Government Finance Statistics IMF Statistics Department

1

The GFSM 2001 SystemThe GFSM 2001 System

– – An OverviewAn Overview

Rif BasantiRif BasantiDeputy Chief of Government Finance Division

Statistics Department, IMF

Government Finance StatisticsGovernment Finance StatisticsIMF Statistics DepartmentIMF Statistics Department

2

ContentsContents

Why revise the GFSM 1986?

Objectives of the GFSM 2001

The GFSM 2001 system• Coverage

• Definitions

• Accounting rules

• Analytic framework

• Statements

• Balances

• Implementation

3

Why a revision of the GFS Manual 1986?Why a revision of the GFS Manual 1986?1/31/3

Conceptual framework is ± 20 years old

Cash-based recording, thus ignored inter alia:• arrears

• interest on discounted bonds

• in kind transactions

• consumption of fixed capital

Emphasis was on a single deficit measure• revenue plus grants minus expenditure minus net

lending = deficit/surplus

4


Financing was defined as:• Government liabilities (“net borrowing”) and

changes in cash & deposits (financial asset)

Focus of cash-based system was on govt’s financing constraint• Liquidity constraint viewed as most binding

priority of govt.

5


Recently new topics have assumed importance for fiscal analysis, e.g.,• arrears, transactions in kind, balance sheet items

(stocks, net worth), sustainability of fiscal policy

• world-wide shift toward resource-based accounting, because of dissatisfaction with cash-based accounting

Other related statistics Manuals have been revised, e.g., SNA, BOP

6

Objectives of the GFS Manual 2001 Objectives of the GFS Manual 2001 1/31/3

To achieve analytic objectives, the new GFS system should generate data that:

• are directly linked to other macroeconomic statistical systems; harmonized as fully as possible with the 1993 SNA

• enable analysts to do assessments of financial soundness of government in ways applied to other organizations in economy

Non-financial

assets

Financialassets

Liab

NFA

FA

LiabLiabLiab

FA FA

NFA NFA

Expense

Revenue

Opening balance

Transactions

Other economic

flowsClosing balance

Revenue

Expend-iture

FA

Liab Liab Liabilities

Opening liabilities

Closing liabilities

Transactions

GFSM 2001:GFSM 1986:

Government Finance Statistics systems2/3

GFSM 2001GFSM 2001 analytical framework analytical framework3/33/3

Expense

Revenue

Statement of Government Operations

Change in net worth Tr

=

=

+

-

-

Liabilities

Financialassets

Non-financial

assets

Change in net worth OEF

Statement of Other Economic

Flows

=

+

-

Net worth

ClosingBalance Sheet

Liabilities

Net worth

OpeningBalance Sheet

=

+ +

- -

=

Stocks Transactions

Net lending/borrowing

+

=

Net finanicalworth

=

Net financial worth

Change in net f.worth OEF

Other flows Stocks

Financialassets

Financialassets

Liabilities Liabilities

Financialassets

Non-financial

assets

Non-financial

assets

Non-financial

assets

9

Coverage of the GFSM 2001 SystemCoverage of the GFSM 2001 System

General government

Public non-financial corporations

Public financial corporations

– Nonmonetary– Monetary

(incl. the central bank)

Non-financialpublic sector

Non-monetarypublic sector Public

sector

10

The GFSM 2001 SystemThe GFSM 2001 System(1/3)(1/3)

Measures of revenue and expense• revenue

– transactions that increase net worth• exclude sales of assets (which are exchanges of one

asset for another)

• expense– transactions that reduce net worth

• exclude acquisition of assets

11


Transactions in nonfinancial assets

• net acquisition of nonfinancial assets– acquisition

– disposal

• consumption of fixed capital

Financing (transactions in financial assets and liabilities)

• identify financial assets and liabilities separately (by residency, instrument, sector)

– net acquisition of financial assets– net incurrence of liabilities

12


Integrated system• Full integration of flows and stocks (operating

statements and balance sheets)

• Basic principle of GFSM 2001 system:

opening balance sheet value

+ transactions

+ other economic flows

= closing balance sheet value

13

OPENINGBALANCE

SHEET

Nonfinancial Assets

Financial Assets

Liabilities

Net WorthChanges in Net

Worth

F L O W S

CLOSINGBALANCE

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 & Losses

Other Changes inthe Volume of Assets

Nonfinancial Assets

Financial Assets

Liabilities

Nonfinancial Assets

Financial Assets

Liabilities

14

Accounting RulesAccounting Rules(1/3)(1/3)

Accrual-based recording• when transaction takes place

– income is earned– resources are used– liabilities are incurred– assets are acquired

• it is a timing and data coverage question

Double-entry accounting

15


Time of Recording• Flows are recorded when:

– economic benefits associated with the events have flowed to or from the unit involved, or

– it is probable that future benefits will flow to or from the unit, and

– the monetary value of the events can be reliably measured

Valuation• All flows and stocks are valued at current market

prices

16


Netting• Generally, flows and stocks are recorded on a

gross basis– For analytic presentations, the net acquisition of assets

or net incurrence of liabilities may be used– Revenue categories are presented net of refunds– Expense categories are presented net of erroneous

and/or unauthorized transactions

Consolidation• In GFS, data presented for a group of units are

consolidated

17

GFSM 2001 StatementsGFSM 2001 Statements

Four statements:

• Statement of Government Operations

• Statement of Other Economic Flows

• Balance Sheet

• Statement of Sources and Uses of Cash

18

The Statement of Government Operations The Statement of Government Operations 1/61/6

Summarizes government’s transactions in a given accounting period

Transactions are classified according to whether they:• increase net worth (revenue)

• decrease net worth (expense)

• change the stock of a nonfinancial asset (capital asset)

• change the stock of a financial asset or liability (financing)

19

Revenue

- Expense

= Net operating balance (gross operating balance)

- Transactions in nonfinancial assets

= Net lending/borrowing

- Transactions in financial assets

+ Transactions in Liabilities


Financing

= zero (because of double-entry recording)

20

Revenue

• Taxes

• Social Contributions

• Grants

• Other revenue


21

Expense• Compensation of employees

• Use of goods and services

• Consumption of fixed capital

• Interest

• Subsidies

• Grants

• Social benefits

• Other expense


Transfers

22

Transactions in nonfinancial assets

• Fixed assets *

• Inventories (net change)

• Valuables

• Nonproduced assets *

* Minus consumption of fixed capital


23

Financing• Transactions in (all) financial assets and liabilities

• Multiple ways to classify:– by residency of counter party (domestic, foreign)– by type of financial instrument (securities other than

shares, loans, shares and other equity, etc.)– by “sector” of counter party (general government,

central bank, depository corporations, etc.)


24

Statement of Other Economic FlowsStatement of Other Economic Flows1/21/2

Shows influences on govt’s financial position in accounting period from flows other than transactions, i.e.

• Holding gains in assets & liabilities (revaluations)– Changes in the price of the asset or liability

• Other volume changes in assets and liabilities– exceptional or unexpected events (e.g., floods,

earthquakes, wars, etc.)– normal events (e.g., discovery of subsoil asset, registration

of patent)– reclassifications (e.g., unit from central to local govt)

25

Changes in nonfinancial assetsHolding gainsOther volume changes

+ Changes in financial assetsHolding gainsOther volume changes

+ Changes in liabilitiesHolding gainsOther volume changes

= Changes in net worth from other economic flows

Statement of Other Economic FlowsStatement of Other Economic Flows2/22/2

26

Balance SheetBalance Sheet1/21/2

Shows the stocks of assets, liabilities and net worth at beginning and end of accounting period

• Economic assets are recorded in GFS, i.e., owners of assets can:

– enforce ownership rights

– derive economic benefits

• Valued at current market value

• Assets by type of asset

• Liabilities by type of instrument

27

Balance SheetBalance Sheet2/22/2

Nonfinancial assets

Financial assets

Liabilities

Net worth(t)

{= Net worth(t-1)

+ changes in net worth due to transactions [net operating balance](t)

+ changes in net worth due to other economic

flows(t)}

28

Statement of Sources and Uses of CashStatement of Sources and Uses of Cash1/21/2

Shows the total amount of cash generated or absorbed by government through• current operations

• transactions in nonfinancial assets

• transactions in financial assets and liabilities (other than cash itself)

Net change in government’s overall cash position is sum of the net cash received from all the above

29

Statement of Sources and Uses of Cash Statement of Sources and Uses of Cash (Shortened Version) (Shortened Version) 2/22/2

Cash receipts from government operating activities

− Cash payments for government operating activities

= Net cash inflow from operating activities

− Net cash outflow from investments in NFAs

= Cash surplus/deficit

+ Net cash inflow from financial operations other

than cash:

Net acquisition of financial assets other than cash

Net incurrence of liabilities

= Net change in stock of cash

30

Core Balances of the GFSM 2001 SystemCore Balances of the GFSM 2001 System

Multiple balancing items for transactions:

• Net operating balance– Balance of transactions affecting net worth– Closely related to 1993 SNA government saving

• Net lending/borrowing– Net operating balance minus transactions in NFAs

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

cash outflow from investments in NFAs

31

Other Analytic MeasuresOther 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

32

Implementation 1/1Implementation 1/1

It is recognized that full implementation of the new GFS system is a long-term activity

Priorities can only be established by each country taking into account their situation, including available resources

33

Implementation 2/2Implementation 2/2

Nonetheless, countries are encouraged to develop a migration path towards the new system.

It is likely that this will include, over time:• improving existing cash-based data systems• adopting the new classification structure• making adjustments to existing data for serious

deficiencies• developing balance sheet information

FA

Liab

NFA

FA

LiabLiab

FA

Expense

Revenue

Transactions

Revenue

Current and

capital expend-

iture

FA

Liab Liab Liab

Stocks of liabilities

Stocks of liabilities

TransactionsGFSM 2001:GFS 1986:

=>

Step 1: Cash basis => reclassification to new GFS I. Cash data to GFS tables 1 to 5 II. Partial balance sheet (Table 6)

Stocks of financial assets & liabilities


1

2

3

6

3

3

COFOG5

* Net operating balance** Net lending / borrowing

*

**

Migration path:

6

FA bysectors

4

FA

NFA

FA

LiabLiab

FA

Expense

Revenue

Transactions

Liab

Transactions

=>

Step 2: Full coverage of units and events (approach accrual recording)

I. Statement of Government Operations (Tables 1-5) II. Partial balance sheet (Table 6)



1

2

3

6

3

3

COFOG5


*

**

FA

NFA

Expense

Revenue



Liab Liab Liab

FAFA

Step 1:

Migration path:

6

NW tr

FA by sectors

4

FA

NFA

FA

LiabLiab

FA

Expense

Revenue

Transactions

Liab

Transactions

=>

Step 3: Full accrual accounting for financial accounts I. Statement of Government Operations (Tables 1-5) II. Other Economic Flows for financial assets III. Partial balance sheet (Table 6)



1

2

3

6

3

3


*

**

FA

NFA

Expense

Revenue



Liab Liab Liab

FAFA

Step 2:

Migration path:

FA

Liab

Other economic

flows

6

6 6

NW tr NW tr

FA

NFA

FA

LiabLiab

FA

Expense

Revenue

Transactions

Liab

Transactions

=>

Step 4: Accrual accounting for nonfinancial assets I. Statement of Government Operations (Tables 1-5) II. Statement of Other Economic Flows III. Integrated stocks and flows (Table 6)

Openingbalance

Closingbalance

1

2

3

6

3

3

*

**

FA

NFA

Expense

Revenue



Liab Liab Liab

FAFA

Step 3:

Migration path:

FA

Liab

Other economic

flows

6

6 6

NW tr NW tr

FA

NFA NFANFA6 6

NW OEF NW

Liab

Other economic

flows

NFA

FA

NFA

FA

LiabLiabLiab

FA FA

NFA NFA

Expense

Revenue

Opening balance

Transactions

Other economic

flows

Closing balance

Liab

GFS as a fiscal policy instrument

CurrentAccounts

AccumulationAccounts

BalanceSheet

ESA 95

GFSM 2001

Chart ofAccounts

COA

Capital transfers &

Non-financialassets

Income account

Production account

Transactions

GDP (value added)

ESA95SNA’93

Financialassets &liabilities

Saving

Revenue account

Expense account


Non-financialassets

GFS2001

Transactions

Operating balance

Net lending / borrowing

Currentaccount

Capitalaccount


Currentaccount balance

Transactions

BOP’93


Transactions

MFS2000

export G&Simport G&Sincome transactionscurrent transfers

capital transferstransactions in NPNFA

Documents

Government Finance Statistics IMF Statistics Department