Posted by Carlos Tamarit de Castro
In June 2011, at the request of the government of El Salvador, the International Monetary Fund (IMF) conducted an assessment of the government’s compliance with the requirements of the IMF Code of Good Practices on Fiscal Transparency. The resulting Report on Observance of Standards and Codes (ROSC) is now available on the IMF website.
These assessments help countries present their fiscal policies and improvements with greater clarity and openness. This is a way to assess transparency, using the IMF’s Manual on Fiscal Transparency as a primary resource.
The report is divided in two parts. The first one details the current practices of El Salvador regarding (i) clarity of roles and responsibilities, (ii) openness of the budget process, (iii) public availability of information, and (iv) independently assessed assurances of integrity. The second part sets out the IMF staff’s comments on the preceding information.
El Salvador currently meets many of the Code standards. For example, the structure and functions of the central government and its interrelations with local governments are clearly specified; the budget calendar is specified and observed, and the Legislative Assembly has adequate time to consider the draft budget; the tax laws and regulations are clear and comprehensible and appeals are considered in a timely manner; the budget presentation provides a separate indication of all sources of revenue; the budget accounts indicate the accounting method used and largely apply accepted accounting standards. In addition, fiscal data dissemination and monthly updating will be improved with the incorporation of the Finance Ministry’s Fiscal Transparency Portal.
Nevertheless, El Salvador can further improve fiscal transparency. The severe fallout from the global crisis in 2009 resulted in a sharp reduction in GDP of almost 3 percent, high deficits and increased debt levels. The recovery initiated in fiscal year 2010 continues in 2011, with improvements in key figures. Against this background, the following would be beneficial: clarifying relations between the government and public corporations; submitting midterm budget outturn reports to the Legislative Assembly; incorporating information on municipal governments into the budget documentation; incorporating comparative figures into the budget documentation for the three preceding years; aggregating expenditure estimates for three/five subsequent years; submitting fiscal risk information including contingent liabilities; conducting a reliable public debt sustainability analysis; and developing improved transparency in quasifiscal activities.
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