Fiscal Transparency, ROSCs and Budget Execution Marco Cangiano IMF-FAD World Bank Seminar Washington DC November 5, 2003

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

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

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

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

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

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)

Standards & Codes  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

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;

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.

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