Coverage

Dimension 14.1: Whole economy.

Dimensions 14.2 and 14.3: CG.

Time period

Last three completed fiscal years.

Measurement guidance

Robust and verifiable macroeconomic and fiscal projections are essential to support the development of a predictable and sustainable fiscal strategy. Preparing economic forecasts and estimating future revenue flows should be a transparent and formalized process. Underlying assumptions should be clearly explained and verifiable.

Dimension 14.1 assesses the extent to which comprehensive medium-term macroeconomic forecasts and underlying assumptions are prepared for the purpose of informing the fiscal and budget-planning processes and are submitted to the legislature as part of the annual budget process. To be consistent with PI-5, element 6, forecasts must include at least estimates of GDP growth, inflation, interest rates, and the exchange rate. The assessors should also analyze the extent to which macroeconomic forecasts and assumptions have been reviewed by an entity other than the preparing entity, for example a fiscal council. For B and C scores the official macroeconomic forecasts may be prepared by the Central Bank.

Dimension 14.2 assesses whether the government has prepared a fiscal forecast for the budget year and the two following fiscal years based on updated macroeconomic projections and that reflects government-approved expenditure and revenue policy settings. The updated revenue projections should be presented by revenue type and should clearly identify underlying assumptions (including rates, coverage, and projected growth). The updated expenditure estimates should be based on the following year estimates of the preceding approved budget, adjusted to take into account the budget and medium-term fiscal impact of any post-budget expenditure policy decisions (including approved adjustments for inflation and public service wages). Variations between the final approved fiscal forecast and the projections included in the previous year’s approved budget should be explained and published as part of the annual budget process.

Dimension 14.3 assesses the capacity of governments to develop and publish alternative fiscal scenarios based on plausible unexpected changes in macroeconomic conditions or other external risk factors that have a potential impact on revenue, expenditure, and debt. Such analyses would typically involve an analysis of debt sustainability.