Improving transparency and sustainability of public finance globally is an essential task for governments and financial bodies, according to International Monetary Fund (IMF).
Speaking at an Institute of Chartered Accountants of England and Wales (ICAEW) panel discussion IMF director of the fiscal affairs department Carlo Cottarelli said comprehensive, clear and timely information is necessary for good fiscal policy making and for governments to get a better understanding of their real-time financial situation.
Costarelli explained many countries still fall short of requirements when reporting to the IMF and it is essential to improve transparency, make fiscal public reporting more timely and improve the fiscal forecasting carried out by governments.
European Central Bank (ECB) head of the fiscal surveillance section Christophe Kamps added that the crisis has shown how poor frameworks for assessing risk currently are.
“We have seen how contingent liabilities have become explicit public debt. In some euro-area countries the problems didn’t build up in the public sector yet have become very important factors for the planning of public budgets.”
The ICAEW debate highlighted the concerns of government influence on public finance and how a more long term approach needs to be taken over the current short term view.
ICAEW president Mark Spofforth said accounting institutes need to ensure they are building a strong profession that can withstand some of the pressures politicians might try and exercise when it comes to public finance reporting.
Kamps emphasised that increased public finance transparency brings benefits to countries as it often means they don’t need to reinstate their figures and leads to long term financial savings.
To coincide with the event in London the event the ICAEW has issued a report including the views of the IMF, the ECB and other global public finance bodies stressing the importance of restoring long-term confidence in public finance.
Spofforth said that in doing so four key points need addressing: using high-quality data, a shift from cash-based to accruals-based accounting needs to take place, financial risks and reporting standards need to take priority and the pending problem of ageing population needs to be take into account when planning long-term public finances.