By Nick Mann | 3 June 2013
European Union governments should be required to report their fiscal position more often as part of efforts to improve their public finances, a leading International Monetary Fund official has said.
Richard Hughes, IMF division chief for public financial management, said current EU reporting requirements, where countries report fiscal data on a quarterly basis with a three-month lag, meant there was ‘a long time to wait’ for information.
‘In the midst of a crisis, governments can’t really wait six months to see how they’re performing against national fiscal rules, they need much more frequent and timely information about fiscal developments at the general government level,’ he explained.
This was particularly significant given the large upwards revisions in debt and deficit seen in some EU countries since the onset of the economic crisis, he noted.
Hughes was speaking in Brussels last week during a conference on the potential introduction of a single set of harmonised EU-wide public sector accounting standards. Those tasked with implementing these European Public Sector Accounting Standards would have a role to play in moves to increase the frequency of reporting, he said.
‘I’d encourage the Epsas standard setters to call on member states to produce operational fiscal reports on a monthly basis, and not on the quarterly basis required for fiscal surveillance purposes at the European level,’ he said.
Epsas should also have a more comprehensive focus on government activity than the current system used by member states to report their debt, deficit and gross domestic product, the European System of Accounts.
Hughes called for a ‘comprehensive framework’ that ‘consolidates all publically controlled entities, recognises all assets and liabilities, records all flows and reconciles them with changes in stocks and captures all changes with economic value’.
In particular, Hughes stressed the importance of public sector accounts including state-owned enterprises and government arrears.
Balance sheets should also include guarantees offered by government aimed at making it easier for the private sector to make invest. ‘Under most countries’ accounting systems, including in Europe, guarantees are an attractive way for cash-strapped governments to provide financial assistance to the private sector because they don’t show up in summary measures of the deficit and debt unless they’re actually called by the private sector counterpart,’ Hughes noted.
