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October 2013

October 29, 2013

History of Fiscal Transparency and Fiscal Secrecy

Posted by Tim Irwin

Working paper logo
What encourages governments to publish information about their finances? A new IMF working paper, “Revealing the Mysteries of State: The Origins of Fiscal Transparency in Western Europe” aims to shed light on this question by examining the history of European fiscal transparency. It was inspired by the Fund’s work on promoting fiscal transparency (see this policy paper and the new draft Fiscal Transparency Code).

The working paper looks back as far as Athens in the fifth-century BC and notes a few of the developments of the last two decades, but it concentrates on the fiscal secrecy of the age of absolutism, in which governments used spies to uncover the accounts of other states, and on the efforts of eighteenth- and nineteenth-century reformers to get the accounts published.

One factor encouraging transparency identified by the paper is the strength of governments’ need to raise money from skeptical lenders and taxpayers. Its influence can be seen at work on many occasions, including medieval Spain and seventeenth-century England, but it was particularly evident during the French Revolution.

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October 21, 2013

How to Decide on the Budget: Set Menu or à la Carte?

Posted by Renaud Duplay

The recent debate over the United States federal budget, which led to a partial government shutdown, was at times hard to follow. Behind the debate over health care reform, lay also a more procedural struggle over the way to prepare the budget on Capitol Hill. Indeed, part of the butting of heads has resulted from a disagreement over what to negotiate on, in the first place. The US Constitution is relatively light on how the budget should be passed, so many legal options were considered in recent weeks, including: passing a continuing resolution to fund federal services and agencies; passing a continuing resolution linked with a defunding of the Affordable Care Act – Obamacare; funding individual federal agencies on a vote by vote basis; funding individual programs of federal agencies given expected adverse impacts of the shutdown, such as on cancer research trials. These options were, to make it even more complicated, linked to various stances on the federal government debt ceiling: separate decision-making, a linked agreed increase, or what resulted, a temporary suspension. In all this a new federal budget for the new budget year was not on the table. This is now on Congress’ to do list for the next three months.  

All of this is possible because the US federal budget works a little bit like ordering à la carte in a restaurant: you can skip the main course if you don’t feel like it and still end up enjoying the meal (or, more often, not really). Indeed, implementing a deal over the US federal budget requires selecting from a different menu of votes depending on the content of the deal. In addition, authority to spend can be given in various ways: either by appropriations bills – for federal agencies’ operating costs for instance – or by specific legislation that grants authority to spend on entitlement programs until this very legislation is modified or repealed. Those programs are called “mandatory” which by the way sets the tone for any future discussion on them.

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October 17, 2013

Job Offer: Network Director, Global Initiative for Fiscal Transparency (GIFT)

GIFT logo
The Global Initiative for Fiscal Transparency (GIFT) is a vibrant multi-stakeholder action network that is strengthening norms, incentives, technical assistance, and use of innovative technologies to foster more transparent, participatory, and accountable public fiscal decision-making processes worldwide.

The GIFT’s founders and Lead Stewards (equivalent of Governing Board) are:

  • Governments: Ministry of Planning, Brazil; Department of Budget & Management, Philippines
  • International Organizations: International Monetary Fund (IMF), The World Bank Group (WB)
  • Civil Society: International Budget Partnership (IBP)

After an incredibly successful thee year incubation period hosted by Innovations for Scaling Impact, and significant funds committed for the next three year expansion phase, GIFT is seeking to hire its first full-time Network Director, which will be housed for the upcoming year at the International Budget Partnership, based in Washington D.C. This is a once-in-a-career opportunity for an entrepreneurial leader to further advance and institutionalize a major global multi-stakeholder initiative in a high profile and critical global public policy issue area.

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October 15, 2013

A PFM View of the New French “Loi Organique”

Posted by Benoit Chevauchez[1]

France is now equipped with a fiscal rule. The organic budget law adopted last December[2] was the French government’s response to the obligations set out in the European Treaty on Stability, Coordination and Governance (TSCG) signed in March 2012. The Treaty resulted from a process initiated in December 2011 by the European Council, in the wake of the euro crisis. The basic idea of the Treaty is that “Euro zone countries” should adopt national fiscal rules in order to integrate in their own legislation the Maastricht principles of fiscal discipline that are set out in the European treaties.

Before the new treaty was ratified, the French national budget law did not address issues of fiscal sustainability. The French Constitution of 1958 was silent in this regard, even if an amendment adopted in 2008 had introduced the concept of “budget balance over the medium term”, but only as a theoretical principle without any operational impact. Similarly, the 2001 LOLF (loi organique relative aux lois de finances), and its predecessor the 1959 Organic Ordinance, wholly ignored sustainability issues.

In practice, France has had a rather modest record in terms of fiscal sustainability: its EU stability programs have seldom been respected, its macroeconomic assumptions have been frequently optimistic, and its debt level has steadily increased up to 90 percent of GDP. Thus, for France, the adoption of the new organic law (OL) is an important initiative, that might also mark a turning point in its fiscal tradition.

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October 10, 2013

Annual Meetings Kicks Off with Talks on Fiscal Transparency

Posted by Rachel F. Wang

Many of the key players committed to promoting greater fiscal transparency met on Tuesday for one of the first events of the 2013 IMF-World Bank Annual Meetings.

The Joint IMF-World Bank Seminar entitled “Strengthening Fiscal Transparency and Government Accounting” brought together representatives from international organizations, national governments, think tanks, professional organizations, and civil society to discuss how to promote greater fiscal openness and improve the information base for fiscal decision-making.

The event was kicked off with a welcome address from Bertrand Badré, Managing Director and World Bank Group Chief Financial Officer, and included two panel discussions on

  • Strengthening fiscal transparency standards and practices chaired by Richard Hughes, Division Chief in the IMF’s Fiscal Affairs Department), and
  • Improving government accounting chaired by Chuck McDonough, Vice President and Controller at the World Bank). 

Panelists included Moritz Kramer from Standard & Poor’s, Phil Sinnett from the PEFA Secretariat, Vivek Ramkumar from the International Budget Partnership, Jo Marie Griesgraber from New Rules for Global Finance Coalition, Devantri Kaur Santa Sigh from the Malaysian Ministry of Finance, Gerhard Steger from the Austrian Ministry of Finance, Fayez Choudhury from IFAC, and Ron Salole from IPSAS board.

Discussions ranged over a variety of areas, including the revision of the IMF’s fiscal transparency code and new fiscal transparency assessment; how fiscal transparency feeds into credit ratings and vice versa; the harmonization of different transparency-related norms and standards; the role that civil society has played in promoting greater fiscal openness by governments; and the opportunities and challenges in moving from cash to accrual accounting.

The keynote address, given by Gerd Schwartz, Deputy Director of the IMF Fiscal Affairs Department set the tone for the morning’s discussion.  The text of his speech is provided below:

I would like to use this opportunity to talk about the importance of fiscal transparency for fiscal sustainability and discuss the work underway to improve both standards and practices.  More specifically, there are four issues I would like to cover:

  • First, I would like to highlight the progress made in promoting greater fiscal transparency over the past decade, thanks to collective efforts of many of the organizations represented in this room.
  • Second, I would like to discuss some of the lessons of the economic crisis regarding the adequacy of existing fiscal transparency standards and practices.
  • Third,  I would like to provide you with an update of the IMF’s ongoing work on strengthening its evaluation tools in the fiscal transparency area; and
  • Finally, I would like to review the broader agenda on fiscal transparency and government financial disclosure.

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