20 Nov Presentation of GFS in the European Statistical System (with emphasis on the excessive Deficit Procedure) Seminar on GFS - Istanbul Denis Besnard Eurostat GFS seminar Istanbul

20 Nov Contents What are Government Financial Statistics? 1) Data to be reported regularly to Eurostat 2) A precise methodological framework required for their compilation GFS seminar Istanbul

20 Nov ) GFS data to be reported to Eurostat  This is a "package", including:  Notification tables, twice a year (end of March and end of September) "basis" of the EDP (published)  A set of supplementary tables in a "questionnaire relating to the EDP notification tables" (not published)  Some supplementary tables linked to "special events" related to the "financial crisis" and for "intergovernmental lending" (published)  Annual or quarterly tables part of the "transmission programme", annex B of the (Parliament and Council) Regulation on ESA (published) GFS seminar Istanbul

20 Nov The four notification tables  These tables were designed in 1993 and progressively improved until the current version completed in 2000  They must cover 4 years plus the current year in which the notification takes place as forecasts (planning), not controlled and assessed by Eurostat  Each year must be given a status: final, half-final, half-finalised  Table 1 is a "summary table" (4 blocks)  Table 2 (for each sub-sector) explains the transition between the public accounts budget balance (labelled as "cash", "accrual" and "mixed") and deficit/surplus B9 for EDP (6 blocks)  Table 3B (for government sector and each sub-sector) explains the contributions of the deficit/surplus and other factors to the variation in the debt level (consolidation at the level of the sector and at the level of sub-sectors) (3 blocks)  Table 4: Provision of other data in accordance with the statements contained in the Council minutes of 22/11/1993. GFS seminar Istanbul

20 Nov GFS seminar Istanbul 5 Net borrowing (-)/ net lending (+) EDP B.9 General government S.13 - Central government S State government S Local government S Social security funds S.1314 General government consolidated gross debt Level at nominal value outstanding at end of year By category: Currency and deposits AF.2 Securities other than shares, exc. Fin. derivativesAF.33 Short-termAF.331 Long-termAF.332 LoansAF.4 Short-termAF.41 Long-termAF.42 General government expenditure on: Gross fixed capital formation P.51 Interest (consolidated) EDP D.41 p.m.: Interest (consolidated) D.41 (uses) Gross domestic product at current market prices B.1*g Table 1

20 Nov GFS seminar Istanbul 6 Working balance in central government accounts Basis of the working balance (cash…) Financial transactions included in the working balance Loans, granted (+) Loans, repayments (-) Equities, acquisition (+) Equities, sales (-) Other financial transactions (+/-) of which: transactions in debt liabilities (+/-) Detail 1 (…) Non-financial transactions not included in the working balance Detail 1 (…) Difference between interest paid (+) and accrued (EDP D.41)(-) Table 2

20 Nov GFS seminar Istanbul 7 Other accounts receivable (+) Detail 1 (…) Other accounts payable (-) Detail 1 (…) Working balance (+/-) of entities not part of central government Net borrowing (-) or net lending (+) of other central government bodies Detail 1 (…) Other adjustments (+/-) (please detail) Detail 1 (…) Net borrowing (-)/lending(+) (EDP B.9) of central government (S.1311) (ESA 95 accounts) Table 2 suite

20 Nov GFS seminar Istanbul 8 Net borrowing(+)/lending(-)(EDP B.9) of central government (S.1311) (with opposed sign) Net acquisition (+) of financial assets Currency and deposits (F.2) Securities other than shares (F.3) Loans (F.4) Increase (+) Reduction (-) Short term loans (F.41), net Long-term loans (F.42) Increase (+) Reduction (-) Shares and other equity (F.5) Portfolio investments, net(2) Shares and other equity other than portfolio investments Increase (+) Reduction (-) Other financial assets (F.1, F.6 and F.7) Table 3

20 Nov GFS seminar Istanbul 9 Adjustments Net incurrence (-) of liabilities in financial derivatives (F.34) Net incurrence (-) of other liabilities (F.5, F.6 and F.7) Issuances above(-)/below(+) nominal {face} value Difference between interest (EDP D.41) accrued(-) and paid(4)(+) of which: interest flows attributable to swaps and FRAs Redemptions of debt above(+)/below(-) nominal value Appreciation(+)/depreciation(-)(3) of foreign-currency debt (5) Changes in sector classification (K.12.1)(5) (+/-) Other volume changes in financial liabilities (K.7, K.8, K.10)(5)(-) Statistical discrepancies Difference between capital and financial accounts (B.9-B.9f) Other statistical discrepancies (+/-) Change in central government (S.1311) consolidated gross debt (for sub-sectors, only:) Central government contribution to general government debt (a=b-c) Central government gross debt (level) (b) Central government holdings of other subsectors debt (level) (c) Table 3 suite

20 Nov GFS seminar Istanbul 10 Trade credits and advances (AF.71 L) Amount outstanding in the government debt from the financing of public undertakings In case of substantial differences between the face value and the present value of government debt, please provide information on i) the extent of these differences: ii) the reasons for these differences: Gross National Income at current market prices (B.5*g)(1) (1) Data to be provided in particular when GNI is substantially greater than GDP. Table 4

20 Nov GFS seminar Istanbul 11 Supplementary table for the financial crisis Part 1 : Net revenue/cost for general government (impact on government deficit) AREVENUE (a+b+c+d) a)Guarantee fees receivable b)Interest receivable c)Dividends receivable d)Other BEXPENDITURE (e+f+g+h) e)Interest payable f)Capital injections recorded as deficit-increasing (capital transfer) g)Calls on guarantees h)Other CNet revenue/cost for general government (A-B) Part 2 : Outstanding amount of assets, actual liabilities and contingent liabilities of general government Assets / Liabilities DClosing balance sheet a)Loans b)Securities other than shares c) Shares and other equity d)Contingent liabilities and assets outside gen. gov. (guarantees) e)Securities issued under liquidity schemes (not in gov. Debt) f)Special purpose entities outside gen. gov. (guarantees)

20 Nov GFS seminar Istanbul 12 Table 1: "Revision of general government net lending (+)/ net borrowing (-) and revision of general government consolidated gross debt" Table 2: Breakdown of financial transactions included in the working balance Table 3: Adjustments for sector delimitation in EDP tables Table 4: Breakdown of other accounts receivable/payable (F.7) reported in EDP tables Table 5:Taxes and social contributions: other accounts receivable/payable (F.7) of general government Table 6: Recording of EU flows in EDP tables Table 7: Military equipment expenditure (weapons and supporting equipment) Table 8: Central government claims, debt cancellation Table 9: Guarantees recording Table 10: Capital injections, super-dividends and privatisations Table 11: Public-Private Partnerships (PPPs) Table 12: Securitisation operations Table 13: Sale and leaseback operations Questionnaire relating to the EDP notification tables

20 Nov The ESA GFS tables (transmission programme)  A number of tables out of 29 are specifically dedicated to GFS (consistent with data notified)  Table 2 (annual): "Main aggregates of general government" showing Revenue and Expenditure, highly relevant for government (t+ 3/9)  Table 9 (annual) "Detailed tax and social contribution receipts by type of tax and social contribution and receiving subsector including the list of taxes and social contributions according to national classification" (T+9)  Table 11 (annual) "General government expenditure by function" (t+12)  Table 25 "Quarterly Non-Financial Accounts of General Government" (t+3)  Table 26 (quarterly) "Financial accounts of general government" (t+3)  Table 28 (quarterly) "Government debt (Maastricht debt) for general government" GFS seminar Istanbul

20 Nov GFS seminar Istanbul 14 Annex: ESA central framework and GFS transactions and aggregates (abstract from ESA10chapter 20) The ESA central framework In the ESA central framework, net lending/net borrowing (B.9) is the balancing item of the capital account. The balancing item of general government in the ESA GFS presentation is identical to the net lending/net borrowing (B.9). In the ESA central framework, the first account is the production account, and therefore the first resource of an institutional sector in the ESA is its output. As the majority of services provided by government are not sold at economically significant prices and so are non-market, government output is measured by convention as the sum of production costs. Similarly, final collective consumption expenditure, consisting of services provided to the community by government such as general services, defence, safety and public order, are measured as the sum of production costs. Also by convention, collective consumption expenditure (P.32) is equal to the actual final consumption (P.4) of government. Final individual consumption expenditure of households provided directly by government on a non-market basis is also measured by its production costs. As a result, two types of flows are "imputed" in the ESA accounts of government: 1) On the resources side, the non-market output, other (P.132) in the production account; 2) On the uses side, the actual final consumption (P.4) and the social transfers in kind - non- market production (D.631), in the redistribution of income in kind account, and in "use of adjusted disposable income account.

20 Nov GFS seminar Istanbul 15 (annex) The ESA GFS presentation of statistics The same basic transaction categories are used in the ESA GFS presentation, but mainly on the basis of actual monetary flows, to obtain the total revenue and the total expenditure of government. Only a selection of imputed flows is taken into account: imputed social contributions and capital transfers in kind. Eliminating from the resources side the non-market output (P.132) to obtain total revenue, and eliminating from the uses side the actual final consumption (P.4=P.32) and the social transfers in kind - non-market production (D.631) to obtain total expenditure… …results in the same balancing item: the net lending/net borrowing (B.9). The only social transfers in kind that are accounted for in the GFS aggregate total expenditure of government are social transfers in kind provided to households via market producers (D.632), as they are subject to real payments of government units. These transactions are also those to be added to the sum of production costs (equal to non- market output, other - P.132) to obtain the final consumption expenditure of the general government. P.3 = P D.632

20 Nov GFS seminar Istanbul 16 (annex) ESA Resources ESA GFS Revenue P.1 Output, of which Market output (P.11) Sales of goods and services Output for own final use (P.12) Sales of goods and services Non-market output (P.13), of which: - Payments for non-market output (P.131) Sales of goods and services - Non-market output, other (P.132) Not accounted for in Total revenue D.2 Taxes on production and imports (receivable) Total taxes D.3 Subsidies (receivable) Other current revenue D.4 Property income Other current revenue D.5 Current taxes on income and wealth Total taxes D.61 Social contributions Total social contributions D.7 Other current transfers Other current revenue D.91r Capital taxes (receivable) Total taxes D.92r Investment grants (receivable) Other capital revenue D.99r Other capital transfers (receivable) Other capital revenue

20 Nov GFS seminar Istanbul 17 (annex) ESA Uses and capital transactions ESA GFS Expenditure P.2 Intermediate consumption Intermediate consumption D.1 Compensation of employees Compensation of employees D.2 Taxes on production and imports (payable) Other current expenditure D.3 Subsidies (payable) Subsidies D.41 Interest Interest D.4 Property income (excluding D.41) Other current expenditure D.5 Current taxes on income Other current expenditure D.62 Social benefits other than social transfers 1in kind Social benefits other than ST in kind

20 Nov ) Methodological framework required for data compilation  When EDP started: ESA 1979  Eurostat had to take decisions, as this National Accounts Manual was of small (if any) usefulness for some issues arising very quickly (so, when possible, reference to manuals below)  SNA93, followed by ESA95 (close but not identical – applicable from 2000 onwards) was an important step from a methodological point:  1) the shift from cash to accrual  2) the inclusion of balance sheets and thus the identification of change in stocks factors (transactions / other flows)  3) a change in principles for government sector delineation and definition of institutional units  4) the identification of new financial instruments (notably financial derivatives)  5) the notion of rearranged transactions ("rerouting", "partitioning" and "recognising the principal party to a transaction")  6) the definition of consolidation and netting GFS seminar Istanbul

20 Nov Eurostat Manual  But high need for interpretation, implementation guidance and supplementation  In 1999, Eurostat elaborates the "Manual on Government Deficit and Debt" - MGDD (more recent edition in 2013)  The Manual has a specific structure for each chapter ("background of the issue", "treatment in national accounts", "rationale of the treatment") and provides simplified examples (under the form of "T accounts") but it is not a compilation guide (normally, no mention of sources data, except in some cases)  The content of the Manual is largely at the initiative of Eurostat (coordination, propositions), based on its control experience but is written in cooperation with experts from Member States (Task Forces)  It may also result from a request from Member states facing a specific issue asking for Eurostat advice (rules of procedures specified in 2009); result is included in the Manual if considered by Eurostat " "of common interest"  From 2012 onwards, in principle, annual edition of the Manual  Shortly, a new edition for the adaptation to ESA10 GFS seminar Istanbul

20 Nov The structure of the Manual reflects what must be covered by the GFS methodological framework  What is the delineation of the government sector?  What is the time of recording of transactions?  How to record the operations, frequently very specific, between government and public corporations, notably "capital injections"?  How to record the relations between government and the financial sector (including the central bank and "defeasance")?  Which problems are raised by the sales of (financial and non- financial) assets by government?  What are the basic criteria for recording leases, licences and concessions (including public-private-partnerships)?  How to record the debt related transactions by government and guarantees it may grant?  What is the measurement of government debt, including operations on derivatives repos and securities lending? GFS seminar Istanbul

20 Nov Thank you for your attention GFS seminar Istanbul