About Government Finance Statistics

 

The Government Finance Statistics Manual 2001 (GFSM 2001),1 an internationally recognized statistical reporting framework, is aimed at helping national authorities to strengthen their capacity to formulate fiscal policy and monitor fiscal developments. The GFSM 2001 supports the balance sheet approach to analyzing economic policy by bringing together stocks and flows in a transparent and consistent framework. The GFS framework provides a basis for analyzing public investment while providing a "common language" that fiscal analysts can use to develop a consistent approach to handling new, and often complex, government operations that create challenges in fiscal reporting and analysis. Also, the GFSM 2001 is better suited for inclusion in a quantitative macroeconomic framework because it yields measures of government saving, investment, and consumption; these measures have been harmonized with the national accounts framework. Equally important, the framework forms an integral part of the IMF's effort to promote international standards for transparency in fiscal reporting.

The GFSM 2001 provides a comprehensive framework for a phased implementation of accrual accounting while also supporting needed improvements in the compilation of cash based fiscal statistics for the general government and its subsectors. National authorities recognize the potential advantages that the GFSM 2001 analytical framework can offer in terms of greater consistency in fiscal reporting and policy analysis. This is evidenced by the increasing number of countries—nearly 100—that have begun to report data according to the classifications, aggregates, and analytical balances of the GFS framework for publication in the 2007 Government Finance Statistics Yearbook, which contains detailed data on revenue, expense, transactions in assets and liabilities, and stocks of assets and liabilities for the general government and its subsectors.

The Data Mapper provides access to a limited amount of country specific data expressed as a percentage of GDP. More detailed data reflecting balance sheet information that integrates transactions with other economic flows and generates stock positions for government assets and liabilities, appropriate for fiscal policy analysis (see Box 1) are available through the 2007 GFS Yearbook and the GFS Database and Browser on CD-ROM (1990-present in GFSM 2001 format).

The basis of recording of the GFS data presented in the Data Mapper is identified as cash or noncash, where the latter encompasses any recording basis other than cash (including accrual). For each country, standardized metadata indicate the general government sector/subsector for which data, as a percentage of GDP, are provided along with information on accounting practices. This should assist users of the Data Mapper to identify countries that report data according to a reporting basis other than that being queried.



Main Features of GFSM 2001

GFSM 2001 provides a harmonized systematic basis for reporting and analyzing government finances. Compared with GFSM 1986, GFSM 2001 is a major step forward—it integrates flows and stocks through balance sheets and removes classification asymmetries. Further, it shifts the emphasis to accrual accounting, recording, and reporting (while maintaining information on a cash basis) and emphasizes economically meaningful fiscal indicators.

A. The GFSM 2001 Analytical Framework

GFSM 2001 harmonizes the system used to report fiscal statistics with other macroeconomic statistical systems—most notably with the national accounts (the 1993 SNA) and, therefore, also the European System of Accounts 1995 (1995 ESA). In this way, GFSM 2001 formalizes and standardizes many adjustments made to fiscal statistics. Moreover, fiscal accounting and reporting are brought closer into line with private sector practice (that is, a profit and loss statement, a balance sheet, and a cash statement). The linkages in the GFSM 2001 framework are summarized in Table 1. In particular, a set of well-defined relationships between flows and stocks—presented in integrated balance sheets—underpins GFSM 2001. Specifically, the framework reconciles the government's opening and closing balance sheets with the flows derived from government operations and the other economic flows.

A key feature of GFSM 2001 is its distinction between transactions and other economic flows. Transactions cover all exchanges or transfers that take place by mutual agreement and the consumption of fixed capital (the economic equivalent of "depreciation"). Mutual agreement does not mean that transactions have to be entered into voluntarily (the payment of taxes is treated as a transaction despite being compulsory). Additionally, transactions cover monetary exchanges and in-kind activity (such as the receipt of commodity grants and noncash remuneration). Other economic flows are the result of events that affect the value of nonfinancial assets, financial assets, and liabilities but that are not exchanges or transfers. These flows can reflect either price changes (including exchange rate movements) or volume changes due to one-off events (such as mineral discoveries or natural disasters).

While countries can apply the GFSM 2001 framework to cash data, ideally, transactions and other economic flows should be recorded on an accrual basis. This means countries record these flows when the economic consequences associated with an event occur or when future consequences can be measured reliably. Thus they record an expense when the government uses resources. This recording will, in practice, usually be when government incurs an obligation to pay for those resources (e.g., when contracted goods are delivered as stipulated in the contract), rather than when it actually pays for the resources. An obligation to pay is distinct from a commitment, which occurs when contracts are signed, orders are placed, etc.

Similarly, in principle, revenue should be recorded when a liability to government is exchanged and not when payment is made. However, difficulties exist in identifying revenue on an accrual basis, and especially in determining precisely when an activity gives rise to a tax liability. In practice, governments would normally record a tax liability at the time of assessment and base it on the amount they realistically expect to collect. Governments also record transactions in nonfinancial assets, financial assets, and liabilities at the time assets change ownership and liabilities are incurred. Other economic flows accrue when an economic asset (or liability) is created, extinguished, or transformed.

The GFSM 2001 increases the comprehensiveness of fiscal data through accrual reporting, allows data inconsistencies to be detected, and thereby strengthens fiscal transparency—all of which will aid fiscal analysis. At the same time, it should be emphasized that the GFSM 2001 system continues to recognize the importance of monitoring cash flows and the crucial role these play in fiscal analysis. Therefore, a separate statement on the sources and uses of cash is an integral part of the GFSM 2001 statistical framework. This statement shows fiscal flows in terms of pure cash, while it follows the same basic structure as the statement on operations.

B. GFSM 2001 Fiscal Tables

The GFSM 2001 analytical framework can be summarized as a set of three fiscal tables.

• The Statement of Government Operations distinguishes between revenue and expense (or operating) transactions and among transactions in nonfinancial assets, financial assets, and liabilities. Revenue covers all transactions that increase net worth, and expense covers all transactions that decrease net worth (including importantly the consumption of fixed capital). In essence, this balance is akin to the government's profit and loss statement for a given year. Transactions in nonfinancial assets, financial assets, and liabilities are not included in revenue or expense.2 Under GFSM 1986, transactions in nonfinancial assets—and in financial assets for public policy (as distinct from liquidity management) purposes—are treated as expenditure. But under GFSM 2001, they are not treated as an expense because they are exchanges that do not affect net worth. This removes the asymmetry that exists in the GFSM 1986 system "above-" and "below-the-line."3

Table 1. The GFSM 2001 Analytical Framework



Opening Balance Sheet Government Operations Other Economic Flows Closing Balance Sheet

Revenue
 
-
 
Expense
 
=
 
Net operating balance
 
=
 
Net worth + Change in net worth due to revenue and expense transactions + Change in net worth due to other economic flows = Net worth
 
= = = =
 
Non financial assets + Net acquisition of non financial assets + Change in non financial assets due to other economic flows = Non financial Assets
 
+ + + +
 
Net financial worth + Net lending/borrowing + Change in net financial worth due to other economic flows = Net financial Worth
 
= = = =
 
Financial assets + Net acquisition of financial assets + Change in financial assets due to other economic flows = Financial assets
 
- - - -
 
Liabilities + Net incurrence of liabilities + Change in liabilities due to other economic flows = Liabilities

 

• The difference between revenue and expense is the net operating balance. Subtracting the net acquisition of nonfinancial assets from the net operating balance yields net lending/borrowing, which in turn is equal to the net acquisition of financial assets less the net incurrence of liabilities (that is, government's financing).

• The Balance Sheet shows the government's net worth at the end of a fiscal year, which is equal to the stock of nonfinancial assets plus net financial worth (i.e., the difference between the stocks of financial assets and liabilities). The change in net worth during a year is the sum of changes due to revenue and expense transactions and to other economic flows. An integrated balance sheet shows the opening balance of assets and liabilities, as well as transactions and other economic flows in these assets and liabilities that explain the closing balance of these assets and liabilities. The Statement of Sources and Uses of Cash shows purely cash flows associated with revenue and expense transactions and transactions in nonfinancial assets, which yields the cash surplus/deficit. Adding cash flow transactions in financial assets (other than cash) and liabilities to the cash surplus/deficit gives the net change in the stock of cash. This cash flow statement provides useful information to link the fiscal impacts with relevant monetary variables.

 

Detailed data reflecting balance sheet information that integrates transactions with other economic flows and generates stock positions for government assets and liabilities, appropriate for fiscal policy analysis (see Box 1) are available through:

  • The 2007 GFS Yearbook contains detailed data on revenue, expense, transactions in assets and liabilities, and stocks of assets and liabilities of general government and its subsectors, for the general government and its subsectors.
  • The GFS Database and Browser on CD-ROM (1990-present in GFSM 2001 format). These data comprise all historic data from 1990 onward which were reclassified from the GFSM 1986 framework to the GFSM 2001 framework for all reported subsectors, as relevant.

The Data Mapper provides access to a limited amount of country specific data expressed as a percentage of GDP. For each country, standardized metadata indicate the general government sector/subsector for which data, as a percentage of GDP, are provided along with information on accounting practices. This should assist users of the Data Mapper to identify countries that report data according to a reporting basis other than that being queried. For countries that report noncash data for all or some subsectors of general government, all statements and detailed tables are presented, where available.4

CD-ROM

The Government Finance Statistics Database and Browser on CD-ROM (1990-present in GFSM 2001 format), which contains annual time series for all reported subsectors of general government, is issued quarterly and is updated as new data are received. Most of the data prior to 2000 reflect reclassified data previously reported by member countries using the GFSM 1986 format. Users should exercise caution when comparing data over time because shortcomings have been identified in the data for the years prior to 2000 that have been reclassified according to the GFSM 2001 framework.

The browser enables users to view and extract data for analytical purposes. The browser software is an easy-to-use Windows interface for accessing the database, selecting specific data series, displaying the selected series in a spreadsheet format, and saving the selected series for transfer to other software systems, such as Microsoft Excel.

There are five complementary views for browsing the database contained within the CD-ROM:

• a "table view" corresponding to the tables contained within the GFS Yearbook;

• an "economic concept view" providing access to similar concepts across countries;

• a view/search facility based on the structure of the time series codes;

• a matrix view for enhanced data analysis; and

• an integrated balance sheet view.

An extensive help facility is incorporated into the browser, including a list of frequently-asked-questions (FAQs).

For users seeking access to historical data, the Historical Government Finance Statistics Database and Browser on CD-ROM contains time series for 149 countries from 1972 to 1989, presented in the framework of the GFSM 1986. Users interested in converting the historical series may refer to the document "Classification of GFSM 1986 Data to the GFSM 2001 Framework," available on the IMF's website: (/external/pubs/ft/gfs/manual/comp.htm)

 

Box 1. The GFSM 2001 Statements and Core Balances

The Statement of Government Operations (GFS Yearbook) records transactions on an accrual basis. The statement distinguishes between the following transactions:
 
RevenueTransactions that increase net worth.
 
ExpenseTransactions that reduce net worth.
 
Net acquisitions of nonfinancial assetsTransactions that affect the stock of nonfinancial assets, without changing net worth (acquisitions minus disposals).
 
FinancingTransactions that affect the stock of financial assets and liabilities, without changing net worth (net acquisition of financial assets minus net incurrence of liabilities).
 
The analysis of government operations is supported by two key fiscal indicators:
 
Operating balanceSummary measure of the effects of revenue and expense transactions on net worth. Net operating balance (NOB) equals revenue minus expense. The gross operating balance (GOB) equals revenue minus expense other than consumption of fixed capital. 1/
 
Net lending/borrowingRepresents the financial resources that the government absorbs from, or releases to, other sectors of the economy. It is calculated as the NOB minus the net acquisition of nonfinancial assets. Net lending/borrowing is also equal to the net acquisition of financial assets minus net incurrence of liabilities.
 
The Integrated Balance sheet (GFS CD-ROM), focuses on an assessment of the sustainability of government operations from a fiscal perspective. It shows the government's net worth at the beginning and end of each fiscal year, as well as the related transactions and other economic flows. The sustainability of fiscal policy depends in part on how the government's net worth changes over time. Changes in net worth can be explained not only by government transactions but also by other economic flows attributable to gains or losses resulting from changes in the prices of assets and liabilities, as well as other changes in their volume.
 
Net worthThe total stock of assets minus liabilities. The net worth in period (t) can also be calculated as the net worth of the previous period (t-1), plus changes in net worth in period (t) due to transactions (the NOB), plus changes in net worth in period (t) due to other economic flows.
 
The Statement of Sources and Uses of Cash (GFS Yearbook) shows purely cash flows associated with revenue and expense transactions and transactions in nonfinancial assets, which yields the cash surplus/deficit. The assessment of the government's level of cash holdings (liquidity) and its determinants is a key element in analyzing interrelationships with monetary policy.
 
Cash surplus/deficitNet cash inflow from operating activities minus the net cash outflow from investments in nonfinancial assets
 

 
1/ The NOB/GOB excludes the net acquisition of nonfinancial assets. The latter does not affect net worth because it represents only an accumulation of assets in exchange for an accumulation of liabilities or use of exit assets.

 

1 International Monetary Fund, Government Finance Statistics Manual 2001, Washington, D.C., 2001; also available online at /external/pubs/ft/gfs/manual/index.htm.

2 In GFSM 1986, capital expenditure covered capital transfers, purchases of fixed assets, stocks (strategic), land, and intangible assets. In comparison, in GFSM 2001, capital transfers are classified as expense (because they affect net worth), and the net acquisition of nonfinancial assets covers purchases and sales of all those nonfinancial assets, as well as valuables. (See also Table 2)

3 However, transfers of assets, which would occur for example when government securities are issued to recapitalize a bank but the government does not acquire an effective claim on the bank, are recorded as the incurrence of a liability (the securities) and a counterpart expense (transfer from government to the bank) because the transfer affects net worth. Any subsidy element in government lending also would be treated as an expense.

4 EU country data reported by Eurostat do not include cash-based components, aggregates, and analytical balances because the European System of Accounts 1995 source data do not provide this information.