Inaugural Address at the Meeting of the International Public Sector Accounting Standards Board

Good morning ladies and gentlemen.

It gives me great pleasure to welcome to the IMF the members of the International Public Sector Accounting Standard Board (IPSASB), their technical advisors, and the staff of International Federation of Accountants (IFAC). I would also like to extend a warm welcome to staff from the various international organizations who are also attending this meeting as observers.

The IMF supports the Accounting Standard Board’s efforts to develop high quality accounting standards. Many governments currently lack an integrated accounting framework incorporating assets and liabilities, income and expenses, and cash flows. This has impaired the capacity of governments to transparently and comprehensively report their operations and financial position to the taxpayers and other stakeholders. The IMF’s Code of Fiscal Transparency recognizes the importance of such transparent reporting in accordance with internationally accepted accounting standards.

The IMF also values formal collaboration of the accounting world and the statistical world, which dates back to June 2003 when the then Public Sector Committee (PSC) of IFAC initiated work towards harmonization of the Government Finance Statistics and International Public Sector Accounting Standards. This collaboration has proved to be mutually beneficial and led to improvements of both public sector accounting and statistical standards.

We meet in the midst of very testing times for the global economy. The past year has seen the deepest economic slowdown since the 1930s. It has also seen an unprecedented series of government interventions in the financial sector and the wider economy aimed at restoring confidence in national financial institutions and supporting global demand.

The scale and breadth of this financial crisis and the complexity of the policy response required poses four major challenges for public sector accounting:

• The first is simply to examine more closely and understand the nature of these unprecedented interventions both on the public sector and on the private institutions concerned. While one finds similar themes across countries (capital injections, direct asset purchases, government guarantees, and liquidity support), no two countries’ policy responses have been exactly alike. And individual country responses have themselves adapted and evolved to keep pace with economic developments.

• The second challenge is to consider how these interventions should be reported in government accounts. Transparency and accountability are crucial to maintaining public support for, and oversight of, these actions that involve significant expenditure of taxpayers’ money. In many cases they even involve commitments of the resources of future generations. In this regard, the work of the Accounting Standards Board to develop new accounting standards for the reporting of financial instruments could not be more timely.

• The third challenge is to pursue collaborative efforts between statistical and accounting standards in order to better inform policy decisions. Effective measurement of these interventions call not only for internationally consistent accounting standards, but also for reporting that will show the impact that these activities have on the other sectors of the economy. The IMF’s statistical work and accounting standards are complementing one another and with combined efforts we could attain our respective goals more effectively.

• The fourth challenge for you as public sector accountants is to stay ahead of developments and not lose sight of the major fiscal challenges around the corner. I am therefore pleased to see the issue of long-term fiscal sustainability on your agenda for this session. For when the dust eventually settles on this period of unprecedented economic turmoil, most of your members will find themselves faced with the no less daunting task of dealing with the legacy of the current crisis together with the fiscal consequences of aging, climate change and other long-term fiscal challenges. However, without the headline-grabbing immediacy of recent events, it will fall to public sector accountants like yourselves to keep this issue at the top of the political agenda.

I therefore wish you success in your efforts and hope that your discussions this week are productive.

Thank you.