IMF to perform Fiscal Transparency Evaluation on Finnish public finances
A mission from the International Monetary Fund (IMF) visited Finland from 28 October to 10 November. The purpose of the mission was to perform a Fiscal Transparency Evaluation of Finland's public finances. The delegation was led by Torben Hansen, who, before joining the IMF, worked as the Deputy Permanent Secretary responsible for budget issues in the Danish Ministry of Finance.
The Ministry of Finance has requested this external transparency evaluation as part of its own development work aimed at enhancing the reporting and steering of public finances.
In the aftermath of the financial crisis, the IMF has focussed on risks related to government finances, and in particular on their identification and management. The financial crisis revealed serious shortcomings in the ability of many – if not most – countries to identify risks originating from outside the traditional budget or central government.
On the basis of its observations, the IMF has updated its transparency framework by developing the
Fiscal Transparency Evaluation tool, which the IMF uses in order to evaluate fiscal transparency practises in various countries and draw up related recommendations (see http://www.imf.org/external/np/fad/trans/). The evaluation has been performed for nine countries before Finland.
The evaluation seeks to answer questions such as the following:
* Fiscal reporting: How comprehensive, timely and reliable is Finland's fiscal reporting?* Forecasting and the budgeting process: How reliable is the picture provided by Finnish forecasts regarding the development of public finances? How accurate is the picture of the Government's fiscal policy and objectives as reflected by Finland's budget and the related material?
* Fiscal risks: To what extent are risks related to Finland's public finances identified, disclosed and managed?
According to the mission's initial assessment, Finland's procedures largely correspond to international best practices. There remains room for improvement, however. The IMF mission’s tentative observations indicated that, for example, Finland's fragmented fiscal reporting requires improvement. A public sector balance sheet taking into account all major assets and liabilities that have an impact on public sector finances would provide a more comprehensive picture of the state of Finland's finances. In its final report, the IMF will publish a public sector balance sheet for Finland.
Additional findings by the IMF were related to clearer goal-setting for fiscal policy and enhanced reporting on the achievement of fiscal objectives. Furthermore, local government steering should be strengthened. Also, the reporting on fiscal risks is currently fragmented, which impedes the creation of a comprehensive overall picture of fiscal risks.
The IMF will finalise its evaluation in early 2015, after which it will be discussed by the Executive Board of the IMF and published.
Further information:
Economic Policy Coordinator, Director General Jukka Pekkarinen, tel. 358 2955 30169
Senior Advisor Sami Yläoutinen, tel. 358 2955 30320