Still Room for the IMF to Further Improve Its Fiscal Transparency Code

Oct 11, 2013

This post was written by Vivek Ramkumar, Director of International Advocacy and the Open Budget Initiative at the International Budget Partnership, and cross posted on the Open Government Partnership blog.

This week at the World Bank’s annual fall meeting, I was part of a panel discussion on the IMF’s newly revised Fiscal Transparency Code. First, kudos to the IMF for publishing the consultative draft of the revised Code. The revised draft provides practical recommendations on how governments can improve fiscal transparency in a phased manner and in a way that takes into account different starting points in current fiscal transparency practices.

As a civil society organization that has been promoting budget transparency for more than a decade, the International Budget Partnership is encouraged by the IMF’s renewed emphasis on fiscal transparency. We focus on budgets because budgets impact people, especially poor people. This is particularly true now, as financial solutions are being sought to combat shared global challenges like persistent poverty and the effects of climate change, and as growth in funds from such domestic sources as new oil, gas, and other resource extraction flow into government coffers.

Our work with civil society organizations around the world has shown how citizens can help transform budget data into real improvements in peoples’ lives. For example, in Brazil the civil society group INESC used revenue data to calculate the potential costs of a regressive tax reform proposal to block its enactment, thus protecting over US$7 billion of important spending in the health sector alone. And, in Argentina the organization ACIJ used data on budget allocations for early childhood education as evidence in groundbreaking litigation that compelled the government of the City of Buenos Aires to provide infrastructure, learning materials, and teachers that increased access to preschool education for 7,000 children from poor families.

Unfortunately, there are only a few dozen examples of civil society organizations achieving such outcomes. Four rounds of our Open Budget Survey have revealed that few governments provide their citizens with access to timely, comprehensive, and accessible budget information. Our Surveys have also shown that at the current pace it will take at least a generation for the vast majority of countries in the world to achieve significant levels of budget transparency. This could mean a generation of wasted resources and missed opportunities.

We need to look at the IMF’s consultative draft of the revised fiscal transparency Code against this backdrop. The Code’s focus on fiscal transparency outputs — that is the publication by governments of key budget reports — rather than fiscal transparency processes — that is the legal frameworks and budgeting systems — is useful because it emphasizes the need for concrete deliverables from governments. However, this narrower focus on the publication of budget data misses three key issues.

One, citizens not only need access to information but they need this information to be provided in a manner that they can understand. The IMF Code recommends that governments publish Citizens Budgets (simplified presentations of technical budget documents), and this is a welcome development. In addition to publishing Citizens Budgets on budget plans, these simplified presentations need to be published for all the major technical budget documents released by governments. Therefore, we recommend that the Code be expanded to recommend the publication of Citizens Budgets during the planning and implementation phases of the budget process.

A second issue that is missing in the draft Code is the role of legislatures in planning and overseeing the implementation of budgets. I realize that it is a bit ironical to discuss the need for strong legislative control of budget plans at this moment in a meeting in the U.S. but democratic traditions require that the power of the public purse be vested with elected representatives of the people. Giving control of budget decisions to a few experts in one agency is not a recipe for success as past experiences have shown. In fact, a recent publication by the IBP reveals that political transitions have not only resulted in ending autocratic rule but also brought greater political contestation in countries by giving voice to opposition parties and empowering the legislature, which in turn has driven budget reforms in these countries.

A third and related issue is the need for public engagement in budgeting. Our experience has been that access to budget information is a key but insufficient condition for empowering citizens and civil society to successfully demand accountability from governments on budget decisions. Citizens need formal opportunities to be able to voice their opinions on budget plans and implementation.

Last week I attended a public hearing in an informal settlement in the City of Cape Town, South Africa, on refuse collection and sanitation services provided through private contractors employed by the City. Although the government had provided the civil society group that had organized the hearing with access to project records, they were unwilling to engage in the discussions at the public hearing in a constructive manner. One official refused to answer questions raised by residents of the informal settlement on the problems they faced in getting access to refuse collection and sanitation services, stating that he was not interested in a dialogue.

A couple of years ago when I attended a similar public hearing in India, an incident at the hearing made it clear to me why citizens need opportunities for engaging with officials. During the middle of the discussions, an old man at that public hearing stood up and began to sing loudly. The organizers of the public hearing asked the old man to be quiet so that the public hearing discussions could continue. When he refused to be quiet the lead organizer stood up and asked the old man to come to the side with her. I followed them. She asked the old man why he was singing. He replied:

“I am a poor farmer and this is the first time in my life that I have attended a meeting organized by the government at which the powerful and corrupt are being held to account and I have a forum to speak my mind. That is why I am singing in joy.”

I realize that some of the issues that I recommend for inclusion in the IMF’s Code are not central to the IMF’s mission of ensuring macroeconomic fiscal discipline. But if the Code is to be truly relevant to the public then these issues of accessibility of budgets and opportunities for public engagement in budgeting need to be seriously considered by the IMF. One way by which the IMF could cover these issues could be through a preamble to the Code that emphasizes the broader environment within which the Code is being developed.

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