Code of Good Practices on Fiscal Transparency

The code contains transparency requirements to provide assurances to the public and to capital markets that a sufficiently complete picture of the structure and finances of government is available so as to allow the soundness of fiscal policy to be reliably assessed (April 1998).

At its fiftieth meeting in Washington, D.C., on April 16, 1998, the Interim Committee of the Board of Governors of the International Monetary Fund adopted the Code of Good Practices on Fiscal Transparency-Declaration on Principles. It did so in response to a clear consensus that good governance is of central importance to achieving macroeconomic stability and high-quality growth, and that fiscal transparency is a key aspect of good governance.

Fiscal transparency means being open to the public about the structure and functions of government, fiscal policy intentions, public sector accounts, and fiscal projections. The public is defined to include all those individuals and organizations with an interest in the design and implementation of fiscal policy. Fiscal transparency strengthens accountability and increases the political risk associated with maintaining unsustainable policies. It can therefore enhance credibility, the benefits of which will be reflected in lower borrowing costs and stronger support for sound macroeconomic policies by a well-informed public. In contrast, nontransparent fiscal management can be destabilizing, create inefficiency, and foster inequity. The potential for a fiscal crisis in one country to spill over to others underscores the value of efforts to anticipate and prevent these events. Improved fiscal transparency is a necessary part of such efforts, which must attract the strong support of member countries if they are to succeed. The Code is based on four general principles of fiscal transparency which all countries should support.

The first general principle - Clarity of Roles and Responsibilities - reflects the importance of clear boundaries within government between fiscal, monetary, and public enterprise activities, and between the public and private sectors. However, the Code does not advocate any particular allocation of responsibility among government agencies.

The second general principle - Public Availability of Information - is concerned with the need for both comprehensive fiscal information and for governments to commit themselves to publish fiscal information at clearly specified times. The concept of comprehensiveness goes beyond that typically reflected in government budget and accounts reports. In particular, the Code emphasizes the need to report on any quasi fiscal activities that have been assigned to or otherwise undertaken by agencies outside general government.

The third general principle - Open Budget Preparation, Execution, and Reporting - encompasses traditional standards relating to the coverage, accessibility, and integrity of fiscal information. Considerable emphasis is placed on the development and harmonization of international statistical and accounting standards for government reporting.

The fourth general principle - Independent Assurances of Integrity -emphasizes the traditional means of providing such assurances through external audit and statistical independence, but then goes beyond this and calls for openness by governments to allow independent scrutiny.