WASHINGTON, USA -- Costa Rica is approaching best practice in fiscal reporting and forecasting, according to a new report published by the IMF. The Fiscal Transparency Assessment (FTA) report notes that, following a number of significant reforms in recent years, the country meets the basic requirements for fiscal risk disclosure under the new IMF’s fiscal transparency code (FTC).
The assessment identified areas that can be further improved, such as: (i) most fiscal and budgetary information is on a cash basis; (ii) there is insufficient reconciliation and comparability between accounting, budgetary, and statistical information and revenue, expenditure, and financing forecasts; (iii) the budgetary system is very fragmented and dual given that part of the budget is approved by the Legislative Assembly (41 percent of expenditures) and part is approved by the Office of the Comptroller General of the Republic (59 percent); (iv) the government does not revise the budgetary framework for the year in progress; (v) there is no statement of numerical targets for the main fiscal aggregates; (vi) fiscal projections cover only five years; and (vii) no fiscal risk aggregate report is produced on aspects such as macroeconomic risks, contingent liabilities, guarantees, concession contracts, and the indebtedness of municipal governments.
The report also noted the Costa Rica government’s plans for further improving the timeliness, quality, and comprehensiveness of its budgets, statistics, and accounts. The government has prepared its own action plan to implement the recommendations provided in the assessment. The Costa Rica government’s action plan in response to this report is available at the end of the report.
The report was carried out at the request of the Costa Rica Government by a Fiscal Affairs Department team which visited San Jose in March 2013. It is part of a pilot assessment that uses a new assessment format based on the ongoing revisions to the FTC, which is expected to be finalized in the first half of 2014.
Background on FTAs
FTAs will replace the fiscal transparency Report on the Observance of Standards and Codes (ROSC) as the Fund’s principal instrument for evaluating the transparency of countries’ fiscal reports, forecasts, and risk management. They examine the extent to which a country’s published fiscal information provides a complete and accurate picture of its fiscal position, prospects, and risks.
The Ireland FTA was one of several pilot assessments that are based on a working draft of the revised FTC.
Building on the recommendations of the 2012 IMF Board Paper “Fiscal Transparency, Accountability, and Risk”, the FTA improves on the fiscal transparency ROSC by:
• Placing greater emphasis on the quality of reported information, rather than the clarity of reporting procedures;
• Offering countries with a clearer summary of how their fiscal reports, forecasts, and risk analysis compare against international standards;
• Undertaking a more rigorous analysis of sources and scale of any gaps in countries’ published fiscal information; and
• Providing countries with a sequenced, medium-term action plan for addressing those gaps.