Fiscal Transparency in Times of Emergency Response: Reflections for Covid-19

(Consult the full –Fiscal Data for Emergency Response: Guide for COVID-19-)

The health emergency we are experiencing at the beginning of 2020 is certainly not the first or last one the world will see. Yet, Covid-19 pushes us to reflect on the preparedness of our fiscal transparency instruments to account for public finance adjustments, as well as to provide useful information in a timely manner—to both government agencies for efficient coordination and decision-making, and the public for policy implementation and accountability. Governments are being faced with the need to make rapid decisions1 regarding different aspects of public finances, some even announcing what is being called a “blank check” to combat Coronavirus and its economic effects2. Generally speaking, these measures target emergency spending to prevent, detect, control, treat, and contain the virus, countercyclical actions to reactivate the economy and support affected people and sectors, and financing needs to ensure liquidity and cash requirements during the emergency and for the stimulus measures3.

While transparency expectations for risks management and contingencies are part of international standards4 and particular attention has also been given in post-disaster attention5, fiscal transparency in emergency situations is certainly intricate. Crisis response interactions generate complexity and confusion, which are exacerbated by fluid, chaotic processes governed by special rules, which often override ordinary processes and timings that may otherwise be well normed and documented. Therefore, specific data, presentation, disaggregation, and timeliness will require focalized and proactive publication measures that respond to the characteristics of the emergency. Gathering and publishing -quality and timely- information of the public financial measures taken and its implications is essential to mitigate the risks that can complicate internal and external monitoring and can be a culprit for mismanagement, corruption, and unforeseen fiscal risks.

Considering the challenges that compiling and consolidating the data might pose, especially if specific information systems are not in place, it is relevant to make strategic decisions regarding expected information needs in the short, medium and longer-term. In our recently released Fiscal Transparency Portals Tutorial: A User-Centered Development, we highlighted the importance of listening to the demand of information, reacting accordingly by providing information and understanding that demand is dynamic as the context and priorities evolve. This can certainly be applied to emergency response efforts, such as the one we are facing with the coronavirus pandemic, as I delve in the following.

 

 Who needs the information 

Saying that the “public” needs fiscal information about the emergency relief and post-emergency efforts is too abstract to actually dissect how to prioritize gathering and releasing the kinds of information that might be required or useful by different groups, such as those that are either: 

  • part of the response to the outbreak (e.g. different government agencies, aid organizations, international financial institutions), 
  • facing an emergency themselves (e.g. infected individuals and their families, businesses affected by bans, quarantines or similar restrictions), 
  • external actors with vested interests (e.g. investors, credit agencies) or
  • oversight of government decisions (e.g. audit institutions, civil society organizations).

 

 What information is required 

Considering the public finance measures that are being announced there are a number of essential questions for reflection that can guide disclosure. From each question, the publishers can generate a data mapping6 format with key fields to publish7:

Budget reallocations and reprioritization

  • Will the resources originally allocated to the health sector be enough to purchase tests, supplies and equipment, and to cover the human resources necessary to respond, contain and mitigate the outbreak? Are there other public services that come under stress due to the outbreak that might need additional funding (e.g. public transport, security forces, immigration services)?
    • How will additional budget needs be covered (contingency funds, transfers from other programs from the health sector or other sectors, geographical redistribution)? (i.e. Proposed Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 of the United States)
  • Which are the budget lines/programs affected by the cuts or reallocations? How are reallocations prioritized and what are the trade-offs?
  • How will emergency acquisitions/procurements be managed? (i.e. Ukraine has announced simplifying the procedures of procurement for the emergency, but with mandatory reporting in Prozorro System -the country’s e-procurement system-) 

Countercyclical measures and reactivating the economy

  • What changes are expected in the macroeconomic framework considering all measures taken?  (i.e. the Ministry of Finance of France estimated that public debt will exceed 100 percent of GDP this year, above the European Union’s guidelines of not more than 60 percent)
  • What financial and monetary measures will be established?
  • Will special tax expenditures be implemented as a relief for affected sectors or locations? 
    • If so, what form(s) will they take (exclusions, deductions, deferrals, credits)? What are their expected outcomes and timeframes? Do they have well-defined coverage that aligns with their goals? What is their projected effect on overall revenue? (i.e. the Government of Canada has unveiled specific measures of flexibility for taxpayers)

Additional financing needs for the emergency and stimulus measures 

  • Are there donor funds available to face the emergency
    • If so, are resources financial or non-financial? Are they entering the government treasury or being managed separately (extra-budgetary)? Finally, where and how will they be used to ensure complementarity and avoid overlap? (i.e. the government of South Africa has normed that donor funding received to assist with the national state of disaster must paid into the Reconstruction and Development Fund)
  • Will there be a greater deficit than projected and how will it be covered? (i.e. emergency credit toolkit set by the IMF that will be used in Bosnia)
    • If any additional debt is contracted, what are the conditions, term and future implications? 

 

 How to publish the information to make it useful 

Many of the topics above will be disclosed in press releases, as well as in financial reports with aggregated information, as tends to be the case. This can provide insights regarding financial stability and the general implications of the emergency response issued. However, only with granular and open data will we be able to trace the real implemented actions and decision-making process for accountability, and build resilience for emergency responses in the future.

Depending on the scope of the implications for Public Financial Management, which will vary from country to country, as well as the capacity of the government, focalized efforts including fiscal transparency platforms might be worth considering. As a manner of inspiration, it is worth looking at:

Recovery.gov (United States), a website that oversaw spending under the American Recovery and Reinvestment Act of 2009, which was implemented as a response to the economic crisis of 2008-2009 in order to reactivate the economy; or

Fuerza México (Mexico), a digital platform set up by the Ministry of Finance following the earthquakes that occurred on September 2017, as a means to disclose information and data from the different agencies and entities involved in emergency relief and reconstruction tasks8.

Challenges in consolidating data and sustainability should be underscored, which takes us back to the importance of identifying objectives with defined audiences and prioritizing information.

 

 Space for public engagement 

As an immediate reaction, it might be difficult to think about how in times of emergency where decision-making is sped-up, the government can create spaces for public engagement. However, we live in a time of social innovation where high degrees of expertise from outside of the government can be readily available and two-way communication channels can improve decision-making for the public good. Governments can, therefore, set a mix of formal and informal public engagement mechanisms according to the stages of the emergency and post-emergency response.

For example, consider how during the emergency response open mapping could rapidly and more efficiently help identify the oversaturation or scarcity of resources amongst clinics and thus allow for their redistribution, and likewise, enable direct-aid and humanitarian foundations to deliver complementary, targeted supplies. Academia and specialized organizations could help model the repercussions of different budget reallocation scenarios and their implications for financial stability and sustainable development. Finally, civil society and academia could provide important insights into designing tax relief and stimulus measures, an example can be the recommendations made by the Budget Justice Coalition of South Africa for the Medium-Term Budget Framework of 2018. As Joel Friedman states in the Guide to Tax Work for NGOs, civil society groups could help broaden the debate to include a new focus on fairness and the needs of affected marginalized groups in the discussion, which might otherwise be dominated by businesses and wealthy individuals.

Finally, radical and extraordinary fiscal decisions regarding the emergency must also take into account relevant stakeholders, without whom implementation would be very hard. Helping economic sectors, new subsidies, bailouts, stimulus, public-private partnerships, corporate welfare, all of which have significant fiscal consequences, should be designed with the active participation of representatives of the social sectors concerned.

 

 

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Footnotes

1. Governments have announced measures that go from immediate changes in allocations to more comprehensive support packages. To reference some: China, Korea, Iran, Italy, France, Spain.
2. Germany has announced loans and credit guarantees of €460 billion that could be increased by €93 billion if necessary.
3. In line with this, the International Monetary Fund (IMF) has shared a set of policy recommendations to help countries define fiscal and monetary measures and present the Fund’s flexible and rapid-disbursing emergency response toolkit. Additionally, the IMF’s Public Financial Management Blog has published two useful entries regarding public financial measures to tackle Covid-19 challenges: Fiscal Policies to Protect People During the Coronavirus Outbreak, by Vitor Gaspar and Paolo Mauro, and Preparing Public Financial Management Systems to Meet Covid-19 Challenges by Sandeep Saxena and Michelle Stone.
4. The Fiscal Transparency Code under Pillar III- Fiscal Risk Analysis and Management, which focuses on fiscal risks and budgetary contingencies that arise during budget execution.
5. The World Bank has recently published a new approach for a Post-Disaster Financial Management Review and Engagement Framework, which explains how to undertake a rapid assessment of Public Financial Management systems to determine their ability to respond effectively to natural disasters whilst maintaining accountabilityWhile important comparisons and lessons can be extracted from examples of crisis management in natural disasters, a major difference between a natural disaster and a disease outbreak is the uncertainty of when the tide will turn. For example, in the case of an earthquake, the immediate aftermath is when the damage is biggest so governments and private entities can calculate the damage costs and plan ahead. With a disease outbreak, such as Covid-19, we can only project the spread rate, but the peak is still hard to predict and consequently, the emergency spending overlaps with financing and countercyclical measures.
6. For more information on mapping data consult module 5 of the Fiscal Transparency Portals Tutorial: A User-Centered Development
7. For each data field it is important to identify if it is available in internal systems or it might need to be gathered specifically for this purpose.
8. The platform was recognized as part of the Champions in the WSIS 2018 conference.

Budget literacy cases as part of a comprehensive strategy to strengthen dialogue between government and population

To achieve a truly informed dialogue between government and society, based on the supply of budget information published online, whether it is public reports in closed formats, budget transparency portals, platforms that address the specific needs of the population, or open data publication, it is necessary to enable a certain level of understanding on the matter and its complexity on the demand side; the users of the information.

As we mentioned in the Fiscal Transparency Portals Tutorial launched in January 2020 (Spanish version), budget literacy is an effective tool, not only for identifying the information needs and goals of different audiences, but as a mechanism that allows generating capacities for users who would like to engage, but do not have the necessary knowledge to do so.

Starting 2019, from GIFT, as a global network that facilitates dialogue between its stewards and partners, we have implemented an interactive dashboard that allows having clarity on the current plans and next steps of its members. In it, one of the topics that we see most frequently reflected is budget literacy. We note that more and more, GIFT stewards envision budget literacy as part of a comprehensive strategy to strengthen an informed dialogue, analysis, and interaction between government and public to enhance the search for better services and public finances.

For this reason, the GIFT, acting on the initiative of the Office of Planning and Budget of Uruguay, took on the task of beginning a compilation of some cases implemented in the last year. The cases can be permanently consulted in this link.

From this compilation, below, we present four cases from Latin American countries that are part of the Network and that have decided to share their progress and experiences with the community. In each of them we can appreciate different approaches and target population, as well as country-specific origins: organizers from the government in some cases, civil society or collaborations between both sectors in others:

3 budget literacy tools as part of a comprehensive budget transparency strategy, by Paula Manera from the Office of Planning and Budget – Presidency of Uruguay

From direct interaction with society to a work plan to improve a portal, by Daniel Torres from the Ministry of Finance of the Dominican Republic

Costa Rica trains citizens for the first time on the Open Budget, by Erick Rojas Villalobos from the Ministry of Finance of the Republic of Costa Rica

Strengthening organizations and activists in budget analysis with gender focus by Carmen Ryan and Julieta Izcurdia from the Civil Association for Equality and Justice of Argentina (ACIJ)

As we mentioned in the sixth Module of the Tutorial on portals, remember that each country is different, as well as users’ needs and capacities from one to another, it is good to be inspired by the best international implementations, but imitating or replicating can result in a product that is not attractive to the audience, or worse, not functional in the country context.