OREANDA-NEWS. Finland meets most of the principles of the Fiscal Transparency Code at a good or advanced level, according to the conclusions of a Fiscal Transparency Evaluation published by the International Monetary Fund (IMF) today, and carried out at the request of the country by a joint team from the IMF’s Fiscal Affairs and Statistics Departments in November 2014.

In some areas, notably related to the analysis and management of fiscal risks, practices in Finland are still rated as basic, but in general the importance of these areas for fiscal management in Finland is relatively low. Overall, the Finnish authorities produce a large amount of data and information related to all three pillars of the Code: fiscal reporting; fiscal forecasting and budgeting; and fiscal risk analysis and management. The report’s key findings are:

Fiscal reports consolidate the general government sector in line with European System of Accounts reporting standards but balance sheets exclude nonfinancial assets of some 77 percent of GDP and pension liabilities related to government employees of some 100 percent of GDP. Tax expenditures of 12 percent of GDP are high by international comparison but disclosed on a regular basis.

Finland has a well established and binding medium-term budget framework, covering around 80 percent of budgetary central government expenditures. Macroeconomic forecasts are reasonably accurate and unbiased, but the accuracy of fiscal forecasts is relatively low, as compared to other European Union countries.

The government provides only limited analysis of the sensitivity of fiscal forecasts to assumptions, and while a considerable amount of information is published on a variety of specific fiscal risks, the government does not yet produce a single report that collects and summarizes this information. The stock of general government guarantees is among the largest in Western Europe, but all guarantees are authorized by the legislature and disclosed on a regular basis.

The report makes eight recommendations to enhance the information-base for fiscal policy making and ensure that Finland remains at the forefront of international practices:

  • expand the institutional coverage of the consolidated central government financial statements;
  • gradually develop fiscal statistics for the consolidated public sector;
  • strengthen the design and reporting of fiscal objectives and strengthen reporting on the level of compliance with the spending limits;
  • develop general guidelines for cost-benefit analysis for all major investment projects, and publish the results;
  • streamline the number of performance objectives for each ministry;
  • include more analysis of risk in fiscal forecasts and projections;
  • prepare a regular report on fiscal risks that incorporates macroeconomic risks as well as a range of other risks; and
  • introduce measures to reduce the risks that municipalities create for the central government and/or other municipalities.