New Fiscal Transparency Code to Improve Policies and Accountability

New Code is cornerstone of modern fiscal transparency architecture

Emphasis on fiscal risks, quality of fiscal reporting, forecasting, and budgeting

Allows assessment of key country transparency practices and reform needs

The new Fiscal Transparency Code and new Fiscal Transparency Evaluation are part of the IMF’s efforts to strengthen fiscal surveillance, support policymaking, and improve fiscal accountability. The IMF’s Executive Board, where all member countries are represented, has just approved the first three pillars of the new four-pillar code.

Since they were first published in 1998 and last updated in 2007, the IMF’s Code of Good Practices on Fiscal Transparency and accompanying Manual and Guide have been centerpieces of the global architecture of fiscal transparency standards. The Code also provided the framework for conducting fiscal transparency assessments, or “Fiscal ROSCs,” which, as part of the Fund’s Reports on the Observance of Standards and Codes (ROSC), analyzed countries’ adherence to the principles and practices in the Code.

Focus on four pillars of fiscal transparency

The new Code, described in the Update on the Fiscal Transparency Initiative, covers four key elements of fiscal transparency (see figure):

• Pillar I: Fiscal Reporting, 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 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 ownership, contracting, taxation, and utilization of natural resource endowments.

While Pillars I, II, and III have been finalized, Pillar IV will be completed later this year, and requires adapting the principles of the first three pillars to the particular circumstances of resource-rich countries.

“The new Fiscal Transparency Code and Fiscal Transparency Evaluation address the weaknesses of the 2007 Code and Fiscal ROSC,” said Richard Hughes, Division Chief in the IMF’s Fiscal Affairs Department...