## 1. Priority Recommendations

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### Summary of mission outcomes and priority recommendations
- Mission: IMF Statistics Department (STA) technical assistance (TA) mission to Andorran Statistics Department (ASD) on external sector statistics (ESS), March 21–April 1, 2022.
- Focus: assist ASD to initiate compilation of international investment position (IIP) and produce balance of payments statistics regularly with improved coverage and quality.
- Key outcomes:
  - ASD is ready to start compiling IIP; mission provided recommendations to improve coverage and quality of annual IIP data for 2019 and 2020.
  - ASD is ready to produce balance of payments data regularly; mission provided recommendations to fill remaining data gaps and improve quality.
  - ASD should report new annual balance of payments data for 2020 and updated data for 2019 to the IMF for redissemination after implementing recommendations.
  - Discussions initiated on improving frequency from annual to quarterly.
  - Direct reporting system being improved: enterprises required to report balance sheet information with explanation notes (provides source data for several main IIP and balance of payments components for 2021 and forward). Deadline for data submission is September of the following year.
- Priority recommendations and target dates:
  - April 2022 — Start compiling IIP data. Report 2019 and 2020 data to the IMF for redissemination. — ASD
  - April 2022 — Report new 2020 and updated 2019 balance of payments data to the IMF for redissemination. — ASD
  - December 2022 — Review the results of the new direct reporting system to use the information to compile IIP and balance of payments data. — ASD

### Detailed technical assessment and priority milestones
- Overarching outcome: A new data set has been compiled and made available internally and/or disseminated to the public.
- High-priority (H) and Medium-priority (M) actions with target completion dates (selected):
  - H — Report IIP data for 2019 and 2020 to the IMF for redissemination after implementing the mission recommendations. April 2022.
  - H — Continue to coordinate with the AFA and Andorran banks to record financial derivative asset and liability positions for banks. June 2022.
  - M — Investigate whether other institutions sectors (e.g., OFCs) have financial derivative positions. December 2022.
  - H — Estimate euros circulating in Andorra using the average currency in circulation to deposits ratio obtained from neighboring countries. Already implemented.
  - M — Investigate whether OFCs have loan assets consulting with the AFA. June 2022.
  - M — Contact banks to guide them to report accounts receivable and payable on a gross basis. June 2022.
  - H — Record SDR holdings and allocations as explained by the mission. Double-check the data received from the Ministry of Finance and those on the IMF’s website. Already implemented.
  - H — Report the new balance of payments data for 2020 and updated data for 2019 to the IMF for redissemination after implementing the mission recommendations. April 2022.
  - M — Record merchanting on a gross basis with the information on the goods acquired and goods sold under merchanting. Already implemented.
  - H — Start recording financial derivative transactions in balance of payments following mission guidance. June 2022.
  - H — Record SDR holdings and allocations following the mission’s guidance in the balance of payments for 2020. Already implemented.
- Source data adequacy actions (selected):
  - H — Review results of the new direct reporting to compile FDI asset positions and compare with CDIS mirror data. December 2022.
  - H — Further improve direct reporting system by covering equity liabilities. December 2022.
  - M — Explore source data for households’ investments in real estate abroad by revising household survey or acquiring Tax Office information. December 2022.
  - M — Obtain source data from the Andorran public pension fund and validate by comparing with custody bank information. Already implemented.
  - M — Confirm with banks that reported portfolio investment liabilities for general government were non-residents’ holdings; contact Ministry of Finance for source data. June 2022.
  - H — Obtain source data from the AFA to record OFCs’ portfolio investment asset positions for equity and debt securities. June 2022.
  - M — Review deposit assets and loan liabilities for non-financial corporations from the new direct reporting system to replace mirror data. December 2022.
  - M — Obtain source data from the AFA for deposit assets and loan liabilities for OFCs. September 2022.
  - M — Review trade credit information from new direct reporting for non-financial corporations and explain difference between trade credit and bank-provided trade finance. December 2022.
  - M — Contact banks to guide reporting of accounts receivable and payable on a gross basis. September 2022.
  - M — Further investigate classification of other equity and reclassify to correct items. June 2022.
  - H — Contact AFA to revise source data for dividends received. June 2022.
  - M — Contact AFA to revise source data to record transactions for both accounts receivable and payable. September 2022.
- Priority scale: H – High, M – Medium.

### I. International Investment Position (IIP) — assessment and recommendations
- Context and readiness:
  - Andorra joined the IMF in October 2020. First Article IV consultation: March–April 2021 (Board meeting June 2021).
  - ASD disseminated first annual balance of payments statistics in May 2021 (data for 2019); remaining gaps and IIP not yet compiled prior to mission.
  - ASD prepared preliminary annual IIP data for 2019 and 2020 for mission review; mission provided recommendations to improve coverage and quality.
  - Mission advised ASD to report IIP data to IMF for redissemination after implementing recommendations.
- Direct Investment (FDI) specifics:
  - Direct reporting system improved starting with information for 2021: enterprises required to report balance sheet information with explanation notes; data shared among ASD, Ministry of Economy, Tax Office; deadline September of following year.
  - Around 6,000 enterprises expected to report under the new system. ASD plans to review data for 1,000 to 2,000 enterprises but mission advised focusing initially on largest enterprises (a few hundred enterprises).
  - New reporting currently does not cover FDI and portfolio equity liabilities; ASD plans to use business register (share of non-residents’ equity holdings) and Ministry of Economy approvals of investments—shortcomings: market values of equities and information on disinvestments not available.
  - ASD acquiring information on non-residents’ investments in Andorran real estate from Ministry of Economy; ASD lacks data on Andorran households’ investments in real estate abroad and plans to revise household survey and consult Tax Office.
  - Until new direct reporting data available, ASD plans to use mirror data from IMF’s Coordinated Direct Investment Survey (CDIS) to record FDI assets and liabilities; CDIS mirror data show minimum levels because some partner-country data with Andorra reported confidential and some countries do not participate in CDIS. Mission explained differences between CDIS directional principle and BPM6 asset/liability presentation; reverse investment led to negative debt instrument positions in CDIS mirror data for Andorra.
- FDI Recommendations (selected):
  - Report IIP data for 2019 and 2020 to IMF for redissemination after implementing mission recommendations (top priority by April 2022; some recommendations will take time).
  - Review results of new direct reporting to compile FDI asset positions and compare with CDIS mirror data (top priority by December 2022).
  - Further improve direct reporting to cover equity liabilities (high priority by December 2022).
  - Explore source data for households’ investments in real estate abroad via household survey or Tax Office (medium priority by December 2022).

### II. Portfolio Investment — assessment and recommendations
- Data sources and issues:
  - Portfolio investment data sourced from Andorran banks for all institutional sectors; banks provide custody services to clients including non-financial corporations, households, and the Andorran public pension fund (Retirement Reserve Fund).
  - ASD collects data from banks using integrated IIP statement, including valuation and foreign exchange rate changes.
  - Mission requested investigation of banks’ large holdings of equity securities; AFA confirmed investments were mostly in money market funds.
  - Mission recommended obtaining source data directly from the Andorran public pension fund rather than relying solely on AFA-reported data to ensure comprehensive recording, including positions made through foreign banks; validate pension fund data against custody banks’ information.
  - It is likely AFA reported non-residents’ holdings of Andorran government securities as portfolio investment liabilities for general government; ASD is confirming with banks via AFA and contacting Ministry of Finance for source data.
  - Portfolio investment asset positions for OFCs are not compiled for equity and debt securities; AFA reports OFCs’ portfolio investment transactions for balance of payments, indicating likely OFC positions abroad; ASD approaching AFA for source data.
- Data source mapping (as presented):
  - General government — Equity Assets: AFA (pension fund); Liabilities: ---
  - Deposit-taking corporations — Equity Assets: AFA; Liabilities: AFA
  - Other financial corporations — Equity Assets: AFA; Liabilities: AFA
  - Non-financial corporations — Equity Assets: AFA (new direct reporting); Liabilities: AFA (new direct reporting)
  - Households — Equity Assets: AFA (household survey or Tax Office); Liabilities: ---
  - Note: *Potential new source data are in parenthesis.*
- Portfolio Investment Recommendations (selected):
  - Obtain source data from the Andorran public pension fund and validate with custody bank information (already implemented).
  - Confirm with banks that reported portfolio investment liabilities for general government were non-residents’ holdings; contact Ministry of Finance for source data (medium priority by June 2022).
  - Obtain source data from AFA to record OFCs’ portfolio investment asset positions for equity and debt securities (high priority by June 2022).

### III. Financial Derivatives
- Status and actions:
  - ASD coordinating with AFA to start compiling financial derivative transactions and positions for Andorran banks.
  - Guidance provided previously to ASD, AFA, and Andorran banks on recording of financial derivative transactions and positions.
  - Compilation of positions is straightforward if banks’ balance sheet data separate positions with residents and non-residents.
- Recommendations:
  - Continue coordination with AFA and Andorran banks to record financial derivative asset and liability positions for banks (high priority by June 2022).
  - Investigate whether other institutional sectors (e.g., OFCs) have financial derivative positions (medium priority by December 2022).

### IV. Currency in Circulation (euros circulating in Andorra)
- Context:
  - Andorra is fully euroized but does not participate in the Eurosystem. Euros circulating in Andorra are part of external assets and should be included in IIP (assets in currency and deposits).
  - No established methodology existed to estimate currency in circulation.
- Methodology agreed:
  - Estimate euros circulating in Andorra by applying the average ratio of currency in circulation to deposits from neighboring euro area countries to Andorra’s deposits. Ratios in neighboring countries ranged around 5 to 15 percent. ASD applied the average ratio among neighboring countries to deposits in Andorra.
- Estimated euros circulating in Andorra (€ million):
  - 2018 — Estimated euros in circulation 601
  - 2019 — Estimated euros in circulation 645
  - 2020 — Estimated euros in circulation 603
- Supporting evidence:
  - ASD estimated annual cash payments by tourists (total spending minus credit card use) at around 400 million euros, supporting plausibility of estimated cash circulating in Andorra.
- Recommendation:
  - Estimate euros circulating in Andorra using the average currency in circulation to deposits ratio obtained from neighboring countries (already implemented).

### Deposits and loans are compiled based on the data from the AFA and the mirror data from the Locational Banking Statistics (LBS)
- Deposits and loan data sources and compilation practices:
  - Deposit assets for banks: Obtained from banks through the AFA.
  - Deposit assets for:
    - OFCs: compiled using the mirror data from the LBS (recommendation to obtain from AFA).
    - Non-financial corporations: compiled using the mirror data from the LBS; new direct reporting system may provide new source data.
    - Households: compiled using mirror data from the LBS; ASD can continue to use mirror data until other sources (e.g., household survey or the Tax Office) become available.
  - LBS coverage and features:
    - Provides position data and changes in positions during the quarter adjusted by exchange rates.
    - Changes in positions can be used as a proxy for transactions to be recorded in the balance of payments.
    - Separately identifies data for banks, OFCs, non-financial corporations, general government, and households.
  - Loan assets:
    - Recorded only for banks (current practice).
    - Mission raised the possibility that OFCs may have loan assets; ASD plans to investigate with the AFA as loans by OFCs could be mixed into the banks’ data.
  - Loan liabilities:
    - Recorded using mirror data from the LBS for OFCs, non-financial corporations, and households.
    - New direct reporting system may provide loan liabilities for non-financial corporations.
    - Loan liabilities for OFCs should be obtained from the AFA.
    - Government loan: government received a loan from a French bank to finance expenses to deal with the pandemic; data obtained from the Ministry of Finance.
- Data source summary by sector (as presented):
  - General government
    - Deposits assets: — AFA
    - Deposits liabilities: — AFA
    - Loans assets: — AFA (AFA)
    - Loans liabilities: Ministry of Finance
  - Deposit-taking corporations
    - Deposits assets: LBS mirror data (AFA)
    - Deposits liabilities: AFA
    - Loans assets: AFA (AFA)
    - Loans liabilities: AFA
  - Other financial corporations
    - Deposits assets: LBS mirror data
    - Deposits liabilities: — —
    - Loans assets: —
    - Loans liabilities: LBS mirror data (AFA)
  - Non-financial corporations
    - Deposits assets: LBS mirror data (new direct reporting)
    - Deposits liabilities: — —
    - Loans assets: —
    - Loans liabilities: LBS mirror data (new direct reporting)
  - Households
    - Deposits assets: LBS mirror data (household survey or Tax Office)
    - Deposits liabilities: — —
    - Loans assets: —
    - Loans liabilities: LBS mirror data (household survey or Tax Office)
  - Note: "*Potential new source data are in parenthesis.*"
- Recommendations on deposits and loans (explicit actions and priorities):
  - Review the information on deposit assets and loan liabilities for non-financial corporations obtained from the new direct reporting system, with a view to replacing the mirror data for recording these instruments (high priority by December 2022).
  - Obtain source data for the AFA to record deposit assets and loan liabilities for OFCs (medium priority by September 2022).
  - Investigate whether OFCs have loan assets consulting with the AFA (medium priority by June 2022).

### Trade credit, accounts receivable/payable, and other equity
- Trade credit:
  - ASD has not yet compiled data on trade credit.
  - New direct reporting may provide source data.
  - Mission explained difference between trade credit and trade finance provided by banks; ASD needs to explain to reporters to avoid misreporting.
- Accounts receivable/payable:
  - Banks report accounts payable but not accounts receivable; likely netted when reported.
  - ASD plans to contact banks to ensure gross reporting of accounts receivable and payable.
- Other equity:
  - Mission provided guidance on reporting other equity to Andorran banks.
  - Banks reported relatively large figures for other equity assets and liabilities.
  - One bank reported investments in equity-linked securities under other equity; mission advised equity-linked securities be reported as debt securities.
- Recommendations:
  - Review trade credit information for non-financial corporations from new direct reporting and record in the IIP; explain difference between trade credit and trade finance as needed (medium priority by December 2022).
  - Contact banks to guide them to report accounts receivable and payable positions on a gross basis (medium priority by September 2022).
  - Further investigate what was reported as other equity and reclassify to correct items (medium priority by June 2022).

### Reserve assets (SDRs and Fund position)
- Current situation:
  - Andorra’s reserve assets are currently limited to holdings of Special Drawing Rights (SDRs).
  - ASD was recording reserve position in the IMF instead of SDR holdings; SDR allocations were not recorded.
- Mission guidance:
  - Explained how Fund accounts should be recorded when Andorra became an IMF member and how to record transactions of SDRs and related interest payments and receipts.
- Recommendation:
  - Record SDR holdings and allocations as explained by the mission. Double-check data received from the Ministry of Finance and those on the IMF’s website (already implemented).

### Balance of payments: readiness, data gaps, and compilation guidance
- ASD preparedness:
  - ASD is ready to produce balance of payments data regularly.
  - Prior to the mission, ASD prepared preliminary new data for 2020 and updated data for 2019 for mission review.
  - Mission provided recommendations to improve coverage and quality and advised ASD to report data to the IMF for redissemination after implementing recommendations.
  - ASD and mission initiated discussions to improve compilation frequency from annual to quarterly.
- Merchanting:
  - ASD started recording merchanting from business survey information.
  - Mission recommended compiling merchanting on a gross basis: record values for goods acquired and goods sold (sold goods as credit; acquired goods as negative credit).
  - Recommendation: Record merchanting on a gross basis with information on goods acquired and goods sold (already implemented).
- Dividends in primary income:
  - Mission recommended recording dividends in primary income in balance of payments for 2020 consistently with 2019.
  - Source data for dividends received from AFA for 2020 were very low compared to 2019.
  - ASD adjusted 2020 data using the 2019 dividend yield with modification for changes in world stock market dividend yields; adjustment acceptable as a temporal measure.
  - Mission recommended ASD address the issue with the AFA and replace adjusted data with real data.
  - Recommendation: Contact AFA to revise source data for dividends received (high priority by June 2022).
- Financial derivatives in balance of payments:
  - Mission provided detailed guidance using BPM6 Compilation Guide (Form 20).
  - Guidance: most transactions settle asset or liability positions and should be recorded as decreases in assets and liabilities in balance of payments; only purchasing and selling options are recorded as increases in assets and liabilities.
  - Mission advised recording financial derivative transactions and positions based on the integrated IIP statement to review consistency between balance of payments and IIP.
  - Recommendation: Start recording financial derivative transactions in balance of payments following mission guidance (high priority by June 2022).
- Accounts receivable/payable and trade credit in balance of payments:
  - Mission recommended recording both accounts receivable and payable in balance of payments; previously only accounts payable were recorded.
  - Source data for trade credit transactions may become available from new direct reporting system.
  - Recommendation: Contact AFA to revise source data to record transactions for both accounts receivable and payable (medium priority by September 2022).
- Reserve assets in balance of payments:
  - ASD was recording reserve position in the IMF instead of SDR holdings; SDR allocations not recorded in balance of payments for 2020.
  - Recommendation: Record SDR holdings and allocations following mission guidance in balance of payments for 2020 (already implemented).
- Quarterly balance of payments:
  - Discussion of steps and challenges to move from annual to quarterly compilation.
  - Bank-provided source data (e.g., other investment items) are available quarterly.
  - New direct reporting system results will be available only annually; household survey is annual.
  - Some travel data are available monthly, but travel services are compiled only annually.
  - A follow-up mission could assist ASD in developing source data to compile balance of payments quarterly.
- Overall reporting recommendations (priorities and timing):
  - Report the new balance of payments data for 2020 and updated data for 2019 by implementing mission recommendations to the IMF for redissemination (top priority by April 2022). Some recommendations will take time; report revised data once those recommendations are implemented (high priority).
  - Record merchanting on a gross basis (already implemented).
  - Contact AFA to revise source data for dividends received (high priority by June 2022).
  - Start recording financial derivative transactions in balance of payments following mission guidance (high priority by June 2022).
  - Contact AFA to revise source data to record transactions for both accounts receivable and payable (medium priority by September 2022).
  - Record SDR holdings and allocations in balance of payments for 2020 as guided by the mission (already implemented).

*Source: IMF STA technical assistance mission report — "1. Priority Recommendations" (Andorra).*

### 1. Priority Recommendations _____________________________________________________________________ 4

### 1. Priority Recommendations

### Summary of mission outcomes and priority recommendations
- Mission: IMF Statistics Department (STA) technical assistance (TA) mission to Andorran Statistics Department (ASD) on external sector statistics (ESS), March 21–April 1, 2022.
- Focus: assist ASD to initiate compilation of international investment position (IIP) and produce balance of payments statistics regularly with improved coverage and quality.
- Key outcomes:
  - ASD is ready to start compiling IIP; mission provided recommendations to improve coverage and quality of annual IIP data for 2019 and 2020.
  - ASD is ready to produce balance of payments data regularly; mission provided recommendations to fill remaining data gaps and improve quality.
  - ASD should report new annual balance of payments data for 2020 and updated data for 2019 to the IMF for redissemination after implementing recommendations.
  - Discussions initiated on improving frequency from annual to quarterly.
  - Direct reporting system being improved: enterprises required to report balance sheet information with explanation notes (provides source data for several main IIP and balance of payments components for 2021 and forward). Deadline for data submission is September of the following year.
- Table 1. Andorra: Priority Recommendations (Target Date / Priority Recommendations / Responsible Institutions)
  - April 2022 — Start compiling IIP data. Report 2019 and 2020 data to the IMF for redissemination. — ASD
  - April 2022 — Report new 2020 and updated 2019 balance of payments data to the IMF for redissemination. — ASD
  - December 2022 — Review the results of the new direct reporting system to use the information to compile IIP and balance of payments data. — ASD

### Detailed technical assessment and recommendations — priority milestones
- Overarching outcome: A new data set has been compiled and made available internally and/or disseminated to the public.
- High-priority (H) and Medium-priority (M) actions with target completion dates:
  - H — Report IIP data for 2019 and 2020 to the IMF for redissemination after implementing the mission recommendations. April 2022.
  - H — Continue to coordinate with the AFA and Andorran banks to record financial derivative asset and liability positions for banks. June 2022.
  - M — Investigate whether other institutions sectors (e.g., OFCs) have financial derivative positions. December 2022.
  - H — Estimate euros circulating in Andorra using the average currency in circulation to deposits ratio obtained from neighboring countries. Already implemented.
  - M — Investigate whether OFCs have loan assets consulting with the AFA. June 2022.
  - M — Contact banks to guide them to report accounts receivable and payable on a gross basis. June 2022.
  - H — Record SDR holdings and allocations as explained by the mission. Double-check the data received from the Ministry of Finance and those on the IMF’s website. Already implemented.
  - H — Report the new balance of payments data for 2020 and updated data for 2019 to the IMF for redissemination after implementing the mission recommendations. April 2022.
  - M — Record merchanting on a gross basis with the information on the goods acquired and goods sold under merchanting. Already implemented.
  - H — Start recording financial derivative transactions in balance of payments following mission guidance. June 2022.
  - H — Record SDR holdings and allocations following the mission’s guidance in the balance of payments for 2020. Already implemented.
- Source data adequacy actions (selected):
  - H — Review results of the new direct reporting to compile FDI asset positions and compare with CDIS mirror data. December 2022.
  - H — Further improve direct reporting system by covering equity liabilities. December 2022.
  - M — Explore source data for households’ investments in real estate abroad by revising household survey or acquiring Tax Office information. December 2022.
  - M — Obtain source data from the Andorran public pension fund and validate by comparing with custody bank information. Already implemented.
  - M — Confirm with banks that reported portfolio investment liabilities for general government were non-residents’ holdings; contact Ministry of Finance for source data. June 2022.
  - H — Obtain source data from the AFA to record OFCs’ portfolio investment asset positions for equity and debt securities. June 2022.
  - M — Review deposit assets and loan liabilities for non-financial corporations from the new direct reporting system to replace mirror data. December 2022.
  - M — Obtain source data from the AFA for deposit assets and loan liabilities for OFCs. September 2022.
  - M — Review trade credit information from new direct reporting for non-financial corporations and explain difference between trade credit and bank-provided trade finance. December 2022.
  - M — Contact banks to guide reporting of accounts receivable and payable on a gross basis. September 2022.
  - M — Further investigate classification of other equity and reclassify to correct items. June 2022.
  - H — Contact AFA to revise source data for dividends received. June 2022.
  - M — Contact AFA to revise source data to record transactions for both accounts receivable and payable. September 2022.
- Priority scale: H – High, M – Medium.

### I. International Investment Position (IIP) — assessment and recommendations
- Context:
  - Andorra joined the IMF in October 2020. First Article IV consultation: March–April 2021 (Board meeting June 2021).
  - ASD disseminated first annual balance of payments statistics in May 2021 (data for 2019); remaining gaps and IIP not yet compiled prior to mission.
- Readiness:
  - ASD prepared preliminary annual IIP data for 2019 and 2020 for mission review; mission provided recommendations to improve coverage and quality.
  - Mission advised ASD to report IIP data to IMF for redissemination after implementing recommendations.
- Direct Investment (FDI):
  - Direct reporting system improved starting with information for 2021: enterprises required to report balance sheet information with explanation notes; data shared among ASD, Ministry of Economy, Tax Office; deadline September of following year.
  - Around 6,000 enterprises expected to report under the new system. ASD plans to review data for 1,000 to 2,000 enterprises but mission advised focusing initially on largest enterprises (a few hundred enterprises).
  - New reporting currently does not cover FDI and portfolio equity liabilities; ASD plans to use business register (share of non-residents’ equity holdings) and Ministry of Economy approvals of investments—shortcomings: market values of equities and information on disinvestments not available.
  - ASD acquiring information on non-residents’ investments in Andorran real estate from Ministry of Economy; ASD lacks data on Andorran households’ investments in real estate abroad and plans to revise household survey and consult Tax Office.
  - Until new direct reporting data available, ASD plans to use mirror data from IMF’s Coordinated Direct Investment Survey (CDIS) to record FDI assets and liabilities; CDIS mirror data show minimum levels because some partner-country data with Andorra reported confidential and some countries do not participate in CDIS. Mission explained differences between CDIS directional principle and BPM6 asset/liability presentation; reverse investment led to negative debt instrument positions in CDIS mirror data for Andorra.
- FDI Recommendations (selected):
  - Report IIP data for 2019 and 2020 to IMF for redissemination after implementing mission recommendations (top priority by April 2022; some recommendations will take time).
  - Review results of new direct reporting to compile FDI asset positions and compare with CDIS mirror data (top priority by December 2022).
  - Further improve direct reporting to cover equity liabilities (high priority by December 2022).
  - Explore source data for households’ investments in real estate abroad via household survey or Tax Office (medium priority by December 2022).

### II. Portfolio Investment — assessment and recommendations
- Data sources and issues:
  - Portfolio investment data sourced from Andorran banks for all institutional sectors; banks provide custody services to clients including non-financial corporations, households, and the Andorran public pension fund (Retirement Reserve Fund).
  - ASD collects data from banks using integrated IIP statement, including valuation and foreign exchange rate changes.
  - Mission requested investigation of banks’ large holdings of equity securities; AFA confirmed investments were mostly in money market funds.
  - Mission recommended obtaining source data directly from the Andorran public pension fund rather than relying solely on AFA-reported data to ensure comprehensive recording, including positions made through foreign banks; validate pension fund data against custody banks’ information.
  - It is likely AFA reported non-residents’ holdings of Andorran government securities as portfolio investment liabilities for general government; ASD is confirming with banks via AFA and contacting Ministry of Finance for source data.
  - Portfolio investment asset positions for OFCs are not compiled for equity and debt securities; AFA reports OFCs’ portfolio investment transactions for balance of payments, indicating likely OFC positions abroad; ASD approaching AFA for source data.
- Table 2. Andorra: Data Source for Portfolio Investment Position By Sector (as presented)
  - General government — Equity Assets: AFA (pension fund); Liabilities: ---
  - Deposit-taking corporations — Equity Assets: AFA; Liabilities: AFA
  - Other financial corporations — Equity Assets: AFA; Liabilities: AFA
  - Non-financial corporations — Equity Assets: AFA (new direct reporting); Liabilities: AFA (new direct reporting)
  - Households — Equity Assets: AFA (household survey or Tax Office); Liabilities: ---
  - Debt securities — Assets and Liabilities follow a similar pattern with AFA and potential new sources in parenthesis (pension fund, Ministry of Finance, new direct reporting, household survey or Tax Office).
  - Note: *Potential new source data are in parenthesis.
- Portfolio Investment Recommendations (selected):
  - Obtain source data from the Andorran public pension fund and validate with custody bank information (already implemented).
  - Confirm with banks that reported portfolio investment liabilities for general government were non-residents’ holdings; contact Ministry of Finance for source data (medium priority by June 2022).
  - Obtain source data from AFA to record OFCs’ portfolio investment asset positions for equity and debt securities (high priority by June 2022).

### III. Financial Derivatives
- Status and actions:
  - ASD coordinating with AFA to start compiling financial derivative transactions and positions for Andorran banks.
  - Guidance provided previously to ASD, AFA, and Andorran banks on recording of financial derivative transactions and positions.
  - Compilation of positions is straightforward if banks’ balance sheet data separate positions with residents and non-residents.
- Recommendations:
  - Continue coordination with AFA and Andorran banks to record financial derivative asset and liability positions for banks (high priority by June 2022).
  - Investigate whether other institutional sectors (e.g., OFCs) have financial derivative positions (medium priority by December 2022).

### IV. Currency in Circulation (euros circulating in Andorra)
- Context:
  - Andorra is fully euroized but does not participate in the Eurosystem. Euros circulating in Andorra are part of external assets and should be included in IIP (assets in currency and deposits).
  - No established methodology existed to estimate currency in circulation.
- Methodology agreed:
  - Estimate euros circulating in Andorra by applying the average ratio of currency in circulation to deposits from neighboring euro area countries to Andorra’s deposits. Ratios in neighboring countries ranged around 5 to 15 percent. ASD applied the average ratio among neighboring countries to deposits in Andorra.
- Table 3. Andorra: Estimated Euros Circulating in Andorra (€ million)
  - 2018 — Estimated euros in circulation 601
  - 2019 — Estimated euros in circulation 645
  - 2020 — Estimated euros in circulation 603
- Supporting evidence:
  - ASD estimated annual cash payments by tourists (total spending minus credit card use) at around 400 million euros, supporting plausibility of estimated cash circulating in Andorra.
- Recommendation:
  - Estimate euros circulating in Andorra using the average currency in circulation to deposits ratio obtained from neighboring countries (already implemented).

*Source: IMF STA technical assistance mission report — "1. Priority Recommendations" (Andorra).*

### 22. Deposits and loans are compiled based on the data from the AFA and the mirror

### 22. Deposits and loans are compiled based on the data from the AFA and the mirror data from the Locational Banking Statistics (LBS)

### Deposits and loan data sources and compilation practices
- Deposit assets for banks:
  - Obtained from banks through the AFA.
- Deposit assets for:
  - OFCs: compiled using the mirror data from the LBS (recommendation to obtain from AFA).
  - Non-financial corporations: compiled using the mirror data from the LBS; new direct reporting system may provide new source data.
  - Households: compiled using mirror data from the LBS; ASD can continue to use mirror data until other sources (e.g., household survey or the Tax Office) become available.
- LBS coverage and features:
  - Provides position data and changes in positions during the quarter adjusted by exchange rates.
  - Changes in positions can be used as a proxy for transactions to be recorded in the balance of payments.
  - Separately identifies data for banks, OFCs, non-financial corporations, general government, and households.
- Loan assets:
  - Recorded only for banks (current practice).
  - Mission raised the possibility that OFCs may have loan assets; ASD plans to investigate with the AFA as loans by OFCs could be mixed into the banks’ data.
- Loan liabilities:
  - Recorded using mirror data from the LBS for OFCs, non-financial corporations, and households.
  - New direct reporting system may provide loan liabilities for non-financial corporations.
  - Loan liabilities for OFCs should be obtained from the AFA.
  - Government loan: government received a loan from a French bank to finance expenses to deal with the pandemic; data obtained from the Ministry of Finance.

### Table 4: Data source summary by sector (as presented)
- General government
  - Deposits assets: — AFA
  - Deposits liabilities: — AFA
  - Loans assets: — AFA (AFA)
  - Loans liabilities: Ministry of Finance
- Deposit-taking corporations
  - Deposits assets: LBS mirror data (AFA)
  - Deposits liabilities: AFA
  - Loans assets: AFA (AFA)
  - Loans liabilities: AFA
- Other financial corporations
  - Deposits assets: LBS mirror data
  - Deposits liabilities: — —
  - Loans assets: —
  - Loans liabilities: LBS mirror data (AFA)
- Non-financial corporations
  - Deposits assets: LBS mirror data (new direct reporting)
  - Deposits liabilities: — —
  - Loans assets: —
  - Loans liabilities: LBS mirror data (new direct reporting)
- Households
  - Deposits assets: LBS mirror data (household survey or Tax Office)
  - Deposits liabilities: — —
  - Loans assets: —
  - Loans liabilities: LBS mirror data (household survey or Tax Office)
- Note: "*Potential new source data are in parenthesis.*"

### Recommendations on deposits and loans (explicit actions and priorities)
- Review the information on deposit assets and loan liabilities for non-financial corporations obtained from the new direct reporting system, with a view to replacing the mirror data for recording these instruments (high priority by December 2022).
- Obtain source data for the AFA to record deposit assets and loan liabilities for OFCs (medium priority by September 2022).
- Investigate whether OFCs have loan assets consulting with the AFA (medium priority by June 2022).

### Trade credit, accounts receivable/payable, and other equity
- Trade credit:
  - ASD has not yet compiled data on trade credit.
  - New direct reporting may provide source data.
  - Mission explained difference between trade credit and trade finance provided by banks; ASD needs to explain to reporters to avoid misreporting.
- Accounts receivable/payable:
  - Banks report accounts payable but not accounts receivable; likely netted when reported.
  - ASD plans to contact banks to ensure gross reporting of accounts receivable and payable.
- Other equity:
  - Mission provided guidance on reporting other equity to Andorran banks.
  - Banks reported relatively large figures for other equity assets and liabilities.
  - One bank reported investments in equity-linked securities under other equity; mission advised equity-linked securities be reported as debt securities.
- Recommendation:
  - Review trade credit information for non-financial corporations from new direct reporting and record in the IIP; explain difference between trade credit and trade finance as needed (medium priority by December 2022).
  - Contact banks to guide them to report accounts receivable and payable positions on a gross basis (medium priority by September 2022).
  - Further investigate what was reported as other equity and reclassify to correct items (medium priority by June 2022).

### Reserve assets (SDRs and Fund position)
- Current situation:
  - Andorra’s reserve assets are currently limited to holdings of Special Drawing Rights (SDRs).
  - ASD was recording reserve position in the IMF instead of SDR holdings; SDR allocations were not recorded.
- Mission guidance:
  - Explained how Fund accounts should be recorded when Andorra became an IMF member and how to record transactions of SDRs and related interest payments and receipts.
- Recommendation:
  - Record SDR holdings and allocations as explained by the mission. Double-check data received from the Ministry of Finance and those on the IMF’s website (already implemented).

### Balance of payments: readiness, data gaps, and compilation guidance
- ASD preparedness:
  - ASD is ready to produce balance of payments data regularly.
  - Prior to the mission, ASD prepared preliminary new data for 2020 and updated data for 2019 for mission review.
  - Mission provided recommendations to improve coverage and quality and advised ASD to report data to the IMF for redissemination after implementing recommendations.
  - ASD and mission initiated discussions to improve compilation frequency from annual to quarterly.
- Merchanting:
  - ASD started recording merchanting from business survey information.
  - Mission recommended compiling merchanting on a gross basis: record values for goods acquired and goods sold (sold goods as credit; acquired goods as negative credit).
  - Recommendation: Record merchanting on a gross basis with information on goods acquired and goods sold (already implemented).
- Dividends in primary income:
  - Mission recommended recording dividends in primary income in balance of payments for 2020 consistently with 2019.
  - Source data for dividends received from AFA for 2020 were very low compared to 2019.
  - ASD adjusted 2020 data using the 2019 dividend yield with modification for changes in world stock market dividend yields; adjustment acceptable as a temporal measure.
  - Mission recommended ASD address the issue with the AFA and replace adjusted data with real data.
  - Recommendation: Contact AFA to revise source data for dividends received (high priority by June 2022).
- Financial derivatives:
  - Mission provided detailed guidance using BPM6 Compilation Guide (Form 20).
  - Guidance: most transactions settle asset or liability positions and should be recorded as decreases in assets and liabilities in balance of payments; only purchasing and selling options are recorded as increases in assets and liabilities.
  - Mission advised recording financial derivative transactions and positions based on the integrated IIP statement to review consistency between balance of payments and IIP.
  - Recommendation: Start recording financial derivative transactions in balance of payments following mission guidance (high priority by June 2022).
- Accounts receivable/payable and trade credit in balance of payments:
  - Mission recommended recording both accounts receivable and payable in balance of payments; previously only accounts payable were recorded.
  - Source data for trade credit transactions may become available from new direct reporting system.
  - Recommendation: Contact AFA to revise source data to record transactions for both accounts receivable and payable (medium priority by September 2022).
- Reserve assets in balance of payments:
  - ASD was recording reserve position in the IMF instead of SDR holdings; SDR allocations not recorded in balance of payments for 2020.
  - Recommendation: Record SDR holdings and allocations following mission guidance in balance of payments for 2020 (already implemented).
- Quarterly balance of payments:
  - Discussion of steps and challenges to move from annual to quarterly compilation.
  - Bank-provided source data (e.g., other investment items) are available quarterly.
  - New direct reporting system results will be available only annually; household survey is annual.
  - Some travel data are available monthly, but travel services are compiled only annually.
  - A follow-up mission could assist ASD in developing source data to compile balance of payments quarterly.
- Overall reporting recommendations (priorities and timing):
  - Report the new balance of payments data for 2020 and updated data for 2019 by implementing mission recommendations to the IMF for redissemination (top priority by April 2022). Some recommendations will take time; report revised data once those recommendations are implemented (high priority).
  - Record merchanting on a gross basis (already implemented).
  - Contact AFA to revise source data for dividends received (high priority by June 2022).
  - Start recording financial derivative transactions in balance of payments following mission guidance (high priority by June 2022).
  - Contact AFA to revise source data to record transactions for both accounts receivable and payable (medium priority by September 2022).
  - Record SDR holdings and allocations in balance of payments for 2020 as guided by the mission (already implemented).

*Source: tarea2024015 - 22. Deposits and loans are compiled based on the data from the AFA and the mirror data from the Locational Banking Statistics (LBS) compiled by the Bank for International Settlements (BIS).*

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_Source: https://www.imf.org/-/media/files/publications/tar/2024/english/tarea2024015.pdf_