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IMF gives thumbs up to public finance reporting

Makes seven recommendations for Budget format

An evaluation of Malta’s financial reporting and budgeting has given it the thumbs up, with only two of 35 criteria failing to meet even basic standards.

Finance Minister Edward Scicluna confirmed that all the seven recommendations made by the International Monetary Fund (IMF) would be taken on board, although he admitted that some would be harder to achieve than others, and some would take longer than others.

The evaluation was carried out by the IMF following a request by the Finance Ministry made two years ago. The results were presented on Thursday by the deputy division chief of the IMF’s Fiscal Affairs Department, Torben Hansen.

He said that Malta’s overall score was in line with the EU average, with the island doing better than average on two of the three sections assessed, and worse in one.

The sections dealt with fiscal reporting; fiscal forecasting and budgeting; and fiscal risk analysis and management. Each criterion was rated as ‘not met’, basic, good or advanced, matched against the IMF’s Fiscal Transparency Code.

Malta scored 11 out of 35 as ‘advanced’, 10 as ‘good’ and 12 as ‘basic’.
The two criteria that Malta failed to pass were the coverage of tax expenditures, and specific fiscal risks.

Mr Hansen said the IMF was suggesting that extra-budgetary units ¬(EBU) – such as the University and Mcast, which are by definition not reported in the Budget – should nevertheless be reported simultaneously, perhaps in an annex to the main report. It was also suggested that the Budget should give more key performance indicators.

Indeed, central government did not give rise to as many concerns as corporations and EBUs. Mr Hansen said that the liabilities of public corporation represented 17.5 per cent of GDP, somewhat on the high end of a graph ranking the different EU member states. The IMF recommended that reports – at least on their revenue and expenditure - should be consolidated and published on an annual basis.

Prof. Scicluna admitted that his previous attempts to change the format of the Budget speech had not been successful. He would prefer more of the trivial details to be in a separate document, for example.

He promised to try to present consolidated accounts for the corporations as soon as possible, acknowledging that it would not be easy to have them all done by the deadline of the Budget. They are currently presented to Parliament when their audited accounts are due. The EBU reports, on the other hand, form part of the Financial Estimates published simultaneously with the Budget.

The IMF also commented on the high levels of government guarantees in 2016, which had, however, dropped to more average levels by 2017 when the Electrogas guarantee was cancelled.

Another change promised by the minister was showing tax exemptions as ‘costs’ as he said that unfortunately people did not always appreciate that revenue went down when these exemptions were awarded.

The seven recommendations:
Fiscal reporting:
• Gradually expand coverage of fiscal reports to the public sector
• Publish a regular report on tax expenditures
Fiscal forecasting and Budgeting:
• Present more comprehensive information inn budget documentation
• Harmonise presentations in different fiscal reports
• Strengthen framework for public investment management
Fiscal risk analysis and management:
• Publish an annual Fiscal Risk Statement
• Strengthen central oversight of public corporations’ financial performance

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