Back Matter

Appendix I. Results of FAD Survey on Fiscal Transparency and Risk

G. Overview of Countries Surveyed

In January 2012, a survey of fiscal transparency and risks was conducted among FAD economists working on 48 countries, reflecting a range of income levels, regions, and relations with the Fund (Figure A1). The survey asked them to describe the institutional coverage, consolidation details, and timeliness of fiscal reports, and to indicate quasi-fiscal activities, inconsistencies in accounting standards, or other factors that could lead to a discrepancy between overall balance and financing data of the countries to which they were assigned. Furthermore, the survey asked economists to indicate government entities and financial activities whose volatility could lead to a deviation between budgeted and actual fiscal outcomes, and to what extent this volatility posed a threat.

Figure A1.
Figure A1.

Income, Regional, and IMF Program Status of Sampled Countries

Citation: Policy Papers 2012, 054; 10.5089/9781498340076.007.A999

H. Institutional Coverage of Fiscal Data

The institutional coverage of the fiscal data received by Fund staff are presented in Table A1:

Table A1.

Institutional Coverage of Regularly Published Data on Fiscal Flows1/

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Percentage of sample for which given transaction or entity was assessed to pose fiscal risk.

I. Timeliness of Fiscal Data

The periodicity and timeliness of fiscal data received is as follows (Table A2):

Table A2.

Periodicity and Reporting Lag of Regularly Published Fiscal Flows

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J. Reliability of Fiscal Data

According to fiscal economists there were two concerns regarding the reliability of the data:

  • Quasi-fiscal activities: of the countries sampled, 75 percent were perceived to have known quasi-fiscal activity conducted outside the reported fiscal data. The most significant of these was subsidized lending and/or bank recapitalization reported in 50 percent of countries. Also significant was the practice of governments charging less than commercial prices for goods such as fuel, electricity, and water which was reported in 44 percent of countries.

  • Statistical discrepancy: 35 percent of countries were determined to have a significant discrepancy (greater than 1 percent of GDP) between the government’s overall balance and its financing data for the highest reported level of consolidation. Such significant discrepancies were especially common in Latin America (80 percent) and Asia-Pacific (50 percent). Of this subset, the discrepancy was most often attributed to the differences in both coverage and accounting bases between monetary and fiscal statistics. An additional source of discrepancy was the presence of extrabudgetary operations not captured in revenue and expenditure data.

K. Sources and Management of Fiscal Risks

The survey also asked fiscal economists to identify the main sources of fiscal risks in their country assignment and evaluate their fiscal risk disclosure and management practices.

The sources of fiscal risks perceived are presented in Tables A3.

Regarding governments’ fiscal risk disclosure and management practices (Table A4), economists reported:

  • Alternative macroeconomic scenarios: only 10 percent of the countries sampled produce alternative macroeconomic scenarios and only 8 percent produced alternative fiscal scenarios. Within this, 38 percent of advanced and G-20 countries provided alternative macro-fiscal scenarios, compared with 6 percent of emerging and none of developing countries.

  • Fiscal risk statements: two-thirds of countries sampled did not publish fiscal risk statements of any kind. Of those countries which did, the most commonly published fiscal risk statement was a qualitative description of risks produced by 23 percent of countries. Only 10 percent of countries sampled produced a quantified statement of fiscal risk.

Table A3

Transactions and Institutions as a Source of Fiscal Risk

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Table A4

Fiscal Risk Disclosure and Management

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Appendix II: Review of Fiscal ROSCs in Crisis-Hit Countries

Of the ten countries that experienced the largest increase in government liabilities during the crisis (see Box 2 of the main text), eight had undergone a Fiscal Transparency ROSC within the previous eight years. This appendix summarizes the results of a review of the findings and recommendations of these ROSCs, with a particular focus on the following questions:

  • What criteria did the ROSCs use to make judgments on the level of transparency the countries had achieved? What evidence was provided to support these judgments?

  • Did the ROSCs identify the key transparency problems revealed by the crisis? Were these problems given sufficient prominence? Was the relative seriousness of these problems analyzed?

  • Were the ROSC recommendations implemented by the authorities? Did subsequent Article IV staff reports assess progress in implementation of ROSC recommendations?


Germany underwent a Fiscal Transparency ROSC in 2003. The report found that Germany had achieved “a high level of fiscal transparency,” citing, in general terms, a comprehensive, precise and carefully respected body of fiscal laws and regulations which clearly assigns roles and responsibilities for branches and tiers of government and set standards for budgeting, accounting and reporting at all levels of government which require disclosure of not only cash revenue and expenditure but also contingent liabilities, guarantees, tax expenditures, and equity holdings.

At the same time, the ROSC noted that public ownership of financial institutions is extensive at all levels of government, and these institutions often conduct quasi-fiscal activities. As an example, the report noted that in some cases loans were not strictly screened on the basis of creditworthiness, and that many public financial institutions still enjoyed a government guarantee over all of their liabilities, which contributed to very good credit ratings. While noting that quasi-fiscal activities did not appear to be extensive, their cost were not estimated by the authorities nor included in the budget documents. Since the ROSC was issued, many of the quasi-fiscal activities have been transferred to specialist development banks.

The report also noted that budget documents should provide more in-depth information on macrofiscal strategy, risks and structural trends. Further, a lack of a legally binding mechanism for committing the government to achieving its general government deficit and debt targets called for greater clarity in the budget documents regarding performance against its obligations under the Maastricht Treaty. This issue has since been addressed to some extent by the adoption of the so-called debt-brake rule in the German Constitution.

Subsequent Article IVs were silent on the implementation of ROSC recommendations.


France underwent a fiscal transparency ROSC in 2000, followed by three updates over the following four years. The initial report found that France had achieved a high level of fiscal transparency, noting the very high standards set in most aspects of the code. The report focused on recent improvements to the coverage and presentation of fiscal information, citing more complete information on government assets and liabilities as well as disclosure of contingent liabilities, and the change in accounting standards to reflect accrual principles in a number of areas. This assessment seems to have been largely borne out during the crisis, where almost all of the increase in debt was due to the output shock, with relatively small transparency-related factors.

Despite the generally positive findings, the report identified a number of areas where improvements could be made, including clearer identification and reporting of quasi-fiscal activities in the budget presentation; better presentation of fiscal activity that occurs outside the appropriation process, such as issuance of contingent liabilities, quasi-fiscal activity and tax expenditures; and improving the reconciliation of stated policies with outcomes at the general government level. The reports gave no real sense of the magnitudes or priorities of these issues, nor how to resolve them.

Many of these issues were addressed in the Loi Organique aux Lois de Finances (LOLF), which has become fully effective on January 1, 2006. In addition to the annual appropriations, the government has to commit to a multi-annual framework, details of which are provided in the economic, social, and financial report attached to the Budget Act. The first multi-annual fiscal framework law was adopted in 2009. The LOLF also strengthens parliamentary oversight powers, confirms implementation of accrual-basis accounting, and broadens information requirements.

The ROSC updates provided details about improvements to the French system, through the passage of the LOLF, particularly regarding improved analysis of taxes and social security contributions (2001 and 2002 updates), analysis of expenditure (2004 update), principle of sincerity (2002 update), and results-based expenditure appropriation (2001 update). However, the updates tended to focus on actions the government had taken, with little follow up regarding the problem areas that had been identified in the initial report. The ROSC recommendations were featured in subsequent Article IV reports.


Between 1999 and 2006, Fund staff prepared six Fiscal Transparency ROSCs, including two full reports and four updates. The 1999 “experimental” ROSC report was on the whole appreciative of the progress the authorities had made in various areas. It recommended clarifying the treatment of public corporations, investment, quasi-fiscal activities, and state assets, clearly stating the accounting basis underlying the budget and audited financial statements presented to parliament. Further, it recommended “a comprehensive analysis of the sustainability of the government’s fiscal position in the budget report.” The 2005 full report, while noting that Greece had made progress in meeting the requirements of the fiscal transparency code particularly in the area of public availability of information, raised concerns about a range of specific deficiencies including the lack of a consolidated budget covering ordinary, investment, and military expenditure, large number of extrabudgetary funds, inadequate coverage, timeliness and reliability of general government fiscal reporting, lack of control over expenditure commitments and arrears, inadequate assessment of fiscal risk, and lack of systematic analysis/monitoring of fiscal policy objectives. Although the ROSCs identified many of the deficiencies contributing to the fiscal crisis in Greece, there was no attempt to quantify and estimate their relative fiscal costs.

Between 1999 and 2005, the Fund’s Article IV staff reports on Greece consistently reported key ROSC recommendations, without a clear follow-up on the implementation. The 1999 Article IV staff report summarized the recommendations of the ROSC of that year. The 2004 staff report emphasized the need for timely and accurate fiscal data and urged the government to reinforce the integrity of the fiscal accounts. Finally, the 2005 staff report contained a box on the key recommendations of the 2005 reassessment, which was published as a standalone document. However, after 2005, fiscal transparency issues received less attention and Article IV reports were silent about the ROSC findings, and no further follow up was requested.


The Netherlands underwent a Fiscal Transparency ROSC in December 2005. The ROSC found that the Netherlands met or exceeded good practice against each of the four general principles of the Code. At the same time, the ROSC noted that the Netherlands should ensure consistent fiscal reporting across general government to facilitate compliance with ESA 95, place more emphasis on scrutiny and reporting of fiscal developments in the local government sector, and more strictly monitor the financial decisions of line ministries, in particular with respect to PPPs. The ROSC did not include an explicit analysis of the fiscal-financial sector linkage other than the relationship between government and public financial corporations, which mostly operated in dedicated market segments with some quasi-fiscal activity. State ownership of some banks also implied an implicit guarantee for their funding activities.

The 2006 Article IV summarized the ROSC recommendations and noted that they are under consideration by the official working group contemplating a fiscal strategy. The 2007 Article IV reiterated the ROSC’s key message, and noted that many of the new refinements to the fiscal framework were in line with earlier staff recommendations, but not directly related to any specific ROSC recommendations.


Portugal underwent a ROSC in 2003. The final report noted that Portugal met the requirements of the fiscal transparency code in several areas and it had been making significant progress in strengthening fiscal management and transparency. To justify this assessment, the report noted, in general terms, that the allocation of responsibilities between different levels of government was clearly defined and intergovernmental fiscal relations were based on relatively stable principles. The report also noted that budget process was based on a clear legal framework and adequate mechanisms of internal and external control of government operations are in place. Further, the report commended the new budget framework legislation for improving fiscal coordination, accounting and reporting arrangements requirements across all levels of the general government.

However, the report also identified many of the shortcomings revealed by the crisis, including: (i) a lack of focus on institutions on the periphery of the general government sector, such as PPPs and SOEs, that were subsequently reclassified into the general government; (ii) the lack of a sound medium-term budgetary framework, that resulted in continued fiscal drift over the decade as longer-term fiscal objectives were consistently missed; and (iii) weaknesses in budget execution, reporting and accounting processes, that resulted in a large and unobserved build up in expenditure arrears.

The 2003 Article IV report noted briefly that implementing the ROSC recommendations could facilitate the efficient achievement of fiscal objectives.


Spain’s 2005 Fiscal Transparency ROSC noted that Spain had made significant progress in strengthening its fiscal institutions and in disseminating information about the government’s operations. It also noted that the legal framework clearly delineated the scope and responsibilities of the general government and its subsectors, including their relations with the public corporations.

However, the ROSC raised concerns about the lack of timely information on the fiscal decisions and accounts of the subnational tier. To address these concerns, it was recommended that medium- to long-term fiscal costs and risks associated with various forms of PPPs at all levels of government should be systematically quantified, transparently disclosed in budgetary documentation, and taken into account in fiscal scenarios and long-term projections. The report also recommended that the analysis of fiscal risks and contingencies in budget documents should be improved.

The 2006 Article IV noted that while there had been some progress in implementing some of the 2005 ROSC recommendations, considerable scope remained for more extensive and timely publication of territorial governments’ fiscal data, in particular concerning budget execution, quasi-fiscal activities, and contingent liabilities. The 2007 Article IV reiterated the 2005 ROSC recommendations by noting that strengthened transparency and monitoring remain the most effective means to secure fiscal discipline at the regional and local government levels.

United Kingdom

The UK underwent one of the first “experimental” ROSCs in March 1999 covering eight codes and standards including fiscal transparency. While the brief account found that the UK had achieved a “very high level of transparency,” it was not clear what absolute or comparative standard was used as the basis for this summary assessment.

While the report raised concerns about the fact that estimates of contingent liabilities, tax expenditures, and quasi-fiscal activities were not integrated into budget documents, there was no attempt to estimate the importance of these fiscal risks other than to say that the latter was “not significant.” The UK government’s limited exploration of alternative macro-fiscal scenarios, large implicit contingent liabilities to the domestic private financial sector, and growing exposure to public private partnership liabilities revealed during the crisis were not explicitly discussed.

The subsequent Article IV, released in 2000, mentioned the 1999 ROSC and noted that fiscal transparency had improved since the assessment, including through fuller reporting of tax expenditures in budget documents. However, the Article IV also emphasized that improvements are needed in the area of budget reporting. Most notably, the absence of regular treasury reports analyzing fiscal performance during the year in relation to expectations was seen to hamper the public’s assessment of fiscal developments.

United States

The US’s 2003 fiscal ROSC found that it was “fully compliant with most elements of the Fund’s Code, and sets best practice standards in many areas.” It praised the clarity of roles and responsibilities under the US Constitution, the openness of the budget process, and the quality and scope of the budget documentation including detailed sensitivity analysis.

Nonetheless, the ROSC also identified a number of weaknesses including concerns over the lack of clarity over the longer-term direction of fiscal policy, the complexity of the congressional budget process, and the need to provide greater information on the costs and risks associated with GSE such as Fannie Mae and Freddie Mac and other contingent liabilities. Since the ROSC, there has been little concrete progress in addressing these weaknesses despite a number of attempts on the part of the administration, congress, and third parties. In the wake of the crisis, all three of these issues complicated the administration’s fiscal policy making efforts.

The Fund’s 2003 Article IV staff report contained a box on the key recommendations of the ROSC assessment, and subsequent Article IV reports have raised concerns over the GSEs and institutional issues.


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While this paper focuses on the public dissemination of fiscal information, many of its conclusions apply to the availability of information for policymakers even if not made public. Publication of this information brings the added benefits of improving its quality, compelling governments to confront its implications, and widening the debate on how to respond. See Box 1 for definitions of fiscal accounting, reporting, transparency, and risk.


Hameed (2005), and Dabla-Norris and others (2010) find that more transparent developing countries have better credit ratings and better fiscal discipline. This is supported by Alt and Lassen (2006) who find that a greater fiscal transparency is associated with lower public debt and deficits in 19 advanced economies. Arbatli and Escolano (2012) take this further by decomposing the relationship between transparency and credit ratings into the direct impact (reducing current uncertainty over the fiscal position) and the indirect impact (improving primary balance and gross debt over time), finding that the former dominates in developing countries, while the latter dominates in advanced economies. To clarify the direction of causality between fiscal transparency and outcomes, Glennerster and Shin (2008) use the publication of IMF fiscal data and reports to identify a significant causal relationship between publication and quality assurance of fiscal information and lower government bond yields.


Weber (2012) identifies poor fiscal transparency as a key predictor of statistical discrepancies in published fiscal data as measured by stock-flow adjustments between general government net lending/borrowing and the change in net debt. Irwin (2012) notes a positive relationship between the use of accounting devices and perceptions of sovereign credit risks as measured by credit default swap spreads. Gelos and Wei (2005) find that fiscally more transparent countries tend to attract more foreign equity investment and are less vulnerable to withdrawals during times of stress.


The first IPSAS—on Presentation of Financial Statements—was issued in May 2000. Since then 31 more IPSASs have been issued covering a range of topics, including cash flows, financial instruments, presentation of budget information in financial statements, service concession arrangements (including public-private partnerships), intangible assets, and contingent liabilities.


Of the 285 PEFA assessments, 133 are now public, 84 are final (endorsed by the lead agency but not yet made public) and 68 are in draft. Another 45 assessments are ongoing or planned. While around 40 percent of the information gathered through the fiscal transparency ROSC can also be derived from a PEFA evaluation, the PEFA does not provide a comprehensive assessment of fiscal transparency.


The IBP’s 92 question Open Budget Survey ( assesses the availability of eight key budget documents, the comprehensiveness of the data contained in these documents, and the effectiveness of fiscal oversight provided by legislatures, supreme audit institutions, and the public. Answers to these questions are then compiled to generate an Open Budget Index value which is used to rank each country’s relative level of transparency.


According to IMF (2010b), 124 countries were able to transform their national presentation into GFSM 2001 format. However, only 55 compiled and reported GFSM 2001 data directly.


Legal provisions obliging governments to ensure that all budget documents are based on the most up-to-date information about macroeconomic conditions and the cost of government policies.


Indeed, it is unlikely that any of the standard fiscal risk assessments conducted before 2007 which focused on modeling shocks of one or two standard deviations would have caught the magnitude of the exposure to risks. Nevertheless, more analysis of macroeconomic and financial sector risks would have at least highlighted some of the exposure to shocks and the channels through which they would play out and, in any case, would be useful in case of more ordinary shocks.


International statistical and accounting standards define government control in broadly similar terms, as the authority and capacity to direct the policies or activities of another entity when the results of such direction can generate financial or other benefits for the government or expose it to a financial burden or loss. Under 2008 SNA, indicators of control include ownership of majority voting interest or “golden share,” the power to appoint the majority of the board of directors, or the power to dissolve an entity.


Fiscal statistics in Brazil, Honduras, and Uruguay consolidate not only all nonfinancial public corporations but also the central bank.


Since January 2011, the UK’s public sector financial statistics have also included the private financial institutions acquired by the government in the wake of the crisis. However, these recently acquired financial institutions are excluded from the public sector fiscal aggregates targeted for fiscal policy purposes.


The US$291 billion increase in the deficit is the Congressional Budget Office’s (CBO) estimate of the net present value of anticipated cash flows. (CBO, 2009).


See IMF (2010c). Figures in parentheses are as a percent of Dubai and northern emirates GDP.


See Dalton and Dziobek (2005); Mackenzie and Stella (1996); and IMF (2010d).


A number of these conceptual differences (especially around treatment of investment and consolidation of liabilities) would be eliminated if governments implemented accrual-based reporting standards such as GFSM 2001 and IPSAS which focus on the operating balance as the principal measure of the government’s financial performance and the overall net worth as the principal measure of the government’s financial position.


IMF (2011e) provides detailed guidance on the measurement of debt.


GFSM 2001 does require outstanding contingent liabilities to be disclosed as memorandum items to the balance sheet.


Even when the expected value is not recognized in accounts, IPSAS does require relevant information about the size, nature, and beneficiary of the guarantee to be disclosed in the notes to the accounts.


HM Treasury, National Loan Guarantee Scheme ( ) and “UK Guarantees,” Written Ministerial Statement by Lord Sassoon (July 18, 2012).


See, for example, Eurostat (2010).


This will build on the more general guidance offered in Khan and Mayes (2009).


Eurostat is currently carrying out an assessment of the suitability of implementing IPSAS in EU member states (


Statistical standards require reporting of both transactions and positions.


Among the 27 EU member states, only Denmark and the UK prepare budgets on an accrual basis. Austria will adopt accrual budgeting from 2013.


Under the SGP, the deficit is measured on an accrual basis, except that the cost of acquiring a nonfinancial asset is recorded as expenditure in the year of acquisition rather than being spread over the life of the asset.


The term accountability documents refer to fiscal strategy documents, the annual budget document, in-year and year-end fiscal statistics releases, and in-year and end-of-year accounts.


See Office of Management and Budget (2012); and the US Treasury (2012).


Australia, Iceland, New Zealand, and the United Kingdom.


This does not necessarily imply that all such changes should be recognized in determining the deficit in budgets or ex post reports or that governments should change fiscal policy settings in response to short-term fluctuations in the value of their assets and liabilities. For example, GFSM 2001 distinguishes between changes in net worth due to transactions and holding gains and losses.


The INTOSAI operates as an umbrella organization for the government external audit community to promote development and transfer of knowledge, improve government auditing practices worldwide and enhance professional capacities, standing and influence of member supreme audit institutions (SAIs). The GIFT is a multi-stakeholder network working to advance and institutionalize global norms and bring continuous improvements in fiscal transparency, participation, and accountability in various countries.


See Petrie (2003) for a discussion of these aspects.


The revised Code took into consideration suggestions from the general public, country authorities, development agencies, academics, and nongovernmental agencies working in the area of budget transparency.


See CEMAC Directives # 1, 2, 3, 4, and 5/2008; WAEMU Directives # 1, 6, 7, 8, 9 and 10/2009; and EU Council Directive #85/2011.


Where a differentiated standard already exists (as in the case of GDDS, SDDS, and SDDS Plus for statistical reporting), the Code and Manual will look to align themselves with these milestones.


For example, in the case of the institutional coverage of fiscal reports, coverage of central government would be considered basic practice, general government (and its subsectors) would be considered good practice, and public sector (and its subsectors) would be considered best practice.


IMF (2011b). The 2011 Standards and Codes Review Board Paper recommended extending the methodology of targeted ROSCs (currently applied to financial sector ROSCs) to a larger group of ROSCs.


Modules of the revised ROSC could also be used as the basis of a fiduciary risk assessment for countries seeking to access Fund resources, incorporating the lessons of the current fiscal safeguards pilots. See IMF (2012b).

Fiscal Transparency, Accountability, and Risk
Author: International Monetary Fund