IMF publishes fiscal transparency evaluation for Romania. High GDP forecasting errors

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“Romania performs well against the standards set by the Fiscal Transparency Code in many areas according to the conclusions of a Fiscal Transparency Evaluation published by the International Monetary Fund (IMF) today, and carried out at the request of the Government of Romania by a team from the Fund’s Fiscal Affairs Department in February 2014, “ an IMF press release issued on March 11 informs.

“Some 15 of the 36 dimensions in the Fiscal Transparency Code are rated as good or advanced, 15 dimensions are rated as basic, and 6 regarded as yet to be achieved. This reflects progress made in public financial management reform since 2010. The report’s key finding:

  • Fiscal reports cover the general government in line with ESA 95 standards, but do not include the country’s large public corporations sector, which accounts for around 10 percent of GDP. A large volume of data on general government operations, assets, and liabilities is produced, but these are not consolidated into set of financial statements produced in accordance with international standards;
  • Romania’s budget process has improved markedly in recent years with the medium-term budget framework covering approximately 97 percent of central government expenditure and the establishment of independent fiscal oversight. However, high GDP forecasting errors, on average around 4 percent of GDP, weaknesses in the evaluation and oversight of public investments and lack of timeliness in approval of annual budgets suggest the need for further improvements.
  • Fiscal risk management is evaluated as advanced or good in identifying and reporting government guarantees and risks associated with sub-national governments but reporting on other specific risks, such as financial sector exposure and environmental risks, is limited, as is analysis of the potential fiscal impact of changes in the highly volatile macroeconomic environment.

This report makes a number of recommendations to strengthen the authorities’ ongoing reform efforts in the area of fiscal transparency including:

  • Expanding the institutional coverage of fiscal reports to include the wider public sector;
  • Improving the quality and integrity of fiscal reports and financial reports;
  • The inclusion of more detailed macroeconomic forecasts in key budget documents;
  • Increasing the transparency of budget documentation
  • Extending the analysis and reporting of fiscal risks.”

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