IMF Calls for Renewed Fiscal Transparency Effort

  • More transparency needed about the state of government finances
  • Improved transparency key to effective policy response to crisis
  • IMF to enhance monitoring of countries' compliance with standards
  • In the wake of the crisis, a new IMF paper calls for improvements in fiscal reporting standards, faster adoption of those standards by member countries, and improvements in the way the IMF and others monitor fiscal transparency.

    The past 15 years have seen improvements in both fiscal reporting standards and practices. However, the recent crisis has underscored that, even among advanced economies, governments’ understanding of their fiscal position—and the risks to that position—remains inadequate.

    The IMF paper on fiscal transparency, accountability, and risk surveys the state of fiscal transparency and looks at what can be done to improve it.

    Openness on the rise

    Over the past 15 years, a set of internationally accepted standards for fiscal transparency have been developed. These include the IMF’s own Code of Good Practices on Fiscal Transparency and the Government Finance Statistics Manual as well as the International Public Sector Accounting Standards developed by the International Federation of Accountants.

    This period has also witnessed a steady improvement in the comprehensiveness, quality, and timeliness of public financial reporting in countries across the income scale, according to the IMF paper.

    Over 40 percent of governments now produce fiscal statistics covering the whole of the general government, while over 20 percent of governments produce balance sheets covering at least their holdings of financial assets and liabilities.

    “Now is the right time to review our approach to improving fiscal transparency,” said Carlo Cottarelli, head the IMF’s Fiscal Affairs Department. “The crisis has reminded us that comprehensive, reliable, and timely information about the public finances is the foundation of effective fiscal management. It has also highlighted the gaps in both fiscal reporting standards and practices. Improvements in fiscal transparency should therefore be a central element of any government’s fiscal policy response to the crisis.”

    Crisis revealed transparency shortcomings

    According to the IMF, despite the advances made to date, current understanding of governments’ underlying fiscal position and the risks to that position remains inadequate. This was demonstrated by the emergence of previously unreported fiscal deficits...

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