Portugal: Improving Fiscal Transparency What is it about? Why is it a good thing? Where are we on this?

Size: px

Start display at page:

Download "Portugal: Improving Fiscal Transparency What is it about? Why is it a good thing? Where are we on this?"

Ophelia Kelley
5 years ago
Views:

1 Portugal: Improving Fiscal Transparency What is it about? Why is it a good thing? Where are we on this? Albert Jaeger IMF, Lisbon Office Presentation: Conference Budget Watch 2015 ISEG, Lisbon Lisbon, November 26, 2014

2 Fiscal transparency: What is it? High degree of fiscal transparency means: Fiscal reporting is clear, reliable, frequent, and timely; Government s fiscal policymaking process is open and accountable. Therefore, IMF s evaluations assess: Quality of fiscal reporting; Quality of forecasting and budgeting; Quality of fiscal risk analysis and management. Opposite of fiscal transparency: Fiscal secrecy 1/ 1/ IMF Working Paper 13/219: Revealing the Mysteries of State: The Origins of Fiscal Transparency in Western Europe, Tim Irwin 2

3 Fiscal transparency: Why is it good? High degree of fiscal transparency is associated with: Better fiscal performance (lower fiscal deficits and debt); Better sovereign ratings and lower interest spreads; A more efficient public sector. Therefore, potential payoffs from improving fiscal transparency: Helps break with a history of excessive fiscal deficits and debt; Addresses one root of Portugal s (still too) low external competitiveness. 3

4 Fiscal transparency: Where are we? 2/ Level of Importance High Fiscal Reporting Fiscal Forecasting & Budgets Fiscal Risk Analysis and Management Legend Coverage of Institutions Macroeconomic Forecasts Specific Fiscal Risks Not met Coverage of Stocks Medium-term Budget Framework Long-Term Fiscal Sustainability Analysis Coverage of Flows Fiscal Legislation Asset and Liability Management Good External Audit PPPs Advanced Basic Historical Revisions Sub-National Governments Not Assessed Financial Sector Exposure Tax Expenditures Forecast Reconciliation Public Corporations Medium Timeliness of Annual Financial Statements Investment Projects Macroeconomic Risks Internal Consistency Budget Unity Budgetary Contingencies Statistical Integrity Public Participation Guarantees Independent Evaluation Low Frequency of In-Year Reporting Performance Evaluation Environmental Risks Comparability of Fiscal Data Classification Timeliness of Budget Documents Fiscal Policy Objectives Natural Resources Supplementary Budget 2/ IMF report for Portugal: 4

5 Fiscal transparency: Where are we? A quick history of medium-term fiscal plans Medium-Term Fiscal Deficit Paths (Percent of GDP) percent Maastricht limit Real-time actual deficit/gdp ratio Actual deficit/gdp ratio DEO (April 2014) State Budget 2015 (October 2014) IMF Forecasts (November 2014) Source: IMF Staff Estimates; European Commission. 5

6 Fiscal Transparency: Where are we? Making medium-term budgeting stick Why is making medium-term budgeting stick so difficult? Little tradition (basic framework introduced only in 2012) Top-down, input-based budgeting still dominant Continuity and capacity issues in ministries, particularly MoF Will medium-term budgeting stick? New European fiscal rules require it Markets/rating agencies like it Priorities to make medium-term budgeting stick Expand coverage of expenditures (more than 1/3 not covered) Build credibility by reconciling new allocations with previous vintages Publish cost-benefit analysis for all large capital projects Continue reform of budget framework law 6

7 Fiscal transparency: Where are we? A quick history of (not) monitoring fiscal risks General Government Gross Debt Arrears Financial sector bailouts SOE & PPP reclassifications post Dec 2009 SOE & PPP debt outside the General Government sector General Government debt excluding reclassified SOEs, PPPs or financial sector* GG Gross debt reported i n Dec 2009 Fin SOE & PPP Debt dynamics Sector reclassification (f) 40 Source: WEO database, 2013 Fiscal Strategy Document, Eurostat, BdP, DGTD SEE reports and Arrears Monitoring Report. * Includes 0.6 percent of GDP of SOE debts already classified as general government debt prior to December Information on arrears is only available from 2010 onwards. 7

8 Fiscal transparency: Where are we? Improving fiscal risk monitoring Priority steps to improve fiscal risk monitoring: Include comprehensive fiscal risk statement in published budget Provide regular reports on long-term fiscal sustainability Develop asset management strategy New monitoring units for PPPs and SOEs: expand UTAP s mandate; make UTAM operational Improve monitoring and reporting of fiscal risks at municipal and regional levels

9 Fiscal transparency: Two bottom lines First, hard-wiring medium-term budgeting into Portugal s budget culture is the key challenge; Second, there is still some way to go to improve monitoring of fiscal risks.

10 Thank you!

Managing Fiscal Risks

Managing Fiscal Risks Gerd Schwartz Tokyo Fiscal Forum 11 June 2015 Managing fiscal risks and uncertainties Outline of Presentation I. Defining fiscal risks II. Importance of fiscal risks III. Managing