## 1. Belarus Priority Recommendations ## Source details **Canonical URL:** [1. Belarus Priority Recommendations](https://www.imf.org/-/media/files/publications/cr/2020/english/1blrea2020003.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2020/english/1blrea2020003.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2020/english/1blrea2020003.pdf.json) --- ### Summary of mission outcomes - TA mission on sectoral financial accounts and financial balance sheets (FABS) conducted during November 11–22, 2019. - Principal purposes: review Belstat current data sources; identify data sources needing improvement; demonstrate how to construct the tables; prepare a work plan. - Mission findings: - Many required data are currently available; areas for improvement were identified. - Strong basis for Belstat to begin an initial, exploratory compilation of the FABS for 2017. - Belstat currently prepares sector current and capital accounts and seeks to construct the full sequence of accounts including financial balance sheets. - NBRB had prepared FABS for several years but discontinued compiling these data in 2017; past tables were incomplete and for internal use. - Purposes of compiling FABS: - Provide insights into how the real economy is financed (instruments and counterparties). - Help identify whether sectors’ financial positions are sustainable. - Highlight integrating function of the 2008 SNA — the balancing item in the sector financial account (net lending or borrowing) is conceptually identical to the balancing item in the sector capital accounts; differences point to source or compilation issues. - Ensure consistency across macroeconomic statistics: ESS (balance of payments and IIP), GFS, and monetary and financial statistics. - Interagency relations and governance: - Compilation of ESS and monetary and financial statistics: NBRB; GFS: MOF. - Working relations among Belstat, NBRB, and MOF are good; informal interagency groups exist. - Mission recommended formalizing two groups: a steering committee (senior managers) and a technical working group (staff preparing datasets). ### Key data-source observations - Primary data sources reviewed: balance sheets of the central bank, other deposit-taking corporations (DTCs), and other financial corporations — compiled by the NBRB (1SR, 2SR, 4SR). - These provide extensive asset and liability detail and counterparties for most instruments. - A few instances where additional detail or verification of classification is needed; NBRB agreed to explore meeting the additional data required. - GFS (compiled by MOF): generally sufficient for initial FABS construction but some instrument and counterparty detail could be improved; mission recommended Belstat request further detail from MOF and the Ministry of Taxes and Fees. - Other Belstat-collected sources: mission recommended areas for additional information collection or improved use of current data. - Training and capacity building: - Mission recommended Belstat staff apply for FABS courses (e.g., IMF). Specifically, apply for the JVI BSAA course (prior to the deadline of May 2020). ### Mission operational recommendation - Belstat to prepare the FABS for 2017 using presently available data to understand compilation requirements, estimate fillable cells, and identify data improvement needs. ### Agreed action plan (high-level) - March 2020: Formalize a technical working group responsible for addressing technical, classification, definitional, and compilation issues. — Responsible: Belstat, in coordination with NBRB and MOF - March 2020: Formalize a monitoring steering committee of senior managers from each of the agencies. — Responsible: Belstat, in coordination with NBRB and MOF - June 2020: Compile draft FABS for 2017 using data sources discussed on the mission. — Responsible: Belstat, in conjunction with NBRB and MOF ### Governance and process (detailed) - Formalize a steering committee comprising senior managers from Belstat, NBRB, and MOF. — Target completion: March 2020. - Formalize a technical working group (Belstat, NBRB, MOF) to address compilation and classification/definitional issues, ensure consistent treatment, timeliness, data quality improvements, regular progress updates, and other technical matters. — Target completion: March 2020. - Technical working group to determine primary responsibility by sector: NBRB — financial sector and rest of the world; MOF — general government; Belstat — nonfinancial corporations, households, NPISHs. Group to meet regularly, at least quarterly, during development. ### Compilation milestones and exercises - Compile, at the outset, for 2017 a limited matrix instrument by sector with accompanying methodological notes. — Target completion: June 2020. Responsible: Belstat. - Compile draft FABS for 2017 using discussed data sources. — Target completion: June 2020. Responsible: Belstat with NBRB and MOF. - Compile a BSA (Balance Sheet Approach) for 2017 in addition to the FABS. — Target completion: June 2020. Responsible: Belstat. ### Data improvements and verification — selected actions (targets and responsibilities) - Revise 4-f (funds) survey form for equity liability (line 022) to obtain a breakdown of shareholders’ funds as reported to the Ministry of Taxes and Fees on the tax form on balance sheet lines 410–480. — Target completion: June 2020. Responsible: Belstat. - Coordinate with MOF on estimates for the general government sector to obtain missing GFS items, currency composition of government loan and debt securities liabilities, and a sector breakdown of GG’s equity assets. — Target completion: March 2020. Responsible: Belstat and MOF. - Reconcile data sources used to compile current and capital accounts and financial account transactions. — Ongoing. Responsible: Belstat and NBRB. - Obtain a breakdown of miscellaneous assets and liabilities on 1SR and 2SR to obtain instrument and counterparty. — Target: Mach 2020. Responsible: Belstat and NBRB. - Obtain a breakdown of sector counterpart of insurance companies’ insurance technical reserves liabilities. — Target completion: June 2020. Responsible: Belstat and MOF. - Verify the central bank’s loan assets to nonresidents in Belarusian rubles. — Target completion: March 2020. Responsible: NBRB. - Obtain a sector breakdown of direct investment in the balance of payments and IIP. — Target completion: March 2020. Responsible: NBRB and Belstat. - Obtain an instrument breakdown of debt in direct investment in the balance of payments and IIP. — Target completion: March 2020. Responsible: NBRB and Belstat. - Obtain a breakdown of “other claims” in reserve assets of ESS. — Target completion: March 2020. Responsible: NBRB and Belstat. - Examine the cause of negative retained earnings on 1SR. — Target completion: March 2020. Responsible: NBRB and Belstat. - Obtain the value of loans written off by DTCs during any given period. — Target completion: March 2020. Responsible: NBRB and Belstat. - Obtain estimates of the proportions of the foreign currencies in the foreign currency items on the balance sheets of the 1SR and the 2SR. — Target completion: March 2020. Responsible: NBRB and Belstat. - Obtain estimates of the proportions of the foreign currencies in the foreign currency items on the balance sheet of the 1SR, the 2SR, and the 4SR. — Target completion: March 2020. Responsible: NBRB and Belstat. - For central government equity assets, use the value for shareholders’ funds for government-owned enterprises collected from 4-f (Funds), rather than the value reported in the GFS. — Target completion: March 2020. Responsible: Belstat and MOF. - Belstat to obtain from the MOF data on general government on an unconsolidated basis. — Target completion: March 2020. Responsible: Belstat and MOF. - Confirm that the total loans in other investment in ESS for NFCs, households, and NPISHs are by NFCs for both assets and liabilities. — Target completion: March 2020. Responsible: Belstat and NBRB. ### Equity and nonfinancial corporations (NFC) specific actions - Ascertain that the total equity liability value on the 4-f (funds) survey form equals the total equity value on the tax return form for nonfinancial corporations. If differences exist, explore causes; use tax data if more comprehensive unless compelling reason to use 4-f survey. — Target completion: June 2020. Responsible: Belstat. - Treat the total value of equity asset holdings of NFCs as NFCs’ equity investments in other NFCs. — Target completion: March 2020. Responsible: Belstat. - Explore with a sample of respondents to the 4-f (funds) survey how their holdings of equity are valued. Pending confirmation, assume all changes in equity asset holdings represent transactions. — Target completion: June 2020. Responsible: Belstat. - Allocate the difference between total NFC equity on issue (from 4-f or tax return) and the total of equity assets in NFCs of the financial sector, general government, nonresidents, and NFCs’ investment in other NFCs to the household sector. — Target completion: June 2020. Responsible: Belstat. - Request the breakdown of shareholders on the tax form from the Ministry of Taxes and Fees. — Target completion: November 2019. Responsible: Belstat and Ministry of Taxes and Fees. - Combine households with NPISHs in the FABS and compare net lending/borrowing of the combined sector with net lending/borrowing of the combined households’ and NPISH capital accounts. — Target completion: June 2020. Responsible: Belstat. ### Training - Undertake training on FABS as offered by the IMF and other international organizations. — Ongoing. Responsible: Belstat. ### Data sources — Financial corporations sector - Primary report forms collected by NBRB: - 1SR: balance sheet of the central bank. - 2SR: aggregated balance sheet of deposit-taking corporations (DTCs). - 4SR: aggregated balance sheet data of other financial corporations. - These report forms: - Provide considerable detail by instrument and, for the most part, by counterparty sector. - Serve as inputs for other sectors where information may be missing or of lower quality. ### Mapping report forms to the FABS framework - For many data items the place in the FABS framework is straightforward because the instruments are largely consistent with those in the FABS. - Some items lack sufficient detail to be mapped unambiguously. ### Foreign currency breakdown (1SR, 2SR, 4SR) - Findings: - The 1SR, 2SR, and 4SR have a breakdown for foreign currency items for most instruments. - Information is sufficient for balance sheet purposes but needs adjustments to derive transactions from changes in positions. - Exchange rate changes can change outstanding end‑period values without concomitant transactions. - If foreign currency items are denominated in a variety of currencies, differing exchange rate movements complicate transaction estimation from balance sheet changes. - Recommendation: - Belstat to explore with the NBRB how to obtain estimates of the proportions of the foreign currencies in the foreign currency items on the 1SR and 2SR (March 2020). - An approximate breakdown from the chief accountant at each of the DTCs would help. ### Insufficient instrument/counterparty detail and large residuals on the 1SR - Findings: - Some instruments lack sufficient detail to classify by instrument or counterparty on the 1SR. - “Other accounts receivable/payable” on the 1SR have approximately one third of total assets and liabilities classified as “miscellaneous.” - These large residuals likely represent “float” items and would distort the FABS if left as “other accounts receivable/payable.” - Recommendation: - Belstat to request the NBRB to try to break down the large residuals (in other accounts receivable/payable) on the 1SR (March 2020). ### Negative retained earnings on the central bank balance sheet - Findings: - The 1SR shows large negative retained earnings; NBRB indicated retained earnings are calculated as a residual to ensure the balance sheet balances. - Recommendation: - Belstat to request the NBRB to examine the cause of the negative retained earnings on the 1SR and determine whether a change in accounting rules might be required (March 2020). ### DTCs’ loan write-offs - Findings: - Write-offs are not considered a transaction in the 2008 SNA; they are a volume change in the Other Changes in Assets Account. - When deriving transactions from changes in balance sheet positions, the value of the write-off needs to be added back to the closing balance; otherwise loans advanced during a period would be understated. - Such information is not currently reported on the 2SR. - Recommendation: - Belstat to request the NBRB to obtain information on DTCs’ write-offs for any given period on an ongoing basis (March 2020). ### Insurance technical reserves and counterparty allocation - Findings: - Insurance technical reserves comprise unearned premia, claims made not yet settled, and an actuarial assessment of claims yet to be made; life insurance reserves include accumulated amounts built up by policyholders. - Insurance companies usually maintain records by line of business, not by institutional sector; insured entities’ balance sheets typically lack information on entities that have a claim on insurance technical reserves. - Recommendations: - Belstat discuss with the insurance regulator (the MOF) what information might assist in estimating insurance technical reserves by counterpart sector (March 2020). - If regulator has no information, Belstat contact insurance companies directly (with regulator involved) (March 2020). - For life insurance technical reserves, assume all is owing to households unless NBRB has identified any owing to nonresidents. ### Special Drawing Rights (SDRs) - Findings: - Two aspects to SDRs: holdings (if any), and the liability for their allocation. - 2008 SNA recognizes the allocation of SDRs as a liability for the first time; the allocation initially has no net effect on a member’s net IIP. - Belarus agreed as of May 2019 that the NBRB will accept the SDR liability and place it on its balance sheet. - NBRB reports SDR holdings as part of Belarus’ reserve assets in the ESS and on the 1SR. - Belarus has had no transactions in SDRs since the allocation in 2009; asset and liability values in the IIP and 1SR should be the same, with minor differences the mission suggested the NBRB eliminate. ### Allocation of cash holdings to sectors - Findings: - Liabilities: NBRB and nonresident central banks (for foreign currencies) are the sole issuers of cash. - Holdings: apart from holdings of cash reported on the 1SR, the 2SR, and the 4SR, there is no adequate source of information on holdings of cash. - The Belstat 4-f (funds) survey and balance sheet data reported by NFCs for tax returns provide no information on holdings of cash. - There may be a significant residual that will be allocated to the household sector, pending further work. ### Interbank positions convention - Findings: - All interbank positions in the form of loans or deposits are, by convention, treated as deposits. - This convention extends, in principle, to the rest of the world. ### Consolidated list of recommendations (with timing) - Belstat to explore with the NBRB how to obtain estimates of the proportions of the foreign currencies in the foreign currency items on the 1SR and 2SR (March 2020). - Belstat to request the NBRB to try to break down the large residuals (in other accounts receivable/payable) on the 1SR (March 2020). - Belstat to request the NBRB to examine the cause of the negative retained earnings of the central bank on the 1SR (March 2020). - Belstat to request the NBRB to obtain information on DTCs’ write-offs for any given period on an ongoing basis (March 2020). - Belstat, as a first point of departure, discuss with the insurance regulator (the MOF) what information might assist Belstat in estimating the values of insurance technical reserves by counterpart sector (March 2020). - Should the insurance regulator have no such information available, Belstat contact the insurance companies directly (while ensuring the regulator is involved in any such discussion) (March 2020). ### General Government: data sources, valuation, and consolidation - Findings: - MOF compiles GFS. Data are reasonably complete, especially for transactions, but some items are missing (such as “currency and deposits” asset positions and “other accounts receivable” positions). - Many GFS data points do not provide counterparties; cross‑table inference can supply many counterparties, though not for equity investments or “other accounts payable.” - Equity assets are often valued differently on assets and liabilities sides; 2008 SNA recommends market value, but Belarus has no institution for trading in shares. - Mission recommended Belstat use value for shareholders’ funds for government‑owned enterprises collected on Belstat’s form 4f (Funds) for central government equity assets rather than the value reported in the GFS. - Government borrows in the form of loans only from nonresidents; these borrowings are all in foreign currencies. - A breakdown by currency for government debt securities is available from the MOF. - Recommendations: - Belstat request MOF provide the breakdown on counterparties of instruments on the balance sheet of the government of the Republic of Belarus, wherever possible (March 2020). - Belstat obtain from MOF the breakdown of the government of Belarus’ equity investments in the financial and nonfinancial sectors (March 2020). - Belstat use for central government’s equity assets the value for shareholders’ funds collected from the 4f (funds) survey rather than the value reported in the GFS (March 2020). - Belstat request from the MOF the foreign currency breakdown of the foreign currency borrowings of the government of the Republic of Belarus (March 2020). - Belstat obtain from the MOF data on general government on an unconsolidated basis (March 2020). ### Nonfinancial Corporations (NFCs): sources and allocation of instruments - Findings: - Many FABS cells will be available from counterpart information from the 2SR or the ESS; some data items are not straightforward. - Six possible sources for NFC loan data: the 1SR, the 2SR, the 4SR, the ESS, the Belstat 4-f (funds) survey, and the tax filing balance sheet. - Central bank (1SR) reports no loans to NFCs. - 2SR and 4SR each have amounts outstanding with NFCs; NFCs also raise funds from the rest of the world, other NFCs, and households. - For borrowing from the rest of the world, ESS and the NBRB provide information; BPM6 recommends breaking “other sectors” into “other financial corporations” and “nonfinancial corporations, households and nonprofit institutions serving households.” - Loans by or to nonresidents may be included in “direct investment”; instrument breakdown in “direct investment” is between “equity” and “other debt.” - Recommendations: - NBRB provide Belstat with a breakdown of debt instruments in direct investment and a breakdown of instruments (including equity) by sector. - For deposits or loans between direct investment entities, treat them as deposits by convention. ### Equity for NFCs: valuation and treatment - Findings: - Four primary data sources for NFC equity: the ESS, counterpart information in the financial sector, Belstat’s 4-f (funds) survey, and tax balance sheets. - 4-f survey and tax return data cover all NFCs and provide an instrument breakdown including equity liability — these should provide a universe estimate for NFCs’ outstanding equity liabilities. - Mission recommended verifying that total equity liabilities from the 4-f survey and the tax data are the same; if differences exist, explore causes. - Mission recommended using tax data as they are likely to be more comprehensive unless compelling reason exists to use 4-f survey. - Treatment of long-term financial investments: - 4-f (funds) survey and tax reports include “long-term financial investments” without detail; likely include long-term debt securities, long-term accounts receivable, and equity. - Recommendation: Treat total value of “long-term financial investments” as NFCs’ equity investments in other NFCs for initial FABS estimates. - Allocate remaining balance to the household sector for initial FABS estimates. ### Equity: distinction between transactions and positions - Finding: - For equity, only transactions in the shares (or other equity) should be included in the FABS’ financial accounts; for financial balance sheets all shareholders’ funds should be included. - Total shareholders’ funds include accumulated retained earnings, current period retained earnings, revaluations, and other reserves. - Data limitation and recommendation: - 4-f (funds) survey reports only total equity liability; tax form includes the breakdown. - Request the breakdown of shareholders’ funds from the Ministry of Taxes and Fees. (Belstat made this request during the mission.) ### Equity assets valuation and transaction estimation - Finding: - Equity assets are usually reported as a single item and often recorded at acquisition cost; balance sheet changes may be a reasonable proxy for transactions but not for current value of positions. - Recommendations: - Explore with a sample of respondents to the 4-f (funds) survey how their holdings of equity are valued. - Pending confirmation, assume that all changes in equity asset holdings represent transactions (June 2020). - Postpone deriving better estimates of equity asset positions until more work is done on development of the FABS. ### NFC accounts receivable/payable and counterpart allocation - Findings: - 4-f (funds) survey does not identify accounts receivable/payable instruments; tax return includes “short-term accounts receivable”, “long-term accounts receivable”, and “long-term accounts payable”, with no counterpart information. - Breakdown for other accounts receivable often unavailable; recommended not to attempt counterparty allocation at this stage for receivables. - For liabilities, tax return provides breakdown enabling counterpart assignment: - “suppliers, contractors, performers” → other NFCs or rest of the world (ESS should provide rest of the world; remainder attributable to other NFCs). - “advances received” → funds received for subsequent delivery. - “taxes and fees” and “social insurance and security” → owing to general government. - “remuneration of employees” → owing to households. - “leasing payments” → likely operating leases; included in “suppliers…” or nonresidents. - “property owners (founders, participants)” → ambiguous; may be taken to be owing to households. - Recommendations (with dates): - Belstat confirm with NBRB that all the loans in other investment: NFCs, households, and NPISHs in the ESS are by NFCs for both assets and liabilities (March 2020). - NBRB provide Belstat with a breakdown of debt instruments in direct investment, and a sector breakdown for all direct investment debt and equity instruments (March 2020). - Belstat ascertain that total equity liability value on the 4-f survey equals total equity value on the tax return for NFCs; if differences exist, explore causes and use the better-quality source; in the meantime use tax data unless compelling reason to use 4-f (funds) survey (June 2020). - Belstat allocate the difference between total NFC equity on issue and the total of equity assets in NFCs of the financial sector, general government, nonresidents, and NFCs’ investment in other NFCs to the household sector (March 2020). - Belstat request Ministry of Taxes and Fees provide components of NFCs’ shareholders’ funds on the tax form for 2017 (November 2019). - Belstat explore with a sample of respondents to the 4-f (funds) survey how their holdings of equity are valued; pending confirmation assume all changes in equity asset holdings represent transactions (June 2020). ### Rest of the World — reserve assets “other claims” - Finding: - ESS includes an item “other claims” in “reserve assets” that has no direct instrument in the FABS. - Recommendation: - Belstat request the NBRB to break down other claims in reserve assets to identify to which instruments it is allocated on the 1SR (March 2020). ### Households and NPISHs - Finding: - No separate information on NPISHs in the 1SR, 2SR, and 4SR; NPISHs combined into “other resident sectors”. - Recommendation: - Include NPISHs in the household sector in the FABS; combine net lending/borrowing in the capital accounts of the two sectors to confront net lending/borrowing in the financial account of the combined sectors (June 2020). ### Compilation of the FABS and Balance Sheet Approach (BSA) - Findings and approach: - Most data available by instrument and by counterparty or can be constructed. - Compile initially a limited instrument-by-sector matrix for 2017 with accompanying methodological notes; show sector capital accounts and balancing items. - Prepare financial accounts in conjunction with financial balance sheets and the Other Changes in Assets Account for an integrated dataset. - Compilation system entries (mostly by counterpart sector) allow reconfiguration into a sector-by-sector matrix (BSA). - BSA is consolidated within sectors; intrasectoral claims should be consolidated out. - Recommendations: - Belstat compile, at least initially for 2017, a limited matrix, instrument by sector, with accompanying methodological notes (June 2020). - Belstat compile a BSA for 2017 in addition to the FABS (June 2020). ### Appendix I — Reinvested earnings and effects on saving (examples) - Rule: Reinvested earnings = retained earnings × proportion of entity’s shares on issue owned by direct investors. - Examples: - If an NFC is 100 percent owned by direct investor(s) and retained earnings = 100: - Primary income account: Reinvested earnings on foreign direct investment 100 (NFC Uses) and 100 (ROW Resources). - Financial account: Equity Liability 100 (Net incurrence of liabilities) and Asset 100 (Net acquisition of assets). - Effect: Reduces domestic saving and increases foreign saving. - If NFC is 50 percent owned by direct investors, deemed distributed = 50 percent of retained earnings. - Negative reinvested earnings example: operating loss of 100 for NFC 100 percent owned by direct investors: - Primary income account: Reinvested earnings on foreign direct investment -100 (NFC Uses) and -100 (ROW Resources). - Financial account: Equity Liability -100 and Asset -100. - Effect: Increases domestic saving and reduces foreign saving. - Note: Reinvested earnings are a component of shareholders’ funds; for positions data where equity is sum of shareholders’ funds, reinvested earnings are not recorded separately. ### Appendix I — Deriving transactions from foreign-currency-denominated balance sheet items (recommended approach and examples) - Recommended approach: a) Convert opening and closing balances to currency of denomination using exchange rate at beginning of period. b) Take first difference in the currency of denomination. c) Reconvert value in b) back to Belarusian rubles using the average exchange rate for the period. d) Subtract c) from the first difference between the Belarusian values and record as a revaluation in Other Changes in Assets Account. - Example A (no transactions; exchange rate changed from 2:1 to 2.5:1): - Opening balance = 200 Belarusian rubles = 100 euros (at 2:1). - Closing balance = 250 Belarusian rubles = 100 euros (at 2.5:1). - Difference in euros = 0 → Transactions = 0. - Revaluation (Other Changes in Assets Account) = 250 – 200 = 50. - Account identity: 200 + 0 + 50 = 250. - Example B (closing balance 300 rubles): - Opening balance = 200 rubles = 100 euros (2:1). - Closing balance = 300 rubles = 120 euros (2.5:1). - Difference in euros = 20. - Difference in rubles using average exchange rate for period = 20*(2+2.5)/2 = 45 (recorded as transactions in financial account). - Revaluation = 300 – 200 – 45 = 55 (Other Changes in Assets Account). - Account identity: 200 + 45 + 55 = 300. ### Appendix I — Treatment of provisions for loan losses and write-offs - Finding: - In the 2008 SNA, provisions for losses are not an instrument but an internal accounting device; until an asset is written off/down the provision should be added back to shareholders’ funds as part of reserves. - Treatment when reduction is recognized: - No transaction recorded unless creditor and debtor agree to recognize the loss; if agreed, record a capital transfer (debt forgiveness) in the capital account and a counterpart entry in the financial account reflecting reduction in holding of the instrument. - Example: General government loan of 100 forgiven by a foreign creditor: - Capital account: Capital transfers payable GG -100; Capital transfers receivable ROW -100. - Financial account: Loans Net incurrence of liabilities -100; Net acquisition of assets -100. - If a resident DTC unilaterally writes down a loan asset of 100 with a resident NFC (no mutual agreement), record the change as an Other Changes in Volume: - Other Changes in Volume Account: Loans Assets (DTCs) -100; Loans Liabilities (NFCs) -100. - Integration into opening/closing balances: - DTCs loan assets: Opening balance 100 + Transactions 0 + Other Changes in Volume +/- -100 = 0. - NFCs loan liabilities: Opening balance 100 + Transactions 0 + Other Changes in Volume +/- -100 = 0. *Source: 1blrea2020003 - 1. Belarus Priority Recommendations* ### 1. Belarus Priority Recommendations _____________________________________________________________ 6 ### 1. Belarus Priority Recommendations ### Summary of mission outcomes - A technical assistance (TA) mission on sectoral financial accounts and financial balance sheets (FABS) was conducted during November 11–22, 2019. - Principal purposes: review Belstat current data sources; identify data sources needing improvement; demonstrate how to construct the tables; prepare a work plan. - Mission findings: - Many required data are currently available; areas for improvement were identified. - Strong basis for Belstat to begin an initial, exploratory compilation of the FABS for 2017. - Belstat currently prepares sector current and capital accounts and seeks to construct the full sequence of accounts including financial balance sheets. - NBRB had prepared FABS for several years but discontinued compiling these data in 2017; past tables were incomplete and for internal use. - Purposes of compiling FABS: - Provide insights into how the real economy is financed (instruments and counterparties). - Help identify whether sectors’ financial positions are sustainable. - Highlight the integrating function of the System of National Accounts, 2008 (2008 SNA) — the balancing item in the sector financial account (net lending or borrowing) is conceptually identical to the balancing item in the sector capital accounts; differences point to source or compilation issues. - Ensure consistency across macroeconomic statistics: ESS (balance of payments and IIP), GFS, and monetary and financial statistics. - Interagency relations and governance: - Compilation of ESS and monetary and financial statistics: NBRB; GFS: MOF. - Working relations among Belstat, NBRB, and MOF are good; informal interagency groups exist. - Mission recommended formalizing two groups: a steering committee (senior managers) and a technical working group (staff preparing datasets) to address classification/definitional issues, compilation, timing, data quality, and progress updates. ### Key data-source observations - Primary data sources reviewed: balance sheets of the central bank, other deposit-taking corporations (DTCs), and other financial corporations — compiled by the NBRB (1SR, 2SR, 4SR). - These provide extensive asset and liability detail and counterparties for most instruments. - A few instances where additional detail or verification of classification is needed; NBRB agreed to explore meeting the additional data required. - GFS (compiled by MOF): generally sufficient for initial FABS construction but some instrument and counterparty detail could be improved; mission recommended Belstat request further detail from MOF and the Ministry of Taxes and Fees. - Other Belstat-collected sources: mission recommended areas for additional information collection or improved use of current data. - Training and capacity building: - Mission recommended Belstat staff apply for FABS courses (e.g., IMF). Specifically, apply for the JVI BSAA course (prior to the deadline of May 2020).1 1 Applications should be made online at: https://www.jvi.org/training/course-schedules/course-schedule-2020/course/20IM32.html ### Mission operational recommendation - Belstat to prepare the FABS for 2017 using presently available data to understand compilation requirements, estimate fillable cells, and identify data improvement needs. ### Agreed action plan (high-level) - March 2020: Formalize a technical working group responsible for addressing technical, classification, definitional, and compilation issues. — Responsible: Belstat, in coordination with NBRB and MOF - March 2020: Formalize a monitoring steering committee of senior managers from each of the agencies. — Responsible: Belstat, in coordination with NBRB and MOF - June 2020: Compile draft FABS for 2017 using data sources discussed on the mission. — Responsible: Belstat, in conjunction with NBRB and MOF --- ### Detailed technical assessment and priority recommendations - Governance and process - Formalize a steering committee comprising senior managers from Belstat, NBRB, and MOF to ensure project remains on target and to resolve issues beyond the technical group. — Target completion: March 2020. - Formalize a technical working group (Belstat, NBRB, MOF) to address compilation and classification/definitional issues, ensure consistent treatment, timeliness, data quality improvements, regular progress updates, and other technical matters. — Target completion: March 2020. - Technical working group should determine primary responsibility by sector: NBRB — financial sector and rest of the world; MOF — general government; Belstat — nonfinancial corporations, households, NPISHs. Group to meet regularly, at least quarterly, during development. - Compilation milestones and exercises - Compile, at the outset, for 2017 a limited matrix instrument by sector with accompanying methodological notes. — Target completion: June 2020. Responsible: Belstat. - Compile draft FABS for 2017 using discussed data sources. — Target completion: June 2020. Responsible: Belstat with NBRB and MOF. - Compile a BSA (Balance Sheet Approach) for 2017 in addition to the FABS. — Target completion: June 2020. Responsible: Belstat. - Data improvements and verification (selected actions with targets and responsibilities) - Revise 4-f (funds) survey form for equity liability (line 022) to obtain a breakdown of shareholders’ funds as reported to the Ministry of Taxes and Fees on the tax form on balance sheet lines 410–480. — Target completion: June 2020. Responsible: Belstat. - Coordinate with MOF on estimates for the general government sector to obtain missing GFS items, currency composition of government loan and debt securities liabilities, and a sector breakdown of GG’s equity assets. — Target completion: March 2020. Responsible: Belstat and MOF. - Reconcile data sources used to compile current and capital accounts and financial account transactions. — Ongoing. Responsible: Belstat and NBRB. - Obtain a breakdown of miscellaneous assets and liabilities on 1SR and 2SR to obtain instrument and counterparty. — Target: Mach 2020. Responsible: Belstat and NBRB. - Obtain a breakdown of sector counterpart of insurance companies’ insurance technical reserves liabilities. — Target completion: June 2020. Responsible: Belstat and MOF. - Verify the central bank’s loan assets to nonresidents in Belarusian rubles. — Target completion: March 2020. Responsible: NBRB. - Obtain a sector breakdown of direct investment in the balance of payments and IIP. — Target completion: March 2020. Responsible: NBRB and Belstat. - Obtain an instrument breakdown of debt in direct investment in the balance of payments and IIP. — Target completion: March 2020. Responsible: NBRB and Belstat. - Obtain a breakdown of “other claims” in reserve assets of ESS. — Target completion: March 2020. Responsible: NBRB and Belstat. - Examine the cause of negative retained earnings on 1SR. — Target completion: March 2020. Responsible: NBRB and Belstat. - Obtain the value of loans written off by DTCs during any given period. — Target completion: March 2020. Responsible: NBRB and Belstat. - Obtain estimates of the proportions of the foreign currencies in the foreign currency items on the balance sheets of the 1SR and 2SR. — Target completion: March 2020. Responsible: NBRB and Belstat. - Obtain estimates of the proportions of the foreign currencies in the foreign currency items on the balance sheet of the 1SR, the 2SR, and the 4SR. — Target completion: March 2020. Responsible: NBRB and Belstat. - For central government equity assets, use the value for shareholders’ funds for government-owned enterprises collected from 4-f (Funds), rather than the value reported in the GFS. — Target completion: March 2020. Responsible: Belstat and MOF. - Belstat to obtain from the MOF data on general government on an unconsolidated basis. — Target completion: March 2020. Responsible: Belstat and MOF. - Confirm that the total loans in other investment in ESS for NFCs, households, and NPISHs are by NFCs for both assets and liabilities. — Target completion: March 2020. Responsible: Belstat and NBRB. - Equity and nonfinancial corporations (NFC) specific actions - Ascertain that the total equity liability value on the 4-f (funds) survey form equals the total equity value on the tax return form for nonfinancial corporations. If differences exist, explore causes; use tax data if more comprehensive unless compelling reason to use 4-f survey. — Target completion: June 2020. Responsible: Belstat. - Treat the total value of equity asset holdings of NFCs as NFCs’ equity investments in other NFCs. — Target completion: March 2020. Responsible: Belstat. - Explore with a sample of respondents to the 4-f (funds) survey how their holdings of equity are valued. Pending confirmation, assume all changes in equity asset holdings represent transactions. — Target completion: June 2020. Responsible: Belstat. - Allocate the difference between total NFC equity on issue (from 4-f or tax return) and the total of equity assets in NFCs of the financial sector, general government, nonresidents, and NFCs’ investment in other NFCs to the household sector. — Target completion: June 2020. Responsible: Belstat. - Request the breakdown of shareholders on the tax form from the Ministry of Taxes and Fees. — Target completion: November 2019. Responsible: Belstat and Ministry of Taxes and Fees. - Combine households with NPISHs in the FABS and compare net lending/borrowing of the combined sector with net lending/borrowing of the combined households’ and NPISH capital accounts. — Target completion: June 2020. Responsible: Belstat. - Training - Undertake training on FABS as offered by the IMF and other international organizations. — Ongoing. Responsible: Belstat. --- ### Data sources — Financial corporations sector - Primary report forms collected by NBRB: - 1SR: balance sheet of the central bank. - 2SR: aggregated balance sheet of deposit-taking corporations (DTCs). - 4SR: aggregated balance sheet data of other financial corporations. - These report forms: - Provide considerable detail by instrument and, for the most part, by counterparty sector. - Serve as inputs for other sectors where information may be missing or of lower quality. - Mission showed Belstat how to compile financial corporations sector data in the FABS using these sources. *Source: 1blrea2020003 - 1. Belarus Priority Recommendations* ### 18. The mission discussed with Belstat staff each of these report forms to show how to ### 1blrea2020003 - 18. The mission discussed with Belstat staff each of these report forms to show how to ### Mapping report forms to the FABS framework - The mission discussed with Belstat staff each report form to show how to map the instruments to the FABS framework. - For many data items the place in the FABS framework is straightforward because the instruments are largely consistent with those in the FABS. - Some items lack sufficient detail to be mapped unambiguously. ### Foreign currency breakdown (1SR, 2SR, 4SR) Findings - The 1SR, 2SR, and 4SR have a breakdown for foreign currency items for most instruments. - Information is sufficient for balance sheet purposes but needs adjustments to derive transactions from changes in positions (see Appendix I: Example B). - Exchange rate changes between the domestic and foreign currencies can change outstanding end‑period values without concomitant transactions. - If foreign currency items are denominated in a variety of currencies (for example, in U.S. dollars, euros, Russian rubles), exchange rates of those currencies against the Belarusian ruble likely changed by different amounts, complicating transaction estimation from balance sheet changes. Recommendation - Belstat to explore with the NBRB how to obtain estimates of the proportions of the foreign currencies in the foreign currency items on the 1SR and 2SR (March 2020). - The mission noted it is not necessary to have a full breakdown for each item; an approximate breakdown from the chief accountant at each of the DTCs of the foreign currency components on their balance sheets would help. ### Insufficient instrument/counterparty detail and large residuals on the 1SR Findings - Some instruments lack sufficient detail to classify by instrument or counterparty on the 1SR. - “Other accounts receivable/payable” on the 1SR (for the central bank) have approximately one third of total assets and liabilities classified as “miscellaneous.” - These large residuals likely represent “float” items not allocated to account or instrument on the day the balance sheet is drawn up and would distort the FABS if left as “other accounts receivable/payable,” especially as information lacks counterparties. Recommendation - Belstat to request the NBRB to try to break down the large residuals (in other accounts receivable/payable) on the 1SR (March 2020). ### Negative retained earnings on the central bank balance sheet Findings - The 1SR shows large negative retained earnings, an unusual situation for a central bank unless dividends paid exceed earnings. - The NBRB indicated retained earnings on the central bank’s balance sheet is calculated as a residual to ensure the balance sheet balances. Recommendation - Belstat to request the NBRB to examine the cause of the negative retained earnings of the central bank on the 1SR and determine whether a change in accounting rules might be required (March 2020). ### DTCs’ loan write-offs Findings - Write-offs are not considered a transaction in the 2008 SNA; they are a volume change in the Other Changes in Assets Account (see Appendix II, Example C). - Because write-offs are not transactions, when deriving transactions from changes in balance sheet positions, the value of the write-off needs to be added back to the closing balance; otherwise loans advanced during a period would be understated. - Such information is not currently reported on the 2SR. Recommendation - Belstat to request the NBRB to obtain information on DTCs’ write-offs for any given period on an ongoing basis (March 2020). ### Insurance technical reserves and counterparty allocation Findings - Insurance technical reserves comprise unearned premia, claims made that have not yet settled, and an actuarial assessment of claims yet to be made; life insurance reserves include accumulated amounts built up by policyholders. - Insurance companies usually maintain records by line of business, not by institutional sector, and insured entities’ balance sheets typically lack information on entities that have a claim on insurance technical reserves. - Alternative approaches are required to allocate insurance technical reserves by counterparty sector. Recommendations - Belstat, as a first point of departure, discuss with the insurance regulator (the MOF) what, if any, information might be available that would assist Belstat in estimating the values of insurance technical reserves by counterpart sector (March 2020). - Should the insurance regulator have no such information available, Belstat contact the insurance companies directly (while ensuring the regulator is involved in any such discussion) (March 2020). - For life insurance technical reserves, it can be assumed that all is owing to households unless the NBRB has identified any owing to nonresidents (which would be included in the Rest of the World). ### Special Drawing Rights (SDRs) Findings - Two aspects to SDRs: holdings (if any), and the liability for their allocation. - The 2008 SNA recognizes the allocation of SDRs as a liability for the first time; the allocation initially has no net effect on a member’s net international investment position (IIP). - Belarus agreed as of May 2019 that the NBRB will accept the SDR liability and place it on its balance sheet. - The NBRB reports SDR holdings as part of Belarus’ reserve assets in the ESS and on the 1SR. - Belarus has had no transactions in SDRs since the allocation in 2009; asset and liability values in the IIP and 1SR should be the same, with minor differences the mission suggested the NBRB eliminate. ### Allocation of cash holdings to sectors Findings - Liabilities: NBRB and nonresident central banks (for foreign currencies) are the sole issuers of cash. - Holdings: apart from holdings of cash reported on the 1SR, the 2SR, and the 4SR, there is no adequate source of information on holdings of cash. - The Belstat 4-f (funds) survey and balance sheet data reported by NFCs for tax returns provide no information on holdings of cash. - There may be a significant residual that will be allocated to the household sector, pending further work to apportion the balance between households and NFCs. ### Interbank positions convention Findings - All interbank positions in the form of loans or deposits are, by convention, treated as deposits because it is often difficult to differentiate these instruments when held between DTCs. - This convention extends, in principle, to the rest of the world, though compilers of the ESS often find it difficult to identify DTCs’ nonresident counterparties. ### Consolidated list of recommendations (with timing) - Belstat to explore with the NBRB how to obtain estimates of the proportions of the foreign currencies in the foreign currency items on the 1SR and 2SR (March 2020). - Belstat to request the NBRB to try to break down the large residuals (in other accounts receivable/payable) on the 1SR (March 2020). - Belstat to request the NBRB to examine the cause of the negative retained earnings of the central bank on the 1SR (March 2020). - Belstat to request the NBRB to obtain information on DTCs’ write-offs for any given period on an ongoing basis (March 2020). - Belstat, as a first point of departure, discuss with the insurance regulator (the MOF) what, if any, information might be available that would assist Belstat in estimating the values of insurance technical reserves by counterpart sector (March 2020). - Should the insurance regulator have no such information available, Belstat contact the insurance companies directly (while ensuring the regulator is involved in any such discussion) (March 2020). --- ### General Government: data sources, valuation, and consolidation Findings - The MOF compiles Government Finance Statistics (GFS). The data are reasonably complete, especially for transactions, but some items are missing (such as “currency and deposits” asset positions and “other accounts receivable” positions). - Many GFS data points do not provide counterparties; however, cross‑table inference can supply many counterparties, though not for equity investments or “other accounts payable.” - Some items, such as currency and deposits asset positions, are available from counterpart information (1SR and 2SR). - Equity assets are often valued differently on assets and liabilities sides; asset holders often record investments at purchase price while companies adjust shareholders’ funds over time. - The 2008 SNA recommends market value for equity, but Belarus has no institution for trading in shares; the Belarusian Currency and Stock Exchange only handles transactions in currencies. - The mission recommended Belstat use the value for shareholders’ funds for government‑owned enterprises collected on Belstat’s form 4f (Funds) for central government equity assets rather than the value reported in the GFS; differences with GFS should be indicated in methodological notes accompanying the FABS. - The government borrows in the form of loans only from nonresidents; these borrowings are all in foreign currencies. - A breakdown by currency for government debt securities is available from the MOF. Recommendations - Belstat request that the MOF provide the breakdown on counterparties of the instruments on the balance sheet of the government of the Republic of Belarus, wherever possible (March 2020). - Belstat obtain from the MOF the breakdown of the government of Belarus’ equity investments in the financial and nonfinancial sectors (March 2020). - Belstat use for the central government’s equity assets the value for shareholders’ funds for government‑owned enterprises that is collected from the 4f (funds) survey, rather than the value reported in the GFS (March 2020). - Belstat request from the MOF the foreign currency breakdown of the foreign currency borrowings of the government of the Republic of Belarus (March 2020). - Belstat obtain from the MOF data on general government on an unconsolidated basis (March 2020). ### Nonfinancial Corporations (NFCs): sources and allocation of instruments Findings - Information for many FABS cells will be available from counterpart information from the 2SR or the ESS; some data items are not straightforward. - Six possible sources for NFC loan data: the 1SR, the 2SR, the 4SR, the ESS, the Belstat 4-f (funds) survey, and the balance sheet reported as part of tax filing. - The central bank (1SR) reports no loans to NFCs. - The 2SR and 4SR each have amounts outstanding with NFCs; NFCs also raise funds from the rest of the world, other NFCs, and households. - For borrowing from the rest of the world, ESS and the NBRB provide information; BPM6 recommends breaking “other sectors” into “other financial corporations” and “nonfinancial corporations, households and nonprofit institutions serving households.” The NBRB provides additional information for the functional category “other investment.” - Loans by or to nonresidents may be included in “direct investment”; the instrument breakdown in “direct investment” is between “equity” and “other debt,” where “other debt” may include other accounts receivable/payable as well as loans. Recommendations - The mission recommended the NBRB provide Belstat with a breakdown of debt instruments in direct investment and a breakdown of instruments (including equity) by sector. - For deposits or loans between direct investment entities, treat them as deposits by convention (consistent with the interbank convention). Equity for NFCs Findings - Four primary data sources for NFC equity: the ESS, counterpart information in the financial sector, Belstat’s 4-f (funds) survey, and balance sheets reported by NFCs in tax returns. - The 4-f survey and the tax return data cover all NFCs and provide an instrument breakdown including equity liability—these should provide a universe estimate for NFCs’ outstanding equity liabilities. - The mission recommended verifying that total equity liabilities from the 4-f survey and the tax data are the same; if differences exist, explore possible causes. - The mission recommended using tax data as they are likely to be more comprehensive unless a compelling reason exists to use the 4-f funds survey. Treatment of long-term financial investments and allocation of equity assets Findings - The 4-f (funds) survey and tax reports include “long-term financial investments” without further detail; this item could include long-term debt securities, long-term accounts receivable, and equity. - NFCs are more likely to invest in the form of equity in other NFCs (largely related entities) than to place long-term funds in other instruments or sectors. Recommendation - Treat the total value of “long-term financial investments” as NFCs’ equity investments in other NFCs for initial FABS estimates. - Allocate the balance remaining—taking NFCs’ equity assets for the financial sector, general government, nonresidents, and NFCs’ investment in other NFCs from the total equity from the 4-f (funds) survey or tax balance sheet data—to the household sector for compilation of initial FABS estimates. *Source: 1blrea2020003 - 18. The mission discussed with Belstat staff each of these report forms to show how to — INTERNATIONAL MONETARY FUND* ### 39. The mission advised Belstat staff of the difference between transactions and ### 1blrea2020003 - 39. The mission advised Belstat staff of the difference between transactions and ### Equity: distinction between transactions and positions - Finding: For equity, only transactions in the shares (or other equity) should be included in the FABS’ financial accounts; for financial balance sheets all shareholders’ funds should be included. - Rationale: Total shareholders’ funds include accumulated retained earnings, current period retained earnings, revaluations, and other reserves that are either captured elsewhere (e.g., current period retained earnings in sector saving), are not transactions (e.g., revaluation), or were accumulated in prior periods. - Data limitation: The 4-f (funds) survey reports only total equity liability (no breakdown); the tax form includes the breakdown. - Mission recommendation: Request the breakdown of shareholders’ funds from the Ministry of Taxes and Fees. (Belstat made this request during the mission; the information should be provided by the Ministry of Taxes and Fees under the current memorandum of understanding between the two agencies.) - Note: The distinction between measurement of transactions and positions of equity liability also applies to the financial sector; the 1SR, the 2SR, and the 4SR provide the necessary breakdown of shareholders’ funds. ### Equity assets valuation and transaction estimation - Finding: Equity assets are usually reported as a single item and often recorded at acquisition cost; balance sheet changes may be a reasonable proxy for transactions but not for current value of positions. - Recommendation: - Explore with a sample of respondents to the 4-f (funds) survey how their holdings of equity are valued. - Pending confirmation, assume that all changes in equity asset holdings represent transactions (June 2020). - Postpone deriving better estimates of equity asset positions until more work is done on the development of the FABS. ### NFC accounts receivable/payable and counterpart allocation - Data sources: The 4-f (funds) survey does not identify accounts receivable/payable instruments; the tax return includes “short-term accounts receivable”, “long-term accounts receivable”, and “long-term accounts payable”, with no counterpart information. - Finding: Breakdown for other accounts receivable often unavailable; recommended not to attempt counterparty allocation at this stage for receivables. - For liabilities, tax return provides breakdown of “short-term accounts payable” enabling counterpart assignment: - “suppliers, contractors, performers” → other NFCs or rest of the world (ESS should provide rest of the world; remainder attributable to other NFCs). - “advances received” → funds received for subsequent delivery; can be included in calculation of the item above. - “taxes and fees” and “social insurance and security” → funds owing to general government. - “remuneration of employees” → amounts owing to households (nonresident households regarded as insignificant). - “leasing payments” → likely operating leases (not finance leases); amount likely owing to other NFCs or nonresidents and included in the first item (“suppliers…”). - “property owners (founders, participants)” → ambiguous; may be taken to be owing to households. - Footnote: Finance leases are treated as loans and should not be included in accounts payable. Recommendations (with dates): - Belstat confirm with the NBRB that all the loans in other investment: nonfinancial corporations, households, and nonprofit institutions serving households in the ESS are by NFCs for both assets or liabilities (March 2020). - The NBRB provide Belstat with a breakdown of debt instruments in direct investment, and provide a sector breakdown for all direct investment debt and equity instruments (March 2020). - Belstat ascertain that the total equity liability value on the 4-f (funds) survey equals the total equity value on the tax return form for NFCs; if differences exist, explore causes and use the better-quality source; in the meantime use tax data unless compelling reason to use 4-f (funds) survey (June 2020). - Belstat allocate the difference between total NFC equity on issue (from 4-f (funds) survey or tax balance sheet data as appropriate) and the total of equity assets in NFCs of the financial sector, general government, nonresidents, and NFCs’ investment in other NFCs to the household sector (March 2020). - Belstat request the Ministry of Taxes and Fees provide the components of NFCs’ shareholders’ funds on the tax form for 2017 (November 2019). - Belstat explore with a sample of respondents to the 4-f (funds) survey how their holdings of equity are valued; pending confirmation assume all changes in equity asset holdings represent transactions (June 2020). ### Rest of the World — reserve assets “other claims” - Finding: The ESS includes an item “other claims” in “reserve assets” that has no direct instrument in the FABS. - Recommendation: Belstat request the NBRB to break down other claims in reserve assets to identify to which instruments it is allocated on the 1SR (March 2020) to ensure consistency between the ESS and the FABS. ### Households and NPISHs - Finding: No separate information on NPISHs in the 1SR, 2SR, and 4SR; NPISHs combined into “other resident sectors”. - Recommendation: Include NPISHs in the household sector in the FABS; combine net lending/borrowing in the capital accounts of the two sectors to confront net lending/borrowing in the financial account of the combined sectors (June 2020). ### Compilation of the FABS and Balance Sheet Approach (BSA) - Findings and approach: - Most data available by instrument and by counterparty or can be constructed. - To aid users new to datasets, compile initially a limited instrument-by-sector matrix for 2017 with accompanying methodological notes; show sector capital accounts and balancing items. - Prepare financial accounts in conjunction with financial balance sheets and the Other Changes in Assets Account for an integrated dataset. - The compilation system entries (mostly by counterpart sector) allow reconfiguration into a sector-by-sector matrix (BSA). - BSA is consolidated within sectors; intrasectoral claims should be consolidated out. - Recommendations: - Belstat compile, at least initially for 2017, a limited matrix, instrument by sector, with accompanying methodological notes (June 2020). - Belstat compile a BSA for 2017 in addition to the FABS (June 2020). ### Table of proposed data sources (summary) - The source lists instruments F1–F8 across sectors (Central bank, Other deposit-taking corporations, Other financial corporations, Total Financial corporations, General Government, Central Government, Local Government, HHs & NPISHs, ROW) and recommended data sources (1SR, 2SR, 4SR, ESS, GFS, 4-f (funds) Survey, Tax return, MOF). (See table for mapping by instrument.) ### Appendix I — Methodological issues: Reinvested earnings and effects on saving - Rule: Reinvested earnings = retained earnings × proportion of entity’s shares on issue owned by direct investors. - Examples: - If an NFC is 100 percent owned by direct investor(s) and retained earnings = 100: - Primary income account: Reinvested earnings on foreign direct investment 100 (NFC Uses) and 100 (ROW Resources). - Financial account: Equity Liability 100 (Net incurrence of liabilities) and Asset 100 (Net acquisition of assets). - Effect: Reduces domestic saving and increases foreign saving. - If NFC is 50 percent owned by direct investors, deemed distributed = 50 percent of retained earnings. - If a resident entity is a direct investor abroad, treatment reverses and domestic saving is increased. - Negative reinvested earnings (e.g., operating loss of 100 for NFC 100 percent owned by direct investors): - Primary income account: Reinvested earnings on foreign direct investment -100 (NFC Uses) and -100 (ROW Resources). - Financial account: Equity Liability -100 (Net incurrence of liabilities) and Asset -100 (Net acquisition of assets). - Effect: Increases domestic saving and reduces foreign saving. - Note: Reinvested earnings are a component of shareholders’ funds; for positions data where equity is sum of shareholders’ funds, reinvested earnings are not recorded separately. ### Appendix I — Deriving transactions from foreign-currency-denominated balance sheet items - Problem: Changes in domestic-currency valuations can reflect revaluation, not transactions. - Recommended approach: a) Convert opening and closing balances to currency of denomination using exchange rate at beginning of period. b) Take first difference in the currency of denomination. c) Reconvert value in b) back to Belarusian rubles using the average exchange rate for the period. d) Subtract c) from the first difference between the Belarusian values and record as a revaluation in Other Changes in Assets Account. - Example A (no transactions; exchange rate changed from 2:1 to 2.5:1): - Opening balance = 200 Belarusian rubles = 100 euros (at 2:1). - Closing balance = 250 Belarusian rubles = 100 euros (at 2.5:1). - Difference in euros = 0 → Transactions = 0. - Revaluation (Other Changes in Assets Account) = 250 – 200 = 50. - Account identity: 200 + 0 + 50 = 250. - Example B (closing balance 300 rubles): - Opening balance = 200 rubles = 100 euros (2:1). - Closing balance = 300 rubles = 120 euros (2.5:1). - Difference in euros = 20. - Difference in rubles using average exchange rate for period = 20*(2+2.5)/2 = 45 (recorded as transactions in financial account). - Revaluation = 300 – 200 – 45 = 55 (Other Changes in Assets Account). - Account identity: 200 + 45 + 55 = 300. ### Appendix I — Treatment of provisions for loan losses and write-offs - Finding: In the 2008 SNA, provisions for losses are not an instrument but an internal accounting device; until an asset is written off/down the provision should be added back to shareholders’ funds as part of reserves. - Treatment when reduction is recognized: - No transaction recorded unless creditor and debtor agree to recognize the loss; if agreed, record a capital transfer (debt forgiveness) in the capital account and a counterpart entry in the financial account reflecting reduction in holding of the instrument. - Example: General government loan of 100 forgiven by a foreign creditor: - Capital account: Capital transfers payable GG -100; Capital transfers receivable ROW -100. - Financial account: Loans Net incurrence of liabilities -100; Net acquisition of assets -100. - If a resident DTC unilaterally writes down a loan asset of 100 with a resident NFC (no mutual agreement), record the change as an Other Changes in Volume: - Other Changes in Volume Account: Loans Assets (DTCs) -100; Loans Liabilities (NFCs) -100. - Integration into opening/closing balances: - DTCs loan assets: Opening balance 100 + Transactions 0 + Other Changes in Volume +/- -100 = 0. - NFCs loan liabilities: Opening balance 100 + Transactions 0 + Other Changes in Volume +/- -100 = 0. *Republic of Belarus — INTERNATIONAL MONETARY FUND (excerpts from content unit 1blrea2020003)* --- _Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1blrea2020003.pdf_