Posted by Diana Escobar and Sandeep Saxena[1]
The IMF’s Fiscal Transparency Evaluation of Colombia highlights the progress made by the country in recent years in building more transparent fiscal management institutions. The IMF just published the report that evaluates Colombia’s fiscal reporting, fiscal forecasting and budgeting, and fiscal risk analysis management practices against the standards set by the 2014 version of the IMF’s Fiscal Transparency Code. The report includes a sequenced action plan to address important gaps. The report can be accessed here
Fiscal forecasting and budgeting emerges as the area with the most transparent practices The evaluation assigns an “advanced” rating to 6 of the 12 indicators in this area. Colombia scores particularly high on: (1) its well-structured and orderly process for legislative approval of the budget, and the quality of the information submitted to the Congress; (2) the credibility of the government’s macroeconomic and fiscal forecasts; and (3) the policy orientation and medium-term focus of the budget. Also noteworthy are Colombia’s strong fiscal responsibility law, its comprehensive, 10-year rolling fiscal plan (MFMP) which includes quantified fiscal policy objectives, and independent evaluation of compliance with the fiscal responsibility law.
Colombia also shows significant strength in fiscal reporting and fiscal risk management. It is one of the very few countries globally that produces a consolidated balance sheet with a public-sector wide coverage. Colombia’s annual financial statements—available within six months of the year-end—present a consolidated view of over 95 percent of the country’s nearly 4,000 public entities, including the Banco de la República (central bank). The report also highlights Colombia’s strengths in the management of fiscal risks—particularly those stemming from government guarantees, public-private partnerships, and natural disasters—an area that is a weak link in most other fiscal transparency evaluations. Colombia’s practices are based on sound principles and leading-edge innovations that would set a good example for some higher-income countries.
The report notes areas where Colombia could do even better. Prominent among these are gaps in the disclosure of information relating to multi-year investment projects, lack of comparability among fiscal reports due to the absence of a harmonized and consistent classification system, and insufficient public participation in the budget formulation process. Some of these areas are on the government’s radar screen for reform, and can be expected to deliver stronger results in the near term.
The action plan, developed and included in the report in consultation with the Ministry of Finance, complements and reinforces the country’s ongoing efforts to improve fiscal transparency.
To know more about the IMF’s Fiscal Transparency Code, please visit Fiscal Affairs Department’s website. http://www.imf.org/external/np/fad/trans/index.htm.
[1] Diana Escobar is an Advisor in the Macroeconomic Policy Directorate in the Colombian Ministry of Finance and Public Credit. Sandeep Saxena is a Senior Economist in the IMF's Fiscal Affairs Department.
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