A new tool in the fight for fiscal transparency

Last month, the U.S. government issued a little noticed — but significant — report that could become a useful tool in efforts to combat poverty and corruption. With little fanfare, the State Department quietly released its 2014 Fiscal Transparency Report, which assesses the fiscal transparency of 140 governments that were potential beneficiaries of U.S. foreign assistance.

Virtually no one noticed, likely because few are aware of the report’s existence.

Hopefully that changes, because the report has the potential to become a key resource for those working to hold governments accountable for spending money efficiently and effectively on sectors that promote sustainable development.

It’s no secret in development circles that government secrecy rarely leads to positive development outcomes. On the contrary, government opacity enables mismanagement and corruption, undermining development and hobbling economic growth.

Unfortunately, fiscal secrecy is the rule rather than the exception among developing countries. Of the 100 countries covered in the most recent Open Budget Index, 77 provided insignificant budget information to keep citizens informed. The Open Budget Survey Tracker, which provides monthly assessments of budget transparency in select countries, reveals significant gaps in many governments’ disclosures of key documents.

For this reason, the State Department’s Fiscal Transparency Report is a welcome resource. It details whether governments are — or are not — meeting minimum standards of fiscal transparency and indicates whether governments that did not meet the minimum requirements are making “significant progress” toward meeting them. Of the 140 governments assessed in the 2014 Fiscal Transparency Report, 50 were deemed to not meet the minimum requirements of fiscal transparency. Of those, 11 were considered to be making “significant” progress toward meeting the minimum standards.

But by far the most interesting and potentially useful aspect of the 2014 report, and a noteworthy improvement over previous years’ reports, is that it spells out specific areas in which governments fell short on fiscal transparency, notes any progress made toward achieving the minimum standards, and provides concrete recommendations that governments should take.

While other organizations provide analogous analyses (the International Budget Partnership comes to mind, for instance), the fact that this report is issued by an “official” source like the U.S. government gives it — for better or worse — a gravitas that can be impactful.

The 2014 Fiscal Transparency Report provides plenty of carrots and sticks for advocates to use to press opaque governments for reforms. For Congo, for instance, the report concludes that the “budget includes significant gaps, relating both to petroleum revenues and to government expenditures. Debt obligations are not fully disclosed, and audits are not conducted in a timely manner. Congo’s fiscal transparency would be enhanced by improving the completeness and reliability of its budget reporting, including disclosing sovereign debt obligations, and conducting audits in a timely manner.”

Now in its third iteration, the Fiscal Transparency Report is not yet perfect. Some of the evaluation criteria could be made more concrete and specific. For instance, while the publication of national budget documents is one criterion, it is unclear which specific documents are assessed. Furthermore, it is impossible to determine from the report how the State Department weights the various criteria it uses to measure transparency. This makes it hard to understand why a number of countries that the State Department deems to be meeting its minimum fiscal transparency standards score poorly on other fiscal transparency indices. For instance, the State Department gives a passing grade to eight countries that landed at the bottom of the 2012 Open Budget Index for making little or no budget information available to citizens.

If the Fiscal Transparency Report was – dare I say it – more transparent about the indicators used and the weight assigned to each, it would provide both more nuanced information about how the State Department arrived at its conclusions and specific areas in which governments can take action to score quick wins and raise their assessments in future reports.

Overall, however, the report is a significant positive step forward. By naming and shaming the laggards on fiscal transparency, the Fiscal Transparency Report could become a useful tool for applying pressure to opaque governments to be more transparent. It is easy to imagine that the report, with a few tweaks to make its findings more robust, could serve as an important reference tool for governments and good governance advocates alike, similar to the way in which the State Department’s annual Human Rights Reports have become a credible source of information for human rights activists, and of which maligned governments take notice.

What other useful tools could promote fiscal transparency? Let us know by leaving a comment below.

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