Fiscal Transparency in Transition Economies

Abstract

Fiscal transparency became a topic of lively public and academic debate in the aftermath of the Mexican and Asian financial crises. The concept of fiscal transparency is, however, largely of a qualitative nature and is therefore something of a challenge to measure. This paper proposes an index of fiscal transparency that comprises various aspects of fiscal policy formulation, such as medium-term budgeting and analysis, accounting and data quality, off-budgetary activity, intergovernmental relations and auditing. The index is compiled for twenty seven transition economies and is based on a detailed analysis of the actual information disclosed. Analysis of the fiscal transparency index shows a clear pattern indicating that CEE countries stand out from the other two groups across all categories. This seems to be the result of the anchoring of the New Member States in the EU’s structures and procedures. SEE countries are behind the first group, experiencing serious difficulties in budgetary process and reporting standards. The CIS countries still have a long way to go to meet international standards. They must enhance budgetary practices and accounting procedures, as they lag behind the above groups most clearly in this regard.