2023 Fiscal Transparency Report

Report to Congress on Update to the Fiscal Transparency Report

Section 7031(b)(2) of the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2023 (Div. K, P.L. 117-328)

2023 Fiscal Transparency Report

AGENCY: Department of State

ACTION: Notice

Fiscal transparency informs citizens how government and tax revenues are spent and is a critical element of effective public financial management. Transparency provides citizens a window into government budgets and those citizens, in turn, hold governments accountable. It underpins market confidence and sustainability. The Congressionally mandated Fiscal Transparency Report (FTR) is a tool to identify deficiencies and support needed changes. The Office of Macroeconomic Affairs (OMA) of State’s Bureau of Economic and Business Affairs (EB) prepares the annual FTR in consultation with State’s Bureau of Energy Resources (ENR) and the U.S. Agency for International Development (USAID) .

As directed by Congress, EB/OMA evaluates data on fiscal transparency collected by our posts in 141 countries (those eligible to receive U.S. foreign assistance) against minimum requirements and publishes the results on the Department’s website annually. For countries to meet minimum requirements, governments must make key budget documents publicly available within a reasonable period. They must be substantially complete and generally reliable. Governments must also follow a transparent process for awarding government contracts for natural resource extraction.

In the report released in June 2023, 72 countries met minimum requirements and 69 did not. Of those 69, the FTR identified 25 countries that made significant progress towards meeting requirements.

For questions, please contact EB Fiscal Transparency at EEB-Fiscaltransparen@state.gov.

Summary

The Department of State hereby presents the Fiscal Transparency Report pursuant to section 7031(b) of the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2023 (Div. K, P.L. 117-328) (FY 2023 SFOAA). The report describes the minimum requirements of fiscal transparency developed, updated, and strengthened by the Department in consultation with other relevant federal agencies. It reviews governments that were originally identified in the 2014 fiscal transparency report as well as Equatorial Guinea. It assesses those that did not meet the minimum fiscal transparency requirements and indicates whether those governments made significant progress toward meeting the requirements during the review period of January 1 – December 31, 2022. The report also provides a description of the fiscal transparency innovation fund’s FY 2022 project plans and outlines objectives for FY 2023.

Fiscal Transparency

The Department’s fiscal transparency review process assesses whether governments meet minimum requirements of fiscal transparency. For this report, the minimum requirements of fiscal transparency include having key budget documents that are publicly available, substantially complete, and generally reliable. The review includes an assessment of the transparency of processes for awarding government contracts and licenses for natural resource extraction. Fiscal transparency is a critical element of effective public financial management, helps build market confidence, and underpins economic sustainability. Fiscal transparency fosters greater government accountability by providing a window into government budgets, helping citizens hold their leadership accountable, and facilitating better public debate.

Annual reviews of the fiscal transparency of governments that receive U.S. assistance help ensure U.S. taxpayer funds are used appropriately and provide opportunities to dialogue with governments on the importance of fiscal transparency.

Consistent with section 7031(b)(2) of the FY 2023 SFOAA, this report identifies the steps taken by each government to publicly disclose additional budget documentation, contracts, and licenses, which are additional to information disclosed in previous years. It makes specific recommendations of short- and long-term steps governments should take to improve fiscal transparency. Finally, the report outlines the process the Department of State followed in completing the assessments and describes how U.S. foreign assistance resources were used to support fiscal transparency.

Section 7031(b)(1) of the FY 2023 SFOAA requires the Secretary of State to “update and strengthen” minimum requirements of fiscal transparency for each government receiving assistance appropriated by the Act as identified in the 2014 Fiscal Transparency Report. Section 7031(b)(2) further requires the Department to make or update any determination of “significant progress” or “no significant progress” in meeting the minimum requirements of fiscal transparency for each government that did not meet the minimum requirements. Pursuant to Delegation of Authority 513, the Deputy Secretary of State for Management and Resources made those determinations for 2023.

Fiscal transparency determinations may change from year to year due to updating and strengthening minimum requirements of fiscal transparency as required by law, changes in governments’ performance on public financial management, or new information coming to the Department’s attention. As a result, some governments may fall short of these requirements, despite in some cases maintaining or even improving their overall level of fiscal transparency. The report includes a description of how certain governments fell short of the minimum requirements.

While a lack of fiscal transparency can be an enabling factor for corruption, the report does not assess corruption. A finding that a government “does not meet the minimum requirements of fiscal transparency” does not necessarily mean there is significant corruption in the government. Similarly, a finding that a government “meets the minimum requirements of fiscal transparency” does not necessarily reflect a low level of corruption.

Fiscal Transparency Review Process and Criteria

As required by law, the Department conducted an annual review of the minimum requirements of fiscal transparency in consultation with other relevant federal agencies and updated and strengthened those requirements. The Department assessed the fiscal transparency of the 140 governments identified in the 2014 fiscal transparency report plus Equatorial Guinea, determined whether each country met the minimum requirements, and identified measures governments that failed to meet the minimum requirements implemented to make significant progress toward meeting the requirements.

In conducting the 2023 review, the Department assessed the fiscal transparency of governments during the review period of January 1 – December 31, 2022. The Department considered information from U.S. embassies and consulates, other U.S. government agencies, international organizations, and civil society organizations. U.S. diplomatic missions consulted with foreign government officials, international organizations, and civil society organizations to obtain information for these assessments.

In its evaluation, the Department recognizes that countries’ specific circumstances differ, and specific fiscal transparency practices vary among governments. Nevertheless, the report evaluates whether designated countries met basic minimum fiscal transparency requirements to enable meaningful public participation in budgeting processes.

Minimum Requirements of Fiscal Transparency

House Report 117-401 defines “minimum requirements of fiscal transparency” to mean the public disclosure of:

National budget documentation (to include income and expenditures by ministry) and
Government contracts and licenses for natural resource extraction (to include bidding and concession allocation practices).

The 2023 fiscal transparency review process evaluated whether the government publicly disclosed key budget documents, including expenditures broken down by ministry and revenues broken down by source and type. The review process also evaluated whether the government had a supreme audit institution that meets international standards of independence and audits the government’s annual financial statements, and whether such audits are made publicly available. The review further assessed whether the process for awarding licenses and contracts for natural resource extraction is outlined in law or regulation and followed in practice, and whether basic information on such awards is publicly available. The Department applied the following criteria in assessing whether governments met the minimum requirements of fiscal transparency.

Budget information should be:

Publicly Available: Budget documents, including the executive budget proposal, enacted budget, and end-of-year report, should be widely and easily accessible to the public. Complete documents may be available from government offices or libraries, widely available government publications, or via mass media channels. Budget documents should be disseminated within a reasonable period. A “reasonable period” generally corresponds to:

At least one month before the start of the fiscal year and before budget approval by the legislature for the executive budget proposal,
Within three months of enactment for the enacted budget, and
Within 12 months of the end of the fiscal year for the end-of-year report.

Information on government debt obligations should also be publicly available on a public-facing website and updated at least annually, including aggregate, government-backed debt for major state-owned enterprises. The enacted budget and end-of-year report should be available online. If a government had a sovereign wealth fund, it should disclose its source of funding and general approach to withdrawals.

Beginning with this review period, if a government had a sovereign wealth fund, it should be established in a sound legal framework.

Substantially Complete: Publicly available budget documents should provide a substantially full picture of the government’s planned expenditures and revenue, including natural resource revenues. Budgets should include expenditures broken down by ministry and revenues broken down by source and type. Budget documents should detail allocations to and earnings from state-owned enterprises. If not, such information should be available in other public documents. Major state-owned enterprises should have publicly available audited financial statements. A published budget that does not include significant cash or non-cash resources, including foreign aid, would not be considered substantially complete. Budget documents should incorporate all special accounts or funds. If there are off-budget accounts that have a legitimate purpose, they should be audited, the results made public, and the accounts subject to oversight. Budget documents should also include expenditures to support executive offices or royal families where such expenditures represent a significant budgetary outlay. The review process recognizes military and intelligence budgets are often not publicly available for national security reasons. However, parliaments should oversee and approve military and intelligence budgets. Beginning with this review period, military and intelligence budgets should be subject to either parliamentary review and approval or civilian public oversight. Prior reports did not explicitly state that parliamentary review and approval constituted sufficient civilian oversight.

Reliable: Budget documents and related data are considered reliable if the information contained therein is credible, meaning actual government revenues and expenditures correspond to the enacted budget. The government should review budget execution through the course of the year, such as by producing monthly or quarterly budget execution reports. Significant departures from planned receipts and expenditures should be explained in supplementary budget documents and publicly disclosed in a timely manner. Financial statements should be prepared according to internationally accepted principles that yield consistent and comparable statements. The supreme audit institution should meet international standards of independence, audit the executed budget, and verify the annual financial statements. The results of such audits, to include an executive summary with findings or recommendations by the supreme audit institution, should be published within a reasonable period (generally within 12 months of the dissemination of the end-of-year report).

Beginning with this review period, the supreme audit institution should be established in an appropriate and effective legal framework that spells out, in detail, its independence.

Natural resource extraction contracting and licensing procedures should be:

Transparent: Criteria and procedures for the contracting and licensing of natural resource extraction should be publicly available and codified in law or regulation. These laws and regulations should be followed in practice. The basic parameters of concessions and contracts should be made publicly available after the decision. Such information should include the geographic area covered by the contract or license, the resource being developed, the duration of the contract, and the company to which the contract or license is awarded.

Significant Progress or No Significant Progress

A determination of “significant progress” indicates a government satisfactorily addressed a key deficiency in meeting the minimum requirements of fiscal transparency during the review period. A key deficiency is some material condition or fact that causes a government not to meet the minimum requirements of fiscal transparency.

Fiscal Transparency Innovation Fund

Section 7031(b)(3) of the FY 2023 SFOAA requires certain funds appropriated as “Economic Support Funds” under title III of the Act be made available for programs and activities that assist governments and civil society organizations in promoting fiscal transparency. The Department and USAID implement this requirement via the Fiscal Transparency Innovation Fund (FTIF). The Department of State’s Bureau of Economic and Business Affairs and USAID’s Bureau of Development, Democracy, and Innovation solicit proposals and award funds in accordance with established guidelines. With FY 2023 funds, the Department and USAID plan to support projects to enhance: (1) governments’ capacity to develop and execute comprehensive, reliable, and transparent budgets; (2) citizens’ visibility into state expenditure and revenue programs; and/or (3) citizens’ ability to advocate for specific issues related to government budgets and budget processes.

Consistent with the relevant Congressional Notification, the Department of State and USAID are taking steps to obligate a total of $7 million in FY 2022 Economic Support Funds under the FTIF to support projects in the following countries: Angola, Benin, Democratic Republic of the Congo, Dominican Republic, Ethiopia, Kyrgyz Republic, Lebanon, Libya, Madagascar, Senegal, Somalia, and Zambia. Funding will also support a global project to be implemented by a U.S.-based non-governmental organization that may benefit additional countries. The projects are designed to advance efforts by government and civil society to enhance fiscal transparency and public financial management practices and to improve public awareness and involvement in the expenditure of public resources.

Conclusions of Review Process

The Department concluded that, of the 140 countries (and the Palestinian Authority) evaluated, the governments of 72 met minimum requirements of fiscal transparency. Sixty-nine did not meet the minimum requirements of fiscal transparency. Of these 69, however, 25 made significant progress toward meeting the minimum requirements of fiscal transparency.

The Department assessed the following governments as meeting the minimum requirements of fiscal transparency for 2023: Albania, Argentina, Armenia, The Bahamas, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Burkina Faso, Cabo Verde, Chile, Colombia, Costa Rica, Côte d’Ivoire, Croatia, Czech Republic, Estonia, Fiji, Georgia, Ghana, Greece, Guatemala, Guyana, Honduras, Hungary, India, Indonesia, Israel, Jamaica, Jordan, Kazakhstan, Kenya, Kosovo, Kyrgyz Republic, Latvia, Lithuania, Malaysia, Malta, Marshall Islands, Mauritius, Mexico, Micronesia (Federated States of), Moldova, Montenegro, Morocco, Namibia, Nepal, Nigeria, North Macedonia, Panama, Paraguay, Peru, Philippines, Poland, Portugal, Romania, Samoa, Serbia, Seychelles, Singapore, Slovakia, Slovenia, Sri Lanka, Thailand, Timor-Leste, Togo, Tonga, Trinidad and Tobago, Tunisia, Turkey, Uganda, and Uruguay.

The Department assessed the following as not meeting the minimum requirements of fiscal transparency for 2023, and the table identifies whether each made significant progress toward meeting those requirements:

Assessed as not Meeting Minimum Requirements of Fiscal Transparency	Significant Progress	No Significant Progress
Afghanistan		X
Algeria		X
Angola		X
Azerbaijan		X
Bahrain		X
Bangladesh		X
Belize		X
Benin		X
Burma		X
Burundi	X
Cambodia	X
Cameroon	X
Central African Republic	X
Chad		X
China, People’s Republic of		X
Comoros	X
Congo, Democratic Republic of the	X
Congo, Republic of the	X
Djibouti		X
Dominican Republic		X
Ecuador		X
Egypt	X
El Salvador		X
Equatorial Guinea		X
Eswatini		X
Ethiopia	X
Gabon	X
The Gambia		X
Guinea	X
Guinea-Bissau	X
Haiti		X
Iraq	X
Laos		X
Lebanon	X
Lesotho		X
Liberia	X
Libya		X
Madagascar		X
Malawi		X
Maldives	X
Mali		X
Mauritania	X
Mongolia		X
Mozambique		X
Nicaragua		X
Niger		X
Oman		X
Pakistan		X
Palestinian Authority	X
Papua New Guinea		X
Rwanda		X
Sao Tome and Principe		X
Saudi Arabia	X
Senegal	X
Sierra Leone	X
Somalia	X
South Africa		X
South Sudan		X
Sudan		X
Suriname		X
Tajikistan	X
Tanzania	X
Turkmenistan		X
Ukraine		X
Uzbekistan		X
Vietnam		X
Yemen		X
Zambia		X
Zimbabwe	X

Specific Assessments

This section describes areas where governments and authorities did not meet the Department of State’s minimum requirements of fiscal transparency during the review period and includes specific recommendations of short- and long-term steps they should take to improve fiscal transparency. For those determined to have made significant progress toward meeting the minimum requirements, the section also includes a brief description of such progress.

Government-by-Government Assessments

_____________________

Richard R. Verma

Deputy Secretary of State for Management and Resources

2023 Fiscal Transparency Report