[OpenSpending] Developing Nation Fiscal Transparency and Capital Markets Access

[Marc Joffe]

At OKCon, I was impressed with the amount of work that community members are
doing to open up the finances of developing countries. Data and reports
provided by organizations such as the Revenue Watch Institute
<http://www.revenuewatch.org/>  and Government Spending Watch
<http://www.governmentspendingwatch.org/>  provide new insight into the
fiscal condition of nations whose revenue and expenditure data have been
generally unavailable.

 

I would like to call everyone's attention to an underappreciated benefit of
this new transparency: once comprehensive and reliable fiscal data for a
government is published, that government can be more easily rated. Once a
government is rated, it can have greater access to private capital markets.

 

On September 11, the UN General Assembly conducted a thematic debate on
credit rating agencies. One conclusion arising from that debate is that many
developing countries remain unrated and are thus unable to raise private
capital on the debt markets. A major barrier to being rated - aside from
lack of transparency - is the fact that the major rating agencies charge
developing large countries substantial fees to issue a rating.  For more on
this, please see:

 

http://www.financeprecious.com/investing-perspectives/bonds/credit-rating-re
form-overlooks-developing-world-global-issues.html

 

http://www.neurope.eu/article/un-global-credit-rating-system-needs-reform

 

The world would benefit from alternative rating agencies that could leverage
newly available fiscal data to rate developing countries at low or no cost.
There are a number of proposals for a non-profit credit rating agency that
could provide this service.  See for example, the Bertelsmann Foundation
<http://www.bfna.org/category/publication-type/incra> 's INCRA project and
Wikirating <http://www.wikirating.org/> .

 

I look forward to feedback from others on this list.

 

Marc Joffe

Public Sector Credit Solutions <http://www.publicsectorcredit.org/> 

marc at publicsectorcredit.org <mailto:marc at publicsectorcredit.org> 

 

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