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 Jones Government Finance Division Statistics Department

Government Finance Division, IMF Statistics Department 2 Government Finance Statistics Manual 1986 vs 2001/13 Classification Structure GFSM 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 Department3 OPENING BALANCE SHEET NET WORTH Nonfinancial Assets Financial Assets Liabilities F L O W S CLOSING BALANCE SHEET NET WORTH Nonfinancial Assets Financial Assets Liabilities TRANSACTIONS Revenue Expense = NET OPERATING BALANCE minus Nonfinancial Assets = NET LENDING / BORROWING minus Liabilities Financial Assets cash other financial assets minus OTHER ECONOMIC FLOWS Holding Gains and Losses Other Changes in Volume of Assets Nonfinancial Assets Financial Assets Liabilities Nonfinancial Assets Financial Assets Liabilities CHANGE IN NET WORTH (HG) CHANGE IN NET WORTH (OVC)STOCKSSTOCKS

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 4

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 5

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)

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). 7

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 8

Classification of Instrument and Sectoral Coverage * Insurance, pension, and standardized guarantee schemes Sectors/Subsectors Debt Instruments Cur & dep. Other Acc Payable 9

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.” 10

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) 11

The Range of Gross Debt in Canada 12 1 Currently not included in GFSY. Source: Government Finance Statistics Yearbook (GFSY) International Financial Statistics (IFS) June

Magnitude Difference between General and Central Government Gross Debt 13 Source: IMF Government Finance Statistics Yearbook 2012

Net debt and gross debt (% GDP) Consolidated General Government ( GL3), Source: GFS Yearbook. These data may not be fully comparable across countries. Debt (%GDP)