## cr18283

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**Canonical URL:** [cr18283](https://www.imf.org/-/media/files/publications/cr/2018/cr18283.pdf)

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---

### Mission objective, progress, and immediate outputs
- Mission goal: have Malagasy authorities adopt the methodology of the Government Finance Statistics Manual (GFSM) 2014 for their own needs to develop government finance statistics (GFSs) consistent with current international standards.
- Progress and outputs:
  - GFSM 2014 base tables on transactions, including the Statement of Government Operations (SOAP) and its three detailed tables, and the table of expenditures by function prepared for 2010-2016 and submitted to the IMF Statistics Department (STA).
  - Two managers from the Studies Directorate (DE) attended the GFS course in Washington in June 2017; subsequent in-house training of DE employees arranged.
  - Collection of source data on National Public Entities (EPNs) and Decentralized Territorial Governments (CTDs) begun to expand institutional scope beyond budgetary central government.
  - Draft Interministerial decree on preparing and disseminating GFSs under way and should be adopted very soon.
  - Adaptation of the Table of Comprehensive Treasury Operations (OGT) to the GFSM 2014 analytical framework and classifications initiated; detailed breakdown of Other Net Treasury Operations (AONT) prepared.
  - Update of the work plan for 2018 completed.
  - Outreach: educational presentation to 25 employees of units that supply data explaining GFSM 2014 adoption and data submission expectations.
- Constraints:
  - Progress mainly limited to reorganizing core sources; lack of an accrual government accounting system impedes adopting more complex GFSM 2014 features.
  - Future progress dependent on advances in accounting reforms.
- Recommendation on timing:
  - Schedule adoption of the GFSM 2014 analytical framework and classifications at an appropriate date (example: at the end of the current program with the IMF).
  - DE prepared to begin producing monthly OGTs based on GFSM 2014 immediately in parallel with current tables.
  - Adoption of the decree identified by authorities as a priority action item for the PSMFP.
- Next mission: authorities requested mission before October 2018; second half of September set aside tentatively.

### Priority recommendations, action plan, and scheduled deliverables
- Scheduled completion date: June 30, 2018
  - Continue the work of drawing up the draft decree in order to adopt it before the end of the year — Institution in charge: DE.
  - Prepare a version of the table of OGTs consistent with the GFSM 2014 analytical framework and classifications based on the work begun by the mission and send it to the Office of the Minister for consideration — Institution in charge: DE.
  - Submit the report form to the IMF Statistics Department — scheduled completion date noted in detailed table as June 30, 2018.
- Scheduled completion date: December 31, 2018
  - Prepare memoranda of understanding between the DEs and suppliers of core data — Institution in charge: DE.
  - Prepare memoranda for DE and core data suppliers (dependent on adoption of decree).
  - Prepare a table of correspondence between the accounting nomenclature and the GFSM 2014 nomenclature — Special attention to class 4 accounts and class 5 accounts.
  - Prepare an outline for presenting data for core data suppliers (awaiting adoption of decree).
  - Prepare the Statement of Sources and Uses of Cash (SFT) — SFT to be produced by December 31, 2018.
  - Survey and classify government units — list of government entities by March 31, 2018; a list of EPNs and enterprises in which the government holds an interest has been prepared.
  - Expand coverage of the GFSs (GFSM 2014 base) to detailed operations of central government (EPN and CNaPS) for which sources are available — scheduled December 31, 2018.
  - Expand coverage of the GFSs to detailed operations of the CTDs — scheduled December 31, 2018.
  - Expand coverage of the GFSs to the CNaPS — scheduled December 31, 2018.
  - Prepare the capital and reserve accounts of the general government (budgetary central government) — draft capital and reserve account prepared; scheduled December 31, 2018.
- Scheduled completion date: March 31, 2018
  - Begin processing the accounting balances of the EPNs and CTDs to expand the statistical scope — Institution in charge: DE.

### Current status and operational recommendations for GFS production
- Types of GFSs produced by DE:
  - Table of Comprehensive Treasury Operations (OGT): monthly financial operations of the budgetary central government structured according to the GFSM 1986 analytical framework; prepared on a basis similar to a cash basis. Revenue recorded on a cash basis; expenditures recorded on a commitment basis; balance adjusted by change in spending arrears to obtain cash-base balance.
  - Annual GFSs in the MFSP 2014 format: cover budgetary central government; prepared using the same sources as OGT and same recording basis; intended for publication in the Government Finance Statistics Yearbook (GFSY) by the IMF Statistics Department; ultimately should be prepared on an accrual or similar basis when accounting reforms complete.
- Adoption implications:
  - Adopting GFSM 2014 for authorities’ own needs requires developing a new OGT consistent with GFSM 2014 framework and classifications, merging the two production types.
- Dissemination standards and mission recommendations:
  - SDDS recommends preparing annual GFSs that cover all government entities and preparing monthly GFSs on budgetary central government operations.
  - Mission recommends:
    - Continue and strengthen monthly GFSs on budgetary central government operations (general government).
    - Limit expansion beyond general government to annual GFSs.
  - This approach addresses needs of Africa Department (monthly economic data) and Statistics Department (annual data for GFSY and monthly/quarterly data for International Financial Statistics).
- Practical readiness:
  - DE confirmed readiness to transition immediately by producing an OGT table in GFSM 2014 format in parallel with the current table; mission developed a draft OGT table consistent with GFSM 2014 for DE review and submission to senior management.
  - Annual GFSs should be based on finalized core sources (balances or certified financial statements) for better classification after account-closing operations.

### Public sector coverage, institutional composition, and classification guidance
- Public sector composition (authorities provided lists and counts):
  - About 200 EPNs (including a social security institute—the CNaPS) and the CDTs complement general government (general budget, two annex budgets and the Treasury Special Accounts).
  - Authorities provided a list of EPNs showing:
    - 120 EPAs,
    - 56 EPICs, and
    - 28 other entities (enterprises in which the general government holds a non-controlling interest (EPPs)).
  - One document on the MFB website lists 53 public financial and nonfinancial enterprises; according to the financial interest criterion, 22 of these enterprises meet the definition of public enterprise.
- On that basis, the entire public sector consists of:
  - General government;
  - EPAs, EPICs, including the CNaPS, as well as chambers of commerce, the Road Authority, the Road Maintenance Fund and the Distance Learning Center;
  - CTDs;
  - 22 public enterprises.
- Suggested reclassification approach and principles:
  - Exclude commercial institutional entities (certain EPICs) from central government; keep noncommercial institutional entities in central government or include government enterprises in central government if appropriate.
  - Reclassify EPICs and government enterprises gradually, case by case, only when data sources are available and usable.
  - Classify EPPs mainly according to origin of financing: central government subsector if central government is the origin, or enterprise/near-enterprise sector if enterprises provide the majority of financing.
  - Clarify function and financing for the Road Authority, Road Maintenance Fund, and Distance Learning Center to determine sectoral classification.
  - For government enterprises, estimate percentage of noncommercial activity relative to total activity; prioritize analysis for most urgent situations.

### Coverage and limitations of the current OGT
- Current OGT coverage:
  - Limited to central government operations in the strict sense (general government budgetary and cash operations).
  - Excludes operations of the EPNs (EPA and EPIC) and the CTDs except indirectly via budget transfers they receive and their correspondent accounts (deposits and withdrawals).
- Consequence:
  - EPNs’ own resources and their own expenditures are not included in the statistics; no detailed classification of expenditures financed through budget transfers can be made.
  - If these entities do not contract debt or accumulate arrears, their omission has no impact on the central government deficit but hampers accurate analysis of their impact on public finances and the national economy.
- Recommended measures (coverage/classification):
  - Consider reclassifying some EPICs and government enterprises only if data sources are available and usable to avoid work that would have no impact on statistics.
  - Clarify nature and financing of EPPs for classification (central government or enterprise sector).
  - Periodically review and revise the institutional table to make needed reclassifications.
  - Approach the CNaPS to obtain accounting sources usable electronically.

### Capital and reserve account: sources, asset and liability treatment, and recommended actions
- Initial scope: annual capital and reserve account initially limited to general government.
- Potential data providers: Central Treasury Accounting Agency (ACCT) and the Public Debt Directorate (DDP - external and domestic debt units).
- Assets — source availability and comments:
  - Cash and deposits: available in the ACCT and in the consolidated balance sheet; distinguish ariary-denominated and foreign-currency deposits if applicable.
  - Debt instruments: verify whether Malagasy government holds bonds and debentures.
  - Credits: budgetary loans included; other pass-through loans derive from government external borrowing and are monitored by the DPP; claims should be valued in ariary at the exchange rate on the date the capital and reserve account is established.
  - Equities and investment funds: listing incomplete; General Government Financial Interest Unit in the ACCT has an inventory of interests but no valuation.
  - Pension insurance and standard guarantee systems: not applicable for government-provided insurance or standard guarantees.
  - Derivatives: government does not currently hold derivatives.
  - Other receivables: available in balance and ACCT; tax due notices not issued may imply nonrecording of tax receivables.
- Liabilities — source availability and comments:
  - Cash and deposits: correspondent account credits available in balances and at the ACCT.
  - Debt instruments: monitored by DPP; initially valued at face or issue value and subsequently to nominal value.
  - Credits: bilateral and multilateral external debt and domestic contractual debt available in DPP.
  - Pension commitments: Civilian and Military Retirement Fund obligations should be recorded as liabilities where actuarial estimates exist (CRCM); if not available, may be ignored initially.
  - Other accounts payable: pending government payments and arrears available in class 4 and class 5 credit accounts and ACCT.
  - For CNaPS and entities on accrual accounting, balance sheets supply most required information but may need valuation and depreciation adjustments.
- Recommended measures:
  - Collect source data on financial assets and liabilities and prepare a first draft financial capital and reserve account, possibly based on raw unprocessed data.
  - Adjust data where possible to comply with GFSM 2014 rules (valuation of interests in enterprises, valuation of external debt stocks).

### OGT in GFSM 2014 terms: classification differences and operational guidance
- Mission prepared a draft OGT table according to GFSM 2014 analytical framework; standard lines extracted from SOAP and detailed tables. Totals of external and domestic financing consistent with GFSM 2014 but components classified on a “hybrid” basis from OGT or its sources.
- Key classification differences and guidance:
  - Total revenue: both current OGTs and GFSM 2014 include grants; proposed OGTs adopt GFSM 2014 terminology (revenue, understood to include grants).
  - Divestitures of nonfinancial assets: in OGT proceeds are part of total revenue; in GFSM 2014 divestitures are excluded from revenue and subtracted from acquisitions of nonfinancial assets.
  - Tax revenue: difference between OGT and GFSM 2014 tax revenue equals social contributions that are not tax revenue in GFSM 2014. For current central government this difference is zero because budgetary central government excludes CNaPS and retirement contributions are recorded as increases in liabilities.
  - Tax revenue should be net of VAT refunds and other reimbursements per GFSM 2014; to show gross tax revenue in OGT 2014 create subitems: Tax revenue (GFSM 2014); Gross tax revenue; VAT refunds and other tax revenue.
  - Nontax revenue: not a GFSM 2014 category but can be calculated as total revenue minus tax revenue; in GFSM 2014 nontax revenue equals grants and other revenue (property revenue, sales of goods and services, fines and confiscations and other transfers received).
  - Expenditures: GFSM 2014 total expenditures = expenses and acquisitions net of nonfinancial assets; differ from current OGT totals by divestitures and loans minus collections reclassified in financing. Acquisitions net of nonfinancial assets are broken down by origin of resources (external or domestic).
  - Financing: domestic and external financing totals obtained from GFSM 2014 headings; breakdowns presented on a “hybrid” basis by type of creditor and instrument.
- Recommended measure:
  - Submit the draft of the new version of the OGTs to management for consideration.

### Accruals, nonmonetary flows, and transition guidance
- Recording of accruals covers time of recording and recording of nonmonetary flows (nonmonetary transactions and other economic flows).
- Guidance and constraints:
  - Time of recording should generally follow time used in data sources. Given DE’s limited resources, mission does not recommend at this time adjusting core data to estimate accruals. Changeover to accrual recording should follow trend in government accounting.
  - Identify nonmonetary transactions (operations in kind, operations on debts, other economic flows, charges such as transfer of economic ownership in PPPs or leasing) using budget law notes and economic notes.
  - Entities using accrual accounting (CNaPS, some EPICs) supply most required information but may need adjustments (e.g., revalue assets from historic cost to market prices).

### Review of 2010–2016 statistics: findings and specific inconsistencies
- Coverage: institutional scope is budgetary central government for all years submitted; EPN operations not captured except via change in deposit balance as Treasury correspondents.
- Basis for recording revenue: revenue recorded at time collected, regardless of fiscal year.
- Specific findings and inconsistencies:
  - Breakdown of taxes on income, profit and capital gains: not available.
  - Discontinuity: taxes on transfers due to death, estates and grants series discontinuous; disappearance of amounts in 2016 and appearance of taxes on financial and capital transactions unclear.
  - Social security contributions for 2008: error — budgetary central government scope precludes recording social security contributions.
  - High amount for residual sales of noncommercial entities for 2010: includes fee to Malagasy government from Société WISCO equivalent to $100 million; reclassified as rent.
  - Charge of social assistance benefits for one year: mainly student scholarships reclassified as other miscellaneous current charges (2821).
  - Employer social benefits limited to 2015 and 2016: amounts for other years included in revised questionnaire; nature needs clarification.
  - Other current charges not classified elsewhere (2821): mainly student scholarships, dues to international organizations and other current expenditures not classified elsewhere.
  - Increase in equity asset item and shares of investment funds beginning in 2012: due to increase in government’s interest in Air Madagascar as part of restructuring (25 billion ariary per year from 2012 to 2105 and 115 billion in 2016) when the enterprise’s tax debt was consolidated.
  - Insurance, pension and standard guarantee system amounts limited to 2016: fund retirement operations to pay pensions for civil servants (Civilian and Military Retirement Fund); proposals to allocate contributions to charges for remuneration and to increase commitments for retirement to align flows and stocks.
- Recommended corrections:
  - Verify and correct classification/discontinuities (tax series, social contributions, employer social benefits).
  - Engage CRCM for actuarial estimates for pension commitments where available.

### Regulatory framework and draft decree — production and dissemination of GFS (high-level provisions)
- Draft decree provisions and mandates (selected):
  - Art. 1: Prepare and disseminate statistics on operations of government entities under General Directorate of the Treasury through the unit in charge; statistics comprised of OGT and GFS pursuant to Article 3.
  - Art. 2: Unit in charge works in collaboration with National Statistics Institute and other macroeconomic statistical producers such as Banky Foiben' i Madagasikara and the Ministry in charge of the Economy and Planning.
  - Art. 3: GFSs constitute a set separate from other government finance figures and must be prepared in compliance with international statistical standards; reference methodologies are the Government Finance Statistics Manual and the IMF Public Debt Statistics Manual.
  - Art. 4: Scope covers government entities sector entirely: budgetary central government, noncommercial public entities (administrative public entities, industrial and commercial public entities, social security entity, etc.), and subnational governments (regions, communes and provinces). May be expanded to public financial and nonfinancial enterprises.
  - Art. 5: Data suppliers required to submit information and detailed data requested by the unit; memoranda of understanding set procedures for reporting including frequencies and deadlines.
  - Art. 6: Unit required to disseminate GFSs according to frequencies and deadlines and in accordance with international dissemination standards (GDDS or SDDS); published on websites of General Directorate of the Treasury and Ministry in charge of Finance and Budget.
  - Art. 7: Minister of Finance and Budget in charge of implementing decree which will immediately come into effect as soon as published by radio program broadcast or posting, regardless of Official Gazette publication.
- Institutional coverage and classification notes (selected):
  - Units of General Government (OGTs cover subsector 2.1):
    - 2.1 Budgetary central government: general budget institutions and operations (Office of the President, Ministries, legislative and judicial bodies, Civilian and Military Retirement Fund), specific budgets (Postal Service and National Printing Office), Treasury special accounts.
    - 2.2 Extrabudgetary central government*: National Public Entities (EPAs and EPICs), EPPs, Project accounts.
    - 3.1 National Social Protection Institute (CNaPS)*
    - 5.1 Decentralized subnational governments (CTDs) consisting of 22 regions and roughly 1,549 municipalities.
  - Notes:
    - The asterisk indicates statistics do not currently cover the unit or group of units.
    - Institutional table prepared on legal and administrative criteria; reclassification may be necessary for economic criteria.

### Mission timing, next mission focus, and operational objective
- Authorities requested next mission before October 2018; last week of September chosen tentatively.
- Next mission primary focus:
  - Expand scope of central government to include EPAs based on consolidated balance sheets for these entities.
  - Expand scope to include CTDs based on consolidated balance sheets for these subnational entities.
  - Expand scope to include CNaPS, subject to availability of usable source data.
  - Detailed classification of the AONTs.
- Mission objective: establish statistics for the consolidated set of government entities.

### Annex files and tools prepared during mission
- Annex IV — Files integral to the report (inventory):
  - Excel file for preparing the GFSs: MDG GFS 2015-2017, consisting of:
    - Source file entitled OGT, including OGT broken down according to detailed sources and nomenclature classified to GFSM 2014;
    - SOAP sheet presenting the Statement of Government Operations;
    - Three sheets of Revenue, Charges and Transactions on Assets and Liabilities tables;
    - File entitled OGT GFSM 2014 presenting a proposed OGT table consistent with GFSM 2014.
  - SECTEUR PUBLIC, an Excel file providing the list of different entities in the public sector: general government, EPA, EPIC, EPP and enterprises in which the government holds an interest.

*Source: cr18283 - 1.    Priority Recommendations*

### 1.    Priority Recommendations _____________________________________________________________________ 6

### 1.    Priority Recommendations

### Summary of mission results and priority recommendations
- Mission goal: have Malagasy authorities adopt the methodology of the Government Finance Statistics Manual (GFSM) 2014 for their own needs to develop government finance statistics (GFSs) consistent with current international standards.
- Progress and outputs:
  - GFSM 2014 base tables on transactions, including the Statement of Government Operations (SOAP) and its three detailed tables, and the table of expenditures by function prepared for 2010-2016 and submitted to the IMF Statistics Department (STA).
  - Two managers from the Studies Directorate (DE) attended the GFS course in Washington in June 2017; subsequent in-house training of DE employees was arranged.
  - Collection of source data on National Public Entities (EPNs) and Decentralized Territorial Governments (CTDs) has begun; this will expand the institutional scope beyond budgetary central government.
  - Draft Interministerial decree on preparing and disseminating GFSs is under way and should be adopted very soon.
  - Adaptation of the Table of Comprehensive Treasury Operations (OGT) to the GFSM 2014 analytical framework and classifications was initiated.
  - Detailed breakdown of Other Net Treasury Operations (AONT) prepared.
  - Update of the work plan for 2018 completed.
- Outreach: educational presentation to 25 employees of units that supply data explaining GFSM 2014 adoption and data submission expectations.
- Constraints:
  - Progress mainly limited to reorganizing core sources; lack of an accrual government accounting system impedes adopting more complex GFSM 2014 features.
  - Future progress dependent on advances in accounting reforms.
- Recommendation on timing:
  - Schedule adoption of the GFSM 2014 analytical framework and classifications at an appropriate date (example given: at the end of the current program with the IMF).
  - DE prepared to begin producing monthly OGTs based on GFSM 2014 immediately in parallel with current tables.
  - Adoption of the decree identified by authorities as a priority action item for the PSMFP.
- Next mission: authorities requested mission before October 2018; second half of September set aside tentatively.

### Priority recommendations and action plan (table summary)
- Scheduled completion date: June 30, 2018
  - Continue the work of drawing up the draft decree in order to adopt it before the end of the year — Institution in charge: DE.
  - Prepare a version of the table of OGTs that is consistent with the GFSM 2014 analytical framework and classifications based on the work begun by the mission and send it to the Office of the Minister for consideration — Institution in charge: DE.
  - Submit the report form to the IMF Statistics Department — scheduled completion date noted in detailed table as June 30, 2018.
- Scheduled completion date: December 31, 2018
  - Prepare memoranda of understanding between the DEs and suppliers of core data — Institution in charge: DE.
  - Prepare memoranda for DE and core data suppliers (dependent on adoption of decree).
  - Prepare a table of correspondence between the accounting nomenclature and the GFSM 2014 nomenclature — Special attention to class 4 accounts and class 5 accounts.
  - Prepare an outline for presenting data for core data suppliers (awaiting adoption of decree).
  - Prepare the Statement of Sources and Uses of Cash (SFT) — SFT to be produced by December 31, 2018.
  - Survey and classify government units — list of government entities by March 31, 2018; a list of EPNs and enterprises in which the government holds an interest has been prepared.
  - Expand coverage of the GFSs (GFSM 2014 base) to detailed operations of central government (EPN and CNaPS) for which sources are available — scheduled December 31, 2018.
  - Expand coverage of the GFSs to detailed operations of the CTDs — scheduled December 31, 2018.
  - Expand coverage of the GFSs to the CNaPS — scheduled December 31, 2018.
  - Prepare the capital and reserve accounts of the general government (budgetary central government) — draft capital and reserve account prepared; scheduled December 31, 2018.
- Scheduled completion date: March 31, 2018
  - Begin processing the accounting balances of the EPNs and CTDs to expand the statistical scope — Institution in charge: DE.

### Current status and outlook for government finance statistics in Madagascar
- Types of GFSs produced by DE:
  - Table of Comprehensive Treasury Operations (OGT): monthly financial operations of the budgetary central government structured according to the GFSM 1986 analytical framework; prepared on a basis similar to a cash basis. Revenue recorded on a cash basis; expenditures recorded on a commitment basis; balance adjusted by change in spending arrears to obtain cash-base balance.
  - Annual GFSs in the MFSP 2014 format: cover budgetary central government; prepared using the same sources as OGT and same recording basis; intended for publication in the Government Finance Statistics Yearbook (GFSY) by the IMF Statistics Department; ultimately should be prepared on an accrual or similar basis when accounting reforms complete.
- Adoption implications:
  - Adopting GFSM 2014 for authorities’ own needs requires developing a new OGT consistent with GFSM 2014 framework and classifications, merging the two production types.
- Dissemination standards and mission recommendations:
  - SDDS recommends preparing annual GFSs that cover all government entities and preparing monthly GFSs on budgetary central government operations.
  - Mission recommends:
    - Continue and strengthen monthly GFSs on budgetary central government operations (general government).
    - Limit expansion beyond general government to annual GFSs.
  - This approach addresses needs of Africa Department (monthly economic data) and Statistics Department (annual data for GFSY and monthly/quarterly data for International Financial Statistics).
- Practical readiness:
  - DE confirmed readiness to transition immediately by producing an OGT table in GFSM 2014 format in parallel with the current table; mission developed a draft OGT table consistent with GFSM 2014 for DE review and submission to senior management.
  - Annual GFSs should be based on finalized core sources (balances or certified financial statements) for better classification after account-closing operations.

### Expansion of the statistical field
- Core data availability:
  - DE has core data to expand statistical field for the central government, in particular consolidated balance sheets for EPAs and CTDs; processing these sources could be a task for the next mission; SOAP would be set up for EPAs and CTDs.
  - DE obtained core information on operations of the National Social Protection Institute (CNaPS) presented as “Program Budgets” in PDF format; mission recommends DE contact CNaPS to obtain annual accounting documentation (balance or financial statements).
- Consolidation path:
  - Once GFSs are prepared for EPAs, CNaPS and CTDs, consolidation operations could be planned to obtain consolidated GFSs for the central government (general government and EPA), and then for all government entities.
  - Note: it will not be necessary to wait for data from other entities (such as EPICs) to begin consolidation; statistics will initially provide partial coverage.

### Detailed technical assessment and recommendations (selected highlights)
- Regulatory framework (Result)
  - High priority: Submit the decree to appropriate authorities for comments, corrections and adoption — verifiable indicator: The decree has been adopted — scheduled completion date: June 30, 2018 — level of progress: Advanced.
  - Medium priority: Have the DE and the MEP-INSTAT sign a memorandum of understanding — verifiable indicator: memorandum signed — scheduled completion date: December 31, 2018.
  - Medium priority: Prepare and have the DE and core data suppliers sign memoranda — verifiable indicator: Awaiting adoption of the decree on the GFSs; the memoranda of understanding have been signed — scheduled completion date: December 31, 2018.
- Compare classifications of core sources and GFSM 2014 (Result)
  - High priority: Prepare a table of correspondence between accounting nomenclature and GFSM 2014 nomenclature — special attention to class 4 and class 5 accounts — verifiable indicator: The correspondence table has been prepared — scheduled completion date: December 31, 2018.
- Prepare data on current OGT field (budgetary central government) (Result)
  - Medium priority: Prepare an outline for presenting data for core data suppliers — verifiable indicator: outlines/report forms produced — scheduled completion date: December 31, 2018.
  - High priority: Prepare the Statement of Sources and Uses of Cash (SFT) — verifiable indicator: The SFT has been produced — scheduled completion date: December 31, 2018.
- Identify and expand institutional field (Result)
  - Medium priority: Survey and classify government units — verifiable indicator: A list of government entities by March 31, 2018; a list of EPNs and enterprises in which the government holds an interest has been prepared.
  - High priority: Expand coverage of GFSs (GFSM 2014 base) to detailed operations of central government (EPN and CNaPS) and to CTDs — verifiable indicator: OGTs and GFSs applied to an expanded field as source data adequacy permits — scheduled completion date: December 31, 2018.
  - High priority: Expand coverage of GFSs to CNaPS — verifiable indicator: Sources available and the SNPs for the CNaPS have been produced — scheduled completion date: December 31, 2018.
- Other aspects
  - High priority: Prepare the capital and reserve accounts of the general government (budgetary central government) — verifiable indicator: A draft capital and reserve account has been prepared — scheduled completion date: December 31, 2018.
  - High priority: Submit the report form to the IMF Statistics Department — verifiable indicator: The completed GFS questionnaire has been submitted to the Statistics Department — scheduled completion date: June 30, 2018. The GFSs prepared during the mission should be reviewed and, if necessary, completed.

### Regulatory framework
- Draft decree:
  - DE drew up a draft decree in 2017; mission proofread draft, statement of reasons and note to senior authorities and proposed modifications to strengthen scope.
  - Recommended measure: Finalize and adopt the draft decree on the regulatory framework for production and dissemination of government finance statistics.

### Implementation of the last mission’s recommendations (status and actions taken)
- Prepare a work program for 2017 based on the December 2016 mission Action Plan and the PSMFP — Action taken: work program for 2017 prepared and results reviewed during this mission.
- Review and complete correspondence/bridge tables — Action taken: correspondence and bridge tables reviewed and used to revise statistics for 2010-2014 and prepare 2015 and 2016; sent to IMF Statistics Department in November 2017; STA submitted comments and DE responded.
- Revise 2010-2014 GFSs and prepare 2015-2016 — Action taken: SOAP and Tables of Revenue, Expenditures and Transactions on Assets and Liabilities, and functional classification revised for 2010-2014 and prepared for 2015-2016; submitted to STA.
- Delineate scope of government entities and subsectors — Action taken: list of EPNs prepared.
- Evaluate availability of sources beyond general government and begin experimental GFSs for most important entities — Action taken: consolidated balance sheets for EPAs and CTDs are available and submitted to mission; processing remains to be done and DE wishes to begin during 2018.
- Begin production of annual GFSs for budgetary central government based on final accounts — Action taken: not possible at this time because details in final balance are insufficient.

*Source: cr18283 - 1.    Priority Recommendations*

### 22. The entirety of Malagasy central government consists of the central government,

### cr18283 - 22. The entirety of Malagasy central government consists of the central government,

### Public sector coverage and institutional composition
- The entirety of Malagasy central government consists of the central government, i.e. the general government (general budget, two annex budgets and the Treasury Special Accounts) and about 200 EPNs (including a social security institute—the CNaPS—which alone comprises the social security subsector) and the CDTs. The public sector is completed by the addition of financial and nonfinancial public enterprises.
- The authorities provided a list of EPNs showing:
  - 120 EPAs,
  - 56 EPICs, and
  - 28 other entities (enterprises in which the general government holds a non-controlling interest (EPPs)), consisting mainly of chambers of commerce and other entities such as the Madagascar Road Authority, the Road Maintenance Fund and the National Distance Learning Center.
- One document on the MFB website lists 53 public financial and nonfinancial enterprises consisting of:
  - 13 enterprises wholly or almost wholly owned by the general government;
  - 9 in which the government owns a majority interest, but well below 100 percent;
  - 30 in which it owns a minority or negligible interest;
  - One for which the government’s interest is not indicated.
- According to the financial interest criterion, 22 of these enterprises meet the definition of public enterprise. On this basis, the entire public sector consists of:
  - General government;
  - EPAs, EPICs, including the CNaPS, as well as the chambers of commerce, the Road Authority, the Road Maintenance Fund and the Distance Learning Center;
  - CTDs;
  - 22 public enterprises.
- Note: The control criterion is usually considered more robust than the financial interest criterion, but it is not taken into consideration in this document because it can be more difficult to apply and requires adequate basic documentation.

### Coverage of the OGT (Origin, Growth and Use of Funds table) and limitations
- The current OGT table is limited to central government operations in the strict sense (general government budgetary and cash operations). It excludes the operations of the EPNs (EPA and EPIC) and the CTDs except indirectly to the extent of:
  - budget transfers they receive; and
  - their correspondent accounts (deposits and withdrawals).
- Consequence: The EPNs’ own resources and their own expenditures are not included in the statistics; no detailed classification of expenditures financed through budget transfers can be made.
- As long as these entities do not contract debt and do not accumulate arrears, their omission has no impact on the central government deficit, but it is an obstacle to accurate analysis of their impact on public finances and the national economy.
- Recommended measures (specific to coverage/classification):
  - Consider reclassifying some EPICs and government enterprises only if data sources are available and usable so that work that would have no impact on the statistics can be avoided;
  - Clarify the nature and financing of the EPPs for classifying them with the central government or enterprise sector;
  - Periodically review and revise the enclosed institutional table to make any needed reclassifications;
  - Approach the CNaPS to obtain accounting sources that can be used electronically.

### Suggested approach to defining subsectors and reclassification
- Because the current public sector composition is based on legal criteria, it may be advisable to define it in greater detail according to macroeconomic criteria and its subsectors.
- Suggested principles:
  - Exclude commercial institutional entities (certain EPICs) from the scope of the central government; keep noncommercial institutional entities in the central government field or include government enterprises into central government if appropriate.
  - Given other priorities, there is no need to immediately rework the EPICs as long as data sources are not available, since doing so would have no impact on the statistics; this should be done gradually, case by case, as data sources become available and usable.
  - For the EPPs (e.g., chambers of commerce) consider classification mainly according to the origin of their financing: central government subsector if central government is the origin, or enterprise/near-enterprise sector as a nonprofit institution if enterprises provide the majority of financing.
  - Clarify function and mode of financing for the Road Authority, the Road Maintenance Fund and the Distance Learning Center to determine their sectoral classification.
  - For government enterprises, estimate the percentage of noncommercial activity relative to total activity so enterprises with a majority of noncommercial activity could potentially be reclassified in the central government field; prioritize analysis for the most urgent situations.

### Capital and reserve account: data sources, assets and liabilities
- Initial scope: prepare an annual capital and reserve account initially limited to the scope of general government.
- Potential data providers: Central Treasury Accounting Agency (ACCT) and the Public Debt Directorate (DDP - external and domestic debt units).
- Some items can be obtained from stock amounts in the consolidated balance sheet; others come directly from the units involved.

Assets — source availability and comments:
- Cash and deposits: available in the ACCT and provided in the incoming and outgoing balances of the consolidated balance sheet. Distinguish between ariary-denominated and foreign-currency deposits if applicable.
- Debt instruments: unlikely that the Malagasy government has a portfolio of debt instruments (bonds and debentures); this should be verified.
- Credits: loans extended by general government to third parties — only budgetary loans are included in the balance. Other pass-through loans derive from government external borrowing and are monitored by the DPP. These claims should be valued in ariary at the exchange rate on the date the capital and reserve account is established.
- Equities and investment funds: listing incomplete in the balance. The General Government Financial Interest Unit in the ACCT has an inventory of interests in government enterprises, parastatals or semipublic companies, but there is no valuation.
- Pension insurance and standard guarantee systems: not applicable because the Malagasy government does not provide insurance services and does not make standard guarantees.
- Derivatives: Malagasy government does not currently hold derivatives.
- Other receivables: accounting information available in the balance and from the ACCT. Issues to consider:
  - Tax system is a reporting system and tax due notices are not issued — possible nonrecording of tax receivables in accounting books;
  - Check whether class 4 suspense accounts with debit balances or class 5 accounts with debit balances (e.g., checks awaiting deposit) constitute receivables.

Liabilities — source availability and comments:
- Cash and deposits: credit side of correspondent accounts and similar accounts constitute liabilities in the form of deposits. Information available in the balance and at the ACCT.
- Debt instruments: securities (bonds and debentures) issued by the Malagasy government are monitored by the DPP. Initially can be valued at face or issue value and subsequently changed to nominal value.
- Credits: bilateral and multilateral external debt and domestic contractual debt (including commitments to central and other banks). External debt valuations in ariary depend on the exchange rate on the date the capital and reserve account is established. Source data available in the DPP.
- Equities and investment funds: not applicable as liabilities.
- Derivatives: not applicable.
- Pension insurance and standard guarantee systems: commitments of the Civilian and Military Retirement Fund (nonautonomous employer retirement regime of the central government). Contributors acquire rights to future retirement benefits and central government acquires the obligations. Contributions (actual or allocated) should be recorded as a government liability and pension payments decrease this liability. Estimates of commitments are based on actuarial calculations and should in principle be obtained from the CRCM. If CRCM does not have this information, this item may be ignored initially.
- Other accounts payable: all pending government payments, including accrued and unpaid amounts and payment arrears. Core data comprised of entries in various class 4 and class 5 credit accounts and in the ACCT.
- For CNaPS and other entities using accrual accounting, balance sheets provide most required information but adjustments may be necessary (asset valuation, depreciation).

Recommended measures for capital and reserve account:
- Collect source data on the financial assets and liabilities listed and prepare a first draft of the financial capital and reserve account, if need be based on raw data that has not been reprocessed.
- To the extent possible, adjust certain data to process them according to the rules in the GFSM 2014, such as valuing general government interests in enterprises and stocks of external debt.

### OGT according to the GFSM 2014: classification differences and proposal
- The mission prepared a draft OGT table according to the GFSM 2014 analytical framework. The standard lines in this table of revenue and expenditures are extracted from the SOAP or detailed tables of revenue, expenses and transactions on assets and liabilities. Totals of external and domestic financing are consistent with the GFSM 2014, although their components are classified on a “hybrid” basis and are obtained from the OGT table or its sources.
- Key classification differences and operational guidance:
  - Total revenue: in current OGTs and GFSM 2014 total revenue includes grants. The proposed new OGTs adopt the GFSM 2014 terminology (revenue, understood to include grants).
  - Divestitures of nonfinancial assets: In the OGT, proceeds from divestitures are part of total revenue. In GFSM 2014, divestitures are excluded from revenue and subtracted from acquisitions of nonfinancial assets.
  - Tax revenue: difference between OGT and GFSM 2014 tax revenue equals social contributions that do not constitute tax revenue in the manual. For the current central government field this difference is zero because the budgetary central government excludes CNaPS and retirement contributions from civil servants are recorded as increases in liabilities.
  - Tax revenue should be calculated net of VAT refunds and other reimbursements per GFSM 2014. To show gross tax revenue in the OGT 2014, create two subitems:
    - Tax revenue (GFSM 2014)
    - Gross tax revenue
    - VAT refunds and other tax revenue.
  - Nontax revenue: Not a GFSM 2014 category but can be calculated as total revenue minus tax revenue; in GFSM 2014 nontax revenue equals grants and other revenue (property revenue, sales of goods and services, fines and confiscations and other transfers received).
  - Expenditures: Total expenditures according to GFSM 2014 consist of expenses and acquisitions net of nonfinancial assets; differ from current OGT totals by divestitures of nonfinancial assets and loans minus collections reclassified in financing. Acquisitions net of nonfinancial assets are broken down by origin of resources (external or domestic).
  - Financing: Domestic and external financing totals are obtained from GFSM 2014 headings; breakdowns are presented on a “hybrid” basis by type of creditor and instrument, entered directly from the OGT or its sources.
- Recommended measure:
  - Submit the draft of the new version of the OGTs to management for consideration.

### Application of accruals and treatment of nonmonetary flows
- Recording of accruals covers:
  - Time of recording; and
  - Recording of nonmonetary flows, including nonmonetary transactions and other economic flows.
- Guidance and constraints:
  - Time of recording should generally follow the time used in data sources. Given DE’s limited resources, the mission does not recommend at this time adjusting core data to estimate accruals. The changeover to accrual recording should follow the trend in government accounting.
  - Nonmonetary transactions (operations in kind, operations on debts, other economic flows, charges such as transfer of economic ownership in PPPs or leasing) may be substantial and identification effort is useful. Identification can be aided by reading budget law notes and economic notes.
  - For entities using accrual accounting (CNaPS, some EPICs), accounting sources will supply most required information but adjustments may be necessary, e.g., revaluing assets carried at historic cost to market prices.

### Review of statistics for 2010–2016: findings and inconsistencies
- The mission reviewed the 2010-2016 GFSs submitted to the IMF Statistics Department in late 2017 and confirms prior explanations while adding clarifications:
  - Coverage: Institutional scope is budgetary central government for all years submitted. EPN operations are not captured except for change in their deposit balance as Treasury correspondents; that balance reflects only deposits and withdrawals, not total revenue and total expenditures.
  - Basis for recording revenue: Revenue is recorded at the time it is collected, regardless of fiscal year.
  - Breakdown of taxes on income, profit and capital gains: not available.
  - Discontinuity in series of taxes on transfers due to death, estates and grants: amounts may include the transfers, but no breakdowns are available. The disappearance of amounts for these taxes in 2016 and appearance of amounts for taxes on financial and capital transactions is unclear and should be verified.
  - Social security contributions for 2008: error — budgetary central government scope precludes revenue from social security contributions; revisions still showed social security contributions for 2008.
  - High amount for residual sales of noncommercial entities for 2010: includes the fee for operating the iron deposit that Société WISCO paid to the Malagasy government equivalent to $100 million; this fee was reclassified as rent.
  - Charge of social assistance benefits for one single year: mainly student scholarships reclassified as other miscellaneous current charges (2821).
  - Employer social benefits limited to 2015 and 2016: amounts for other years were included in the revised questionnaire; nature of these benefits needs clarification.
  - Nature of other current charges not classified elsewhere (2821): mainly student scholarships, dues to international organizations and current expenditures not classified elsewhere.
  - Increase in equity asset item and shares of investment funds beginning in 2012: due to increase in government’s interest in Air Madagascar as part of restructuring (25 billion ariary per year from 2012 to 2105 and 115 billion in 2016) when the enterprise’s tax debt was consolidated.
  - Amount for insurance, pension and standard guarantee system limited to 2016: these are fund retirement operations to pay pensions for civil servants (Civilian and Military Retirement Fund). Amounts for other years were included in the revised questionnaire, but amounts display excessive variability and are negative, reflecting insufficient actual recording of contributions. Proposal: allocate an amount of the contributions to charges for remuneration to balance operations and increase commitments for retirement so that remuneration received in exchange for rights to future pensions would be recognized, financing needs evaluated, and inconsistency between flows and stocks would decline.

### Recommended next steps and operational proposals
- Prepare/maintain an institutional table of Malagasy government entities (mission prepared such a table in Annex II) and, once checked, send it to the IMF Statistics Department for publication (or updating) in the GFSY.
- For public sector classification and reclassification:
  - Proceed gradually, case by case, reclassifying EPICs and government enterprises only when data sources are available and usable.
  - Clarify financing and function of EPPs (chambers of commerce, Road Authority, Road Maintenance Fund, Distance Learning Center) to determine sector belonging.
  - Estimate noncommercial activity share in government enterprises to identify candidates for reclassification into central government field for urgent cases.
- For capital and reserve account:
  - Collect source data from ACCT and DDP and prepare a first draft financial capital and reserve account, possibly based on raw, unprocessed data.
  - Adjust data where possible to comply with GFSM 2014 rules (valuation of interests in enterprises, valuation of external debt stocks).
- For OGT and GFSM 2014 integration:
  - Submit the draft of the new OGT tables (OGT GFSM 2014 sheet in MDG OGT GFS 2015–2017 file) to management for consideration.
- For accruals and nonmonetary transactions:
  - Follow trend in government accounting when transitioning from cash to accrual recording.
  - Identify possible nonmonetary operations using budget documentation and accounting sources, and adjust valuations (e.g., historic cost to market prices) for entities already on accrual basis.
- For statistical corrections and continuity:
  - Verify and correct classification/discontinuities (tax series, social contributions, employer social benefits).
  - Engage CRCM to obtain actuarial estimates for pension commitments where available.

*IMF staff report text (excerpts) as provided in the source content.*

### 44. The authorities expressed the desire to hold the next mission before October 2018,

### 44. The authorities expressed the desire to hold the next mission before October 2018

### Mission timing and primary focus
- The authorities expressed the desire to hold the next mission before October 2018, and the last week of September was chosen tentatively.
- This mission’s work will entail continuing and delving into greater detail on the topics addressed earlier in this report, and more particularly:
  - Expanding the scope of central government to include the EPAs based on the consolidated balance sheet for these entities;
  - Expanding the scope to include the CTDs based on the consolidated balance sheet for these subnational government entities;
  - Expanding the scope to include the CNaPS, subject to the availability of usable source data.
  - The detailed classification of the AONTs.

### Mission objective
- This mission’s objective is to establish statistics for the consolidated set of government entities.

### Draft Decree — production and dissemination of Government Finance Statistics (high-level provisions)
- Decree context and legal references:
  - References include Organic Law No. 2004-007 of July 26 on the Budget Law; Decree No. 2016-250 of April 10, 2016; Decree No. 2016-265 of April 15, 2016 amended and supplemented by Decree No. 2016-460 of May 11, 2016, No. 016-1147 of August 22, 2016, No. 2017-148 of March 2, 2017, and No. 2017-262 of April 20, 2017; Decree No. 2017-590 of July 17, 2017; Decree No. 2017-121 of February 21, 2017.
- Key articles and mandates:
  - Art. 1: Prepare and disseminate statistics on the operations of government entities under the General Directorate of the Treasury in the Ministry of Finance and Budget through the unit in charge of these statistics. These statistics are comprised of the Comprehensive Treasury Operations (OGT) and government finance statistics (GFS) pursuant to Article 3 of this decree.
  - Art. 2: The unit in charge of the GFSs works in collaboration with the National Statistics Institute (as coordinator of the National Statistics System) and other macroeconomic statistical producers such as Banky Foiben' i Madagasikara and the Ministry in charge of the Economy and Planning.
  - Art. 3: GFSs constitute a set separate from other government finance figures (budgetary or general accounting) and must be prepared in compliance with international statistical standards; reference methodologies are the Government Finance Statistics Manual and the IMF Public Debt Statistics Manual.
  - Art. 4: Scope covers the government entities sector entirely: budgetary central government, noncommercial public entities (administrative public entities, industrial and commercial public entities, social security entity, etc.), and subnational governments (regions, communes and provinces). It may if necessary be expanded to public financial and nonfinancial enterprises.
  - Art. 5: Data suppliers are required to submit information and detailed data requested by the unit in charge of the GFSs. Memoranda of understanding set procedures for reporting, including reporting frequencies and deadlines.
  - Art. 6: The unit in charge of the GFSs is required to disseminate them according to the frequencies and deadlines and in accordance with the international dissemination standards (General Data Dissemination System or Special Data Dissemination Standard). These will be published on the website of the General Directorate of the Treasury and of the Ministry in charge of Finance and Budget.
  - Art. 7: The Minister of Finance and Budget is in charge of implementing this decree which, due to the urgency, will immediately come into effect as soon as it is published by radio program broadcast or posting, regardless of whether or not it is published in the Official Gazette.

### Institutional coverage and classification notes
- Units of General Government (The OGTs cover the operations of subsector 2.1 mentioned below.)
  - Central Government
    - 2.1 Budgetary central government
      - General budget institutions and operations (operation and investment): Office of the President, Ministries and State Secretaries, legislative and judicial bodies (National Assembly, Senate, Supreme Court, Court of Cassation, Council of State, Accounting Office, the courts, etc.), Civilian and Military Retirement Fund.
      - Specific budget (Postal Service and National Printing Office)
      - Treasury special accounts
    - 2.2 Extrabudgetary central government* 
      - National Public Entities (central government entities whose resources consist mainly of budgetary transfers (in administrative public entities or EPAs) and industrial and commercial public entities) or EPICs; enterprises in which the government holds a non-controlling interest (EPPs, chambers of commerce, the Road Authority, the Road Maintenance Fund and the Distance Learning Center); Project accounts.
  - Social Security Funds*
    - 3.1 National Social Protection Institute (CNaPS)
  - State governments
    - 4.1 Not applicable
  - Local Governments*
    - 5.1 Decentralized subnational governments (CTDs), consisting of 22 regions and roughly 1,549 municipalities.
- Notes:
  - The asterisk indicates that the statistics do not currently cover the unit or group of units.
  - The institutional table is in the “new” format of the government finance statistics questionnaire for 2015 (see letter of October 27, 2014). In this format, the institutional table ranks second for metadata to be supplied, which explains the use of the “2” numbering.
  - The table is prepared based on legal and administrative criteria; these criteria may not correspond to economic criteria and reclassification may be necessary.

### Annex IV — Files integral to the report (inventory)
- 1. Excel file for preparing the GFSs: MDG GFS 2015-2017
  - This file consists of the following sheets:
    - The source file, entitled OGT, which includes the OGT broken down according to the detailed sources and the classification of nomenclatures according to the GFSM 2014;
    - The SOAP sheet, which presents the Statement of Government Operations;
    - Three sheets that consists of the Revenue, Charges and Transactions on Assets and Liabilities tables.
    - A file entitled OGT GFSM 2014, which presents a proposed OGT table consistent with the GFSM 2014;
- 2. SECTEUR PUBLIC, an Excel file that provides the list of the different entities in the public sector: general government, EPA, EPIC, EPP and enterprises in which the government holds an interest.

*Reported content drawn from the mission report text.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2018/cr18283.pdf_