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January 03, 2017

Guatemala: Fiscal Transparency Evaluation

GuatemalaCurrency

Posted by Mario Pessoa[1]

The International Monetary Fund has published a Fiscal Transparency Evaluation (FTE) report for Guatemala.

In many areas Guatemala performs well against the standards set by the IMF’s Fiscal Transparency Code. Some eight of the Code’s 36 principles are rated as either “good” or “advanced,” 17 principles are rated as “basic,” and in ten areas the basic requirements of the Code are “not met.” One dimension was not assessed, as there are no existing public-private partnership contracts in Guatemala.

The report’s key findings under the Code’s three pillars are:

  • Coverage of the fiscal reports. There is a wealth of information available on the budgets of central and local governments, and other public sector entities and its execution. Public accounts cover 75 percent of the expenditures of these entities and citizens have easy access to a large volume of fiscal data. The Ministry of Finance publishes monthly a number of accounting, statistics, financial, and debt reports. However, there is room to improve the coverage of reports through the consolidation of the information of the various public subsectors. Data reconciliation in the reports would also improve the quality of information.
  • Fiscal policy objectives and assessment of the fiscal forecasts. In recent years the government has made major strides in developing modern budgeting tools such as a medium-term fiscal framework. Establishing a new fiscal pact in which medium-term fiscal targets are defined would help create fiscal predictability, and ensure that the major challenges of social and economic development are met. In addition, increasing the capacity to prepare and analyze macroeconomic and fiscal scenarios would foster more efficient public financial management.
  • Fiscal risk management. Despite full awareness of the challenges, the government does not actively manage the main fiscal risks. A step forward would be for the government to prepare and publish reports on the fiscal risks related to macroeconomic uncertainties, natural disasters, and social security liabilities. The government could also consider carrying out long-term fiscal sustainability analyses and actuarial studies of social security programs that look ahead at least 10 years. Fiscal forecasting and budgeting is governed by comprehensive legislation and a medium-term fiscal framework. However, official forecasts have significantly overestimated both the growth of GDP (on average by 1.5 percent a year) and the growth of revenue (by 2 percent of GDP a year) over the past decade. As a result, the approved budget has often been reduced significantly during the year due to revenue shortfalls, undermining its credibility.

The report both in Spanish and English can be found at: http://www.imf.org/external/pubs/cat/longres.aspx?sk=44440.0

[1] Mario Pessoa is Deputy Division Chief, PFM 2 Division, Fiscal Affairs Department, IMF.

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

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