Fiscal Transparency, ROSCs and Budget Execution World Bank Seminar Washington DC April 9, 2003

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

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

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

Government PublicInvestors IMF/MDBs Civil Society Financial Analysts Build a dynamic partnership...

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 IMF at Work/Reports on the Observance of Standards and Codes (ROSCs)

ROSC Program

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 International Standards: Strengthening Surveillance, Domestic Institutions, and International Markets (SM/O3/86) Supplement 2;

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.

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