The International Monetary Fund (IMF) was founded in 1944 and currently has a membership of 189 countries. The IMF’s mandate is to i) ensure the stability of the international financial system and promote sustainable growth by reviewing national, regional and global economic and financial developments through policy dialogue known as surveillance; ii) provide financial assistance to countries with balance of payments needs; and iii) support capacity building in member countries through technical assistance and training, including in the fiscal area.
How does the IMF promote fiscal transparency?
The IMF’s Fiscal Transparency Code (FTC), part of the IMF's Fiscal Transparency Initiative, is the global standard for disclosure of information about public finances. The FTC provides a set of principles to improve fiscal transparency and accountability, to support policymaking, enhance fiscal management and strengthen policy dialogue. The FTC was first adopted in 1998 and has been twice revised in 2007 and 2014. The 2014 FTC comprises a set of principles built around four "pillars" that reflect the IMF’s focus on macro-critical issues:
- Pillar I: Fiscal Reporting, to offer relevant, comprehensive, timely, and reliable information on the government’s financial position and performance.
- Pillar II: Fiscal Forecasting and Budgeting, to provide a clear statement of the government’s budgetary objectives and policy intentions, together with comprehensive, timely, and credible projections of the evolution of public finances.
- Pillar III: Fiscal Risk Analysis and Management, to ensure that risks to the public finances are disclosed, analysed, and managed, and that fiscal decision-making across the public sector is effectively coordinated.
- Pillar IV: Resource Revenue Management, to provide a transparent framework for the ownership, contracting, taxation, and utilisation of natural resource endowments.
The FTC was developed in a participatory manner, with review by main partners in the transparency community, including international and civil society organisations. It reflects recent advances in international standards, and emphasises the quality of published information, the importance of fiscal risks, while taking account of different levels of country capacity. For each transparency principle, the FTC differentiates between basic, good, and advanced practices to provide countries with clear milestones toward full compliance with the FTC and ensure its applicability to the full range of IMF member countries.
How and why to use the Code?
Fiscal Transparency Evaluations (FTEs) assess country practices against the FTC (replacing the previous Fiscal ROSCs (Report on the Observance of Standards and Codes). FTEs provide countries with a comprehensive assessment of their fiscal transparency practices, quantify the fiscal risks that they face, and set out a sequenced and prioritised action plan to meet good transparency practices as set out by the FTC. FTEs are carried out at the request of countries, and form part of the IMF’s ongoing policy dialogue and capacity building efforts. Several FTEs, across a broad spectrum of IMF member countries, have been completed.
What are other complementary tools?
The IMF has also developed other diagnostic tools in the fiscal area to complement the FTC, all of which include questions relating to transparency in their specific fields. IMF staff have worked with other stakeholders to ensure that the standards and guidelines in the area of fiscal transparency are fully aligned, and send a consistent and mutually reinforcing message.
These complementary tools include the following:
- Government Finance Statistics Manual (GFSM), 2014, the international standard for compiling and disseminating government finance statistics, including for publication in the IMF GFS Yearbook.
- Public-Private Partnerships Fiscal Risks Assessment Model (PFRAM), an analytical tool to assess the potential fiscal costs and risks arising from Public-Private Partnership (PPP) projects.
- Public Investment Management Assessment (PIMA) instrument, which evaluates 15 institutions that shape decision-making at the three key stages of the public investment cycle: planning sustainable investment across the public sector; allocating investment to the right sectors and projects; and implementing projects on time and on budget.
- Public Expenditure and Financial Accountability (PEFA) (jointly with other partners), a tool that helps governments assess public financial management (PFM) practices.
- Tax Administration Diagnostic Assessment Tool (TADAT) (jointly with other partners), which is designed to provide an objective assessment of the health of key components of a country’s system of tax administration.
What to expect next?
- Complete Pillar IV of the FTC and submit the full FTC to the IMF Board for approval.
- Finalise a two-volume Fiscal Transparency Manual, which will provide more detailed guidance on the implementation of the Code’s principles and practices. Volume I will cover Pillars I, II, and III, and Volume II will focus on Pillar IV.