National Treasury second most transparent fiscal authority – IMF

National Treasury, which is in charge of managing South Africa’s finances, is the second most transparent fiscal authority in the world, according to the IMF’s Fiscal Transparency Evaluation Report.

A team from the fiscal affairs department at the International Monetary Fund (IMF) conducted a Fiscal Transparency Evaluation on request at the National Treasury between 11 and 25 July last year and found that it had many elements of sound fiscal transparency practices and made efforts to continue improving reporting practices over time although there is room for improvement in fiscal reporting.

During the evaluation process the IMF had extensive meetings with senior staff of Treasury, including deputy director generals Edgar Sishi and Duncan Pieterse.

The IMF praised Treasury for its comprehensive, relevant, timely and reliable overview of the government’s financial position and performance. According to the report on the evaluation, Treasury demonstrated consistent transparency in its reporting and maintained rigorous oversight of public finances, despite the serious governance issues around state capture and widespread corruption.

Working with the South African Reserve Bank, Treasury provided broad coverage of financial statistics and government’s debt levels.

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Independence of Auditor-General also good

In addition, the evaluation found that the Auditor-General has remained independent and ensures that the government and its entities produce financial statements in line with international standards.

However, the IMF felt there is still room for improvement in fiscal reporting and transparency. The main issues were that financial statistics did not include the broader public sector, that differences in reports were not explained publicly and that there were gaps in the coverage of assets and liabilities.

The IMF also pointed out that that Treasury tends to produce “overly optimistic gross domestic product (GDP) forecasts” that limit its ability to tackle the country’s rising debt burden. In addition, the IMF suggested that government’s fiscal plans should be scrutinised by independent institutions before release.

Another sticking point for the IMF was the finances of state-owned enterprises and the organisation is concerned about the high numbers of irregularities and qualified audit reports.

Treasury said that it noted the release of the IMF report and that it acknowledges the need to improve in these areas. Work is underway to address these concerns. Predictable and transparent financial reporting underpins macroeconomic stability and enables government to manage its finances properly, it said.

“South Africa has a strong record of fiscal transparency and consistently ranks among the top three countries worldwide for transparency, according to the International Budget Partnership.

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Strong performance, but a few improvements needed

The IMF’s Fiscal Transparency Evaluation report notes a strong performance in fiscal reporting and budget transparency and suggests improvements in three areas:

• Fiscal reporting: Expand and align fiscal reporting to international best practice by including other spheres of the public sector, strengthening tax expenditure disclosure and improving adherence to audit timelines for published financial statements.
• Forecasting and budgeting: Implement precise, time-bound and stable fiscal rules.
• Fiscal risk analysis: Enhance analysis of risks in the fiscal risk statement, publish public-private partnership financial data regularly, consolidate transfers to state-owned companies to show fiscal impact and set limits on government guarantees.

National Treasury says government is committed to addressing these areas to enhance fiscal credibility and ensure continued transparency and accountability in the management of public finances.