ESTP Course Balance of Payments – Introductory course Paris, 22-23 May 2014 Introduction to the BPM6

Outline Why a new manual? History Key influences Continuity with BPM5 Links with the SNA Links with other manuals Some underlying themes Globalization Increased focus on balance sheets Financial and technical innovation Structure of the manual Revisions to BPM6

Why a new Manual? Take into account economic developments associated with globalization; Take into account financial and technological innovation; Increase emphasis on the international investment position and related development of the balance sheet approach; Strengthen the integration between international accounts statistics and other macroeconomic statistics; and, Take account of specialized manuals and classification systems. BPM6: Standard framework for statistics on transactions and positions between an economy and the rest of the world.

History (1/3) Previous editions: 1948, 1950, 1961, 1977, and 1993. In 2001, the IMF Committee on Balance of Payments Statistics (BOPCOM) asked the IMF to begin the process of planning for the BPM5 update. In 2003, the Inter-Secretariat Working Group on National Accounts (ISWGNA) decided to update the 1993 System of National Accounts (1993 SNA). In April 2004, the Annotated Outline was circulated to member countries and posted on the IMF website. Gave proposals and asked many questions.

History (2/3) In 2004, four expert groups were established to advise on the technical issues (BOPTEG, CUTEG, DITEG, and RESTEG). In March 2007, the first complete public draft of BPM6 was posted on the IMF website for public comments. In November 2007, BOPCOM meeting discussed a few remaining unresolved issues and reviewed a revised draft (comment period extended to June 2008). To assure consistency, process was fully coordinated with the revision of the 1993 SNA. A new draft of BPM6 was prepared for BOPCOM’s approval at its meeting in October 2008, and re-posted only for editorial remarks. Final version was posted on the IMF website in January 2010.

Key influences: Continuity with BPM5 The basic framework in BPM6 is unchanged from BPM5. The presentation of current, capital, and financial accounts is maintained. Overall changes to implement BPM6 are less structural than those for BPM5.

Key influences: Links with the SNA Terminology, style, and text are closer; The sectorization is consistent with that of the SNA; BPM6 has full SNA/MFSM classification, but allows for an ease of transition by identifying the old sectors and using their ordering; In line with the SNA, BPM6 replaces monetary authorities by a central bank sector; Other financial corporations sector given a higher profile (previously combined with nonfinancial corporations and households in “other sectors”); Relationship with SNA framework shown in Chapter 2 of BPM6.

Key influences: Links to Other Manuals Advances in thinking in other guides and manuals produced since 1993 are incorporated. These include: The External Debt Guide (2003), such as its definition and identification of debt as a grouping of financial instruments. The Reserves Template Guidelines (2001), such as expanded description of what constitutes reserve assets. The Manual on Statistics of International Trade in Services, MSITS (2002) The Government Finance Statistics Manual (2001), the Monetary and Financial Statistics Manual (2000), and Financial Soundness Indicators Guide (2005) are also drawn upon. Note the MSITS and the Reserves Template Guidelines were subsequently updated, and published in 2011 and 2012, respectively.

Some underlying themes: Globalization Residence-related issues. Outsourcing. Revised treatment of merchanting. Elaboration on currency unions and other regional arrangements.

Some underlying themes: Increased focus on balance sheets (1/2) The IIP has a far more prominent position in BPM6 than in BPM5. Linked to trends in analysis - “balance sheet approach”1/ and concern about balance sheet vulnerability issues. Revised title of the Manual includes IIP . More guidance on IIP issues, based on experience since BPM5. More emphasis on the “other changes in financial assets and liabilities account” to explain changes in IIP, with a separate chapter (Chapter 9). ____________ 1/ Available at: http://www.imf.org/external/pubs/cat/longres.cfm?sk=16167.0

Some underlying themes: Increased focus on balance sheets (2/2) Further breakdowns of the IIP by remaining maturity and particularly by currency are emphasized. SNA/MFSM financial instrument classification now explicit (Chapter 5), whereas in BPM5 mixed with functional categories. Reserve-related liabilities identified (memorandum and supplementary items) Balance sheet aspects added to Chapter 14 on analysis.

Some underlying themes: Financial and technological innovation (1/2) Financial market developments: Investment funds. Index-linked securities. Fees on security lending. Employee stock options. Allocated and unallocated gold accounts. Elaborated cross-border services: Financial intermediation services charges indirectly measured (FISIM). More sophisticated calculation of insurance services. Information technology and intellectual property.

Some underlying themes: Financial and technological innovation (2/2) Information technology and intellectual property: Grouping of telecommunications, internet, and computing services. Research and development (hence patents etc.) are to be treated as a produced asset, so are included in services (previously nonproduced assets, so were included in the capital account). Intellectual property grouping in services. Treatment of computer software clarified.

Structure of the Manual Ch 1 Background and structure of BPM6 Ch 2 IIP and BOP are part of broader system of SNA Ch 3-6 Cross-cutting accounting principles, concepts, and classifications Ch 7-13 Account-by-account Ch 14 Introduction on uses/analysis/selected issues Appendices Nine appendices, including changes from BPM5, currency unions, exceptional financing, and a listing of BOP/IIP standard components

Appendix 8 is very useful. List of changes with paragraph references. Note: Appendix 8 is very useful. List of changes with paragraph references.

Revisions to BPM6 Research agenda: http://www.imf.org/external/pubs/ft/bop/2007/07-08.pdf Important but unresolved issues: - investment income; - ultimate investing economy and ultimate host economy in direct investment; - pass-through funds; - whether direct investment relationships can be achieved other than by economic ownership of equity (e.g., through warrants and repos); - debt concessionality; - extended use of fair value for loans.