Pillars I to III) adequately reflect the most important aspects of natural resource revenue transparency and complement other resource revenue transparency initiatives and standards? Which principles could usefully be added, dropped, or reformulated?
- Do the descriptions of basic, good, and advanced practice under each principle provide a well-sequenced path towards state-of-the-art practice with the respective principle under Pillar IV? Are the different levels of practice appropriately calibrated and sufficiently differentiated?
We encourage comments from all stakeholders of the extractive sector – government officials, parliamentarians, private sector entities, practitioners in the field of resource revenue management, and civil society organizations. During the consultation period, we also hope to hold outreach events to generate further discussions that would inform the final design of Pillar IV.
Procedures
The IMF’s Communications Department (COM) will receive the comments and post a summary of them. Senders can request for their comments to be private. Any interested stakeholder can submit their input through the following channels:
- E-mail: IMFConsultation@imf.org
- Fax: +1 202 623 6220
When submitting your comments, via fax or email, please include the following information so that your comments are registered: name of sender; organization you represent (if any); country; phone number; and e-mail address.
Comments should be submitted no later than March 15, 2015.
Next Steps after this Consultation
The feedback received during this consultation will inform the final version of Pillar IV of the Fiscal Transparency Code, which the IMF plans to submit to its Executive Board for approval and publication in April 2015. As mentioned above, the IMF will also be drafting a new Guide on Resource Revenue Transparency and Accountability (Volume II of the Fiscal Transparency Manual) to align it with the new Fiscal Transparency Code, as well as to reflect recent developments in the extractive industries and new standards and practices in resource revenue transparency. Both volumes of the Fiscal Transparency Manual will also be the subject of a public consultation in Spring 2015 and finalized later in the year.
UPDATE: Comments received January – May 2015
