The Policy Relevance of the Government Finance Statistics Methodology

Workshop on the Implementation and Links between the System of National Accounts, 2008 and the Government Finance Statistics Manual

November 20–22, 2013 in Istanbul, Turkey

DISCLAIMER: This presentation represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management.

Gary JonesGovernment Finance Division

Statistics Department

Government Finance Division, IMF Statistics Department 2

Government Finance Statistics Manual 1986 vs 2001/13

Classification StructureGFSM 1986• Based on analytic framework

– Inflow / outflow of cash– Repayable / nonrepayable– Requited / unrequited– Current / capital– Financial assets / liabilities– Public policy / liquidity

management– Outstanding debt

GFSM 2001• Based on analytic framework

– Transactions that change net worth

• Revenue• Expense

– Transactions in assets and liabilities

– Other economic flows– Balance sheet

IMF Statistics Department 3

OPENINGBALANCE

SHEET

NET WORTH

Nonfinancial Assets

Financial Assets

Liabilities

F L O W SCLOSINGBALANCE

SHEET

NET WORTH

Nonfinancial Assets

Financial Assets

Liabilities

TRANSACTIONS

Revenue

Expense

= NET OPERATING BALANCE

minus

Nonfinancial Assets

= NET LENDING /

BORROWING

minus

Liabilities

FinancialAssets• cash

• other financial assets

minus

OTHER ECONOMIC FLOWS

Holding Gains and Losses

Other Changes inVolume of Assets

Nonfinancial Assets

Financial Assets

Liabilities

Nonfinancial Assets

Financial Assets

Liabilities

CHANGE IN NET WORTH (HG)

CHANGE IN NET WORTH (OVC)

STOCKS STOCKS

4

Core Balances of the GFS System

• Multiple balancing items for transactions:– Net operating balance

• Balance of transactions affecting net worth• Closely related to System of National Accounts government saving

– Net lending/borrowing• Net operating balance minus transactions in nonfinancial assets

– Net cash inflow from operating activities• Balance of cash transactions affecting net worth

– Cash surplus/deficit• Net cash inflow from operating activities minus net cash outflow

from investments in nonfinancial assets

5

Other Analytic Measures

• Some other analytic measures for fiscal policy (see Box 4.1 in GFSM 2001)– Overall fiscal balance

• Net lending/borrowing minus acquisition of financial assets for policy purposes

– Overall primary balance• Overall fiscal balance plus net interest expense

– Net worth• Total stock of assets minus liabilities

– Net financial worth• Total stock of financial assets minus liabilities

6

What Lies Beneath:The Statistical Definition of Public Sector Debt

An Overview of the Coverage of Public Sector Debt for 61 Countries

Robert Dippelsman, Claudia Dziobek, and Carlos A. Gutiérrez Mangas (July 2012)

Staff Discussion Note (SDN)

7

Institutional Coverage

Beneath the surface of existing public sector debt statistics, lie inconsistencies and gaps:

• Many countries report only budgetary central government.• Some report central government (adding social security

funds and other extrabudgetary agencies).• General government is more comprehensive (add state and local

governments).• Fiscal risks may also come from PUBLIC CORPORATIONS -

financial or nonfinancial.• So, PUBLIC SECTOR would give the widest picture

(general government + corporations).

8

Instrument Coverage

• Narrowest coverage is debt securities and loans only. • Currency and deposits (C&D) and Special Drawing

Rights (SDRs) are also debt.• Other accounts payable (OAP) can be important, not

available from cash accounting systems, not the role of debt management office.

• Insurance, pensions, and standardized guarantee schemes (IPSGS) are not widely measured but can be a major source of hidden burden for governments– especially government employee pension obligations.– also mortgages, student loans, deposit guarantees

9

Classification of Instrument and Sectoral Coverage

* Insurance, pension, and standardized guarantee schemes

Sectors/Subsectors

Debt Instruments

Cur &

de

p.

Othe

r Acc

Pa

yabl

e

10

A Unified Approach?

• Many developing countries only report D1 (responsibility of debt management office).

• Maastricht uses D2 (important omissions).– Eurostat requires wider measures, but not in Maastricht definition.– Maastricht is at face value.

• D3 requires accrual system (adds other accounts payable).– But crucial to monitor.– Other accounts payable is not the same as arrears.

• Only a few statistically advanced countries report values of D4.– Many report Insurance, pension, and standardized guarantee

schemes as zero, but may mean “no data” not “no liabilities.”

11

Does it Matter?

• Is Canadian government gross debt 40 percent of GDP?

• YES! (GL1/D1)

• Is Canadian government gross debt 110 percent of GDP?

• YES! (GL3/D4)

12

The Range of Gross Debt in Canada

1 Currently not included in GFSY. Source: Government Finance Statistics Yearbook (GFSY) 2011. International Financial Statistics (IFS) June 2011.

39.8 39.9 72.2

40.2 40.2 72.6

44.7 45.0 96.5

53.5 53.8 109.7

2011

13

Magnitude Difference between General and Central Government Gross Debt

Table 2. Size of Debt-related Risks Posed by the States, Provinces, and Local Governments to the Central Government

Difference between GL3 D1 and GL2 D1 for selected countries (percent of GDP)

Source: IMF Government Finance Statistics Yearbook 2011

0

5

10

15

20

25

30

35

Source: IMF Government Finance Statistics Yearbook 2012

14

Net debt and gross debt (% GDP)Consolidated General Government (GL3), 2011

Source: GFS Yearbook. These data may not be fully comparable across countries.

Debt (%GDP)

-50-30-101030507090

110130150

Australia

Austria

BelgiumCyp

rus

Denmark

Finland

France

Germany

Greece

Iceland

Ireland

Italy

Netherlands

Norway

Portugal

Spain

SwedenTurke

y

United Kingdom

Gross Debt (%GDP) Net Debt (%GDP)