Posted by Sailendra Pattanayak1
The IMF has just published a report that assesses Mexico’s fiscal transparency practices against the standards set by the IMF’s Fiscal Transparency Code. The report covers all four pillars: (I) Fiscal Reporting; (II) Fiscal Forecasting and Budgeting; (iii) Fiscal Risk Analysis and Management; and (IV) Resource Revenue Management. This is the first pilot evaluation of Pillar IV for a country with significant resource revenues. While identifying key strengths of Mexico’s fiscal transparency practices, the report also highlights several gaps and includes a sequenced action plan to address those gaps. The report can be accessed here: https://www.imf.org/en/Publications/CR/Issues/2018/10/03/Mexico-Fiscal-Transparency-Evaluation-46282.
Mexico scores relatively well when compared to other Latin American countries and emerging market economies that have undergone a fiscal transparency evaluation (FTE). Fiscal transparency practices are strongest in the areas of resource revenue management and fiscal forecasting and budgeting, while the scores on fiscal risks analysis and management are lower. Out of the 48 fiscal transparency principles, Mexico meets 15 principles at the advanced level, 9 principles at the good level and 16 principles at the basic level, but do not currently meet basic practice for seven principles.
The report identifies several strengths of Mexico’s fiscal transparency practices. These include regular and timely publication of fiscal statistics and financial statements; annual disclosure of tax expenditures; a comprehensive legal and regulatory framework for fiscal management; fiscal policy anchored in a fiscal consolidation plan and fiscal rules; a well-developed performance information and evaluation system; publication of a citizen’s guide to the budget and an informative Transparency Portal; annual publication of statistics on the volume of oil and gas reserves; specific debt rules for subnational governments; a quantitative limit on new public private partnership obligations; regular monitoring of financial sector risks by a Financial Stability Council; a clear and comprehensive legal and fiscal framework for the petroleum sector; and clear governance arrangements and operational rules for the Mexican Petroleum Fund.
The report also notes areas where Mexico could do even better. Areas of potential improvement include gaps in the coverage of subnational government operations in fiscal reports; no analysis of the long-term sustainability of public finances; lack of compliance with international standards on the classification of revenues and expenditures; few elements of a modern medium-term budget framework; lack of a comprehensive framework for the financial oversight of public corporations; and the need to establish an independent evaluation of macroeconomic and fiscal forecasts.
Based on the evaluation, the report provides 10 key recommendations aimed at further enhancing fiscal transparency practices in Mexico. The report also includes a sequenced action plan, developed in consultation with the Ministry of Finance, for implementing those recommendations.
To know more about the IMF’s Fiscal Transparency Code and FTEs, please visit http://www.imf.org/external/np/fad/trans/index.htm.
[1] Sailendra Pattanayak is a deputy division chief in the IMF’s Fiscal Affairs Department.
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