Fiscal transparency is a key aspect of good governance, which is essential for the achievement of high-quality growth and macroeconomic stability. This manual, published by the International Monetary Fund (IMF), identifies the general principles and best practices of fiscal transparency. Fiscal transparency should make the process of designing and implementing fiscal policies more accountable. Stronger and more credible fiscal policies should attract the support of a well-informed public and lead to more favourable access to domestic and international capital markets.
Fiscal transparency emphasises the need for openness on the structure and functions of government, fiscal policy intentions, public sector accounts and fiscal projections. Fiscal transparency is a component of good fiscal management, which encompasses the efficiency of fiscal policy and the soundness of public finances.
In 1988, the IMF adopted the voluntary Code of Good Practices on Fiscal Transparency. A key principle of fiscal transparency relates to open budgetary procedures. The annual budget is the main instrument of fiscal policy and the information contained within and presented alongside the budget is central to fiscal transparency. The basic requirements for fiscal transparency in budget preparation, execution and reporting include:
- Preparing and presenting the annual budget within a comprehensive quantitative macroeconomic framework. Information on the macroeconomic framework and main assumptions underlying the budget should be provided in a background paper that is part of the budget documentation.
- Presenting budget information in a way that facilitates policy analysis and promotes accountability.
- Reporting budget data on a gross basis, distinguishing revenue, expenditure, and financing, with expenditure classified by economic, functional, and administrative category. Data on extra budgetary activities should be reported in the same way.
- Ensuring regular budget reporting to the legislature and the public. A mid-year report on budget developments should be presented to the legislature, followed by more frequent reports – at least on a quarterly basis.
- Presenting fiscal accounts to the legislature within one year of the end of the fiscal year. The coverage of final accounts and their timing should be specified in the budget law.
Good practice means that a sufficiently complete picture of the structure and finances of government is available to allow the soundness of a country’s fiscal position to be reliably assessed. Governments should seek to meet the standards of good practice in fiscal transparency, particularly in relation to open budgetary procedures, by:
- Presenting the budget report no later than one month prior to the tabling of the annual budget, stating the government’s medium-term and fiscal intentions and highlighting the total revenue, expenditure, the deficit or surplus, and debt.
- Publishing a long-term report on the sustainability of current fiscal practices every five years. A comprehensive, rolling medium-term budget framework should also be published.
- Making the estimated effects of all proposed central government legislation, including the cost implications for sub-national levels of government, publicly available.
- Including a statement of fiscal risks in the budget documentation, as a basis for assessing the budget’s reliability and as a guide to likely fiscal outcomes.
- Presenting fiscal accounts to the legislature within six months of the end of the fiscal year.
- Undertaking an independent audit of the results achieved relative to all performance targets and presenting these results within six months of the end of the fiscal year.
