IMF/World Bank Annual Meetings 2013 Civil Society Forum,
Wednesday 9th October 2013
Host: New Rules for Global Finance, Moderator Nathan Coplin *Note, this event was also recorded on video by New Rules
- Mahinour El Badrawi, Egyptian Center for Economic and Social Rights
- Rosa Canete Alonso, Oxfam Intermon Dominican Republic
- Vivek Ramkumar, International Budget Partnership
- Sailendra Narayan Pattanayak, IMF Fiscal Affairs Dept
Moderator: We are discussing both the content and process of this consultation, which is still open.
Sailendra N Pattanayak
Lessons of the Crisis
- Pattern of worst-impacted nations reflected that lack of transparency exacerbated problems that developed due to the crisis
- Typically due to number of factors, including pushing government obligations to be recorded as non-government, and optimistic biases in macroeconomic forecasts, lack of reliable data and reporting
- Causes identified as
- Overly infrequent fiscal reporting and frequent revision
- Quasi-fiscal activity by SoEs – by focusing exclusively on general government
- Unreported – flows
- Macro Shocks, including biased forecasts
- Exposure to financial sector – no recognition of contingent liabilities
- Monthly operational fiscal reports
- Publication of fiscal data for public sector
- Recognition of doubtful debts in summary aggregates
- Alternative macro-fiscal scenario analysis
- Recognition of quantifiable contingent liabilities
Hence the cases to revise the code; This required on a focus on the quality and reliability of reported outputs, rather than a procedural approach
The code was organized around three pillars, fiscal reports, forecasts and risk analysis.
Our role is to support civil society to reduce poverty and exclusion by helping CSOs to influence budget processes.
We are encouraged by the IMF’s renewed emphasis on fiscal transparency. Budgets impact people, especially poor people, particularly now after the crisis, and the funding and economic context evolves.
When citizens and citizens groups have budget data, they are empowered to improve budget outcomes.
Example of South Africa, where a CSO demonstrated that govt claims that HIV programmes was too expensive were untrue, and 1.6 million people more receive benefits. Unfortunately very few examples of such results.
We conduct a biennial open budget survey, which has shown that few governments provide timely and accessible information on budgets.
There is a trend to improvement, but very slowly requiring a generation of time, which will waste opportuntiies and resources.
On the revised code, the focus on outputs including publication of key documents, as against processes (e.g. legal frameworks or budgeting systems) is a useful distinction. It provides clear recommendations and measurable deliverables, which have tended to be more effective at getting governments to respond .
However the focus is fairly limited and misses three issues.
- Budgets need to be more accessible to citizens, and as such these simplified presentations should be published for all budeget reports, during planning and implmenetation of all budgest cycles
- Role of legislatures – the power of the public purse whould be with elected representatives. Our research has shown that a driver of transparency has been political changes, including empowering demands for transparency via contestation
- Finally, citizens provided with data are not necessarily able to hold government to account, they also require opportunities to actively do so.
Some of our recommendations may not be clearly centred on the IMF’s traditional mandate, but if we are to make this document relevant to citiznes, but we need to ensure that some of their perspectives and voices are heard. Hence the code perhaps needs not just a code but a preamble which supports people’s understanding of the context.
Rosa Canete Alonso
After a decade of education to make citizens aware of the impact of fiscal policies on their lives, and last year popular pressure emerged to copmlaiin of the government’s unanticipated budget.
Fiscal transparency is not an end in itself, but to ensure peoples’ rights are fulfilled, as a first step in necessary changes, leading to fiscal justice and therefore to end poverty and inequity
Dominican Republic Case
At end 2011 the Stand By Arrangement with the IMF was suspended sde to the government’s failure to meet key conditions, though the gov was accused of provoking this deliberately in order to be able to spend an additional 8% of GDP above its budget. This emerged only due to the press release of the IMF, not due to the government admitting this.
Following elections, the same party in government applied tax reforms, including VAT reforms which had a significant regressive impact to cover the gap they’d created, while refusing to answer questions about their creation of the budgetary hole.
The government continues to refuse popular dmeands for fiscal accountability and transparency, including not informing the public fo how the 2012 budget was spent, despite being required to do so. The budget cycle including legal requirements have been violated.
The new draft of the code is a big step forward, and passing from reporting processes, the quality of fiscal data has been a big improvement but this needs to go farther. It needs to show how fiscal data connects to rights, knowing simply how much is spent or which sector is prioritized, but this does not necessarily follow that public services for example improve.
- Coverage: it is necessary to include the tax gap as an indicator in coverage. We think the tax gap is important – in our case it is estimated that 33% of VAT revenue is evaded.
- Credibility – it is necessary to audit who has power to provide discretionary tax exemptions
- Timeliness – it is important to have pluri-annual planning and public budgeting as development outcomes do not occur within a year, and this is a prerequisite of enabling citizens’ engagement
It is necessary to provide different levels of compliance with principles, but a clear path to achieving improvements should be included. Consultations need to occur before the budget is proposed, before the process begins at the very start of the budget cycle.
Transparency is needed, but it is not enough. We need to invest in people and in public services with progressive taxation: we have to face the inequity in power if we are to end poverty and inequality.
Mahionour El Badrawi
Two points are important in terms of the core values of the transparency code. How much are the core values of the code applicable to its practices and its clients?
A core aspect of the period of transition in the Middle East region was reflected in a lack of trust in resource management of the governments in their countries.
In Egypt’s case, a team arrived within months of Egypt’s presidential and governmental overthrow.
The IMF’s proposals, which grew quickly from a $3+ billion to an almost $5 billion loan, was claimed by the government at the time that there were no interest nor policy recommendations attached to the loan, which was disputed by many organisations.
This reflected a lack of public engagement or consultation – had there been any the government would have not had the opportunity to make such statements.
The question in a case of countries such as Egypt since 2006 which never provided end of year budgets, let alone making them accessible to the people, is on what basis can the IMF engage with such a country?
Economic order does not operate in a void of politics. How do we ensure that such loans do serve the economic development of a country, instead of being turned into what may be an illegitimate or odious debt of the people. This leads to erosion of trust, and this leads to people going into the streets, when they feel they are paying without knowing where money is going.
We recommend that the IMF uses its leverage and responsibility to push for transparency? There is a tendency to claim that the Fund only responds to domestically driven proposals but this ignores the situation of emerging democracies where governments seek political support from the powers represented within institutions such as the Fund. An example, instead of recommending yet again as it had in 2009 and 2010, and 2011, for an increase in VAT we have seen this proposal re-emerge in the latest government economic plan. IF the IMF does post recommendations on fiscal transparency, including something as simple as the end of year report, it will just as likely