Transparency Aiding Latin American growth
| Author | Taryn Parry |
| Position | IMF Fiscal Affairs Department |
| Pages | 30-31 |
Page 30
Prospects for stronger and more stable economic growth in Latin America hinge on stronger fiscal management and higher-quality public spending.
Despite a sharp rebound in growth after a serious economic downturn during 1999- 2002, concerns have been raised about the region's ability to maintain strong and stable growth, according to a recent IMF Working Paper. The pace of expansion still lags behind other emerging market and developing countries, and periods of rapid growth have tended to be followed by sharp slowdowns.
Fiscal priorities for the region include continued debt reduction, avoiding procyclical fiscal policy, improving the equity of tax systems, making investment more productive, and promoting a fairer and more transparent business environment. Fiscal transparency can play a critical role in meeting these challenges and remedying weaknesses in fiscal management practices that have been associated with past financial crises.
Fiscal transparency refers to the practice of a government disclosing to the public information about its structures and functions, fiscal policy intentions, public sector accounts, and fiscal projections. The lack of such transparency contributed to a loss of confidence and fed global instability in the late 1990s. Particularly in Latin America, weaknesses were related to poor monitoring of off-budget fiscal activities that eventually had large fiscal consequences.
Fiscal transparency permits a clear assessment of past fiscal performance, the current fiscal position, fiscal risks, and the future direction of fiscal policy. Most important, identifying and better monitoring fiscal risks can prevent unpleasant fiscal surprises. More generally, improvements in the quality and timeliness of fiscal data can help improve the analysis of fiscal data and the quality of fiscal policy decisions.
The issue: Latin America remains vulnerable to financial crises and global slowdowns. Better fiscal management and transparency will help increase economic growth, as well as its stability and quality, and help avert a repeat of previous economic crises.
The evidence: Despite a decade of structural reforms, Latin America suffered an extended economic downturn during 1999-2002. Many countries were hurt by financial crises of major Latin American countries and...
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