Speaking at a major conference on fiscal transparency in the wake of the crisis, IMF director of fiscal affairs Carlo Cottarelli said that there was a natural tendency to let opacity creep back into government accounts and that the risks of that happening were increasing.
He pointed to the falling number of reviews the IMF had carried out on countries’ compliance with the IMF code of good practices and international standards on fiscal transparency – it only carried out one this year. This was partly due to fewer resources but also to a decline in demand by member countries.
The major driver of compliance and change more often than not came from external sources and he urged parliament and fiscal councils such as the UK’s Office for Budget Responsibility, to become “active crusaders” for greater disclosure. Bodies such as the National Audit Office, ICAEW and CIPFA, as well as the media, also had a vital role to play in pushing governments towards increased transparency.
He then referred to the IMF itself. The organisation has just undergone an exercise looking at the role its reports on governments’ compliance with the IMF code of fiscal transparency played during the financial crisis and discovered that there was a major flaw.
“We found that many of the recommendation in reports on countries like Greece and Portugal identified gaps in their financial transparency," he said.
“But our reports weren’t as helpful as they should have been, at least with the benefit of hindsight, in identifying how big the issue was. For example, we had underscored the lack of information about private public partnerships but we had not estimated the size of the risk if they were added to the governments’ liabilities.”
The IMF is about to launch a consultation on revising the fiscal transparency code and would be interested on hearing views about whether or not it should be restructured to include different standards of compliance that countries should aspire to rather than just one “good” level as now.
The conference was supported by the IMF, HM Treasury and ICAEW.