## wpiea2020130-print-pdf — PSBS database description and methodological overview ## Source details **Canonical URL:** [wpiea2020130-print-pdf — PSBS database description and methodological overview](https://www.imf.org/-/media/files/publications/wp/2020/english/wpiea2020130-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/wp/2020/english/wpiea2020130-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/wp/2020/english/wpiea2020130-print-pdf.pdf.json) --- ### Role, relevance, and motivations - PSBSs provide the most comprehensive picture of public wealth by bringing together all the accumulated assets and liabilities that governments control, including public corporations, natural resources, and pension liabilities. - PSBSs account for the entirety of what the state owns and owes, offering a broader fiscal picture beyond debt and deficits. - PSBSs increase transparency and allow closer scrutiny of the government's financial position, potentially increasing return on assets, reducing risks and the costs of borrowing, and improving fiscal policymaking. - Motivation: demand for internationally comparable data is increasing to evaluate government performance, interconnectedness, and longer-term sustainability; traditional cash-and-debt focus can miss fiscal risks and create fiscal illusion. ### Coverage and institutional universe - Database scope and key counts: - Comprehensive annual balance sheet data for a total of 75 countries and territories at different degrees of institutional coverage. - Estimates covering the full public sector are available for 38 countries. - 17 countries: standalone time series compilation for the October 2018 IMF Fiscal Monitor. - 21 countries: single-year data compiled as part of Fiscal Transparency Evaluations. - Central government data shown for 74 countries and territories. - General government data available for 66 countries and territories. - GDP coverage: - Database covers 91 percent of the world’s GDP at the general government level. - Coverage for public sector is close to 63 percent of world’s GDP (based on latest available year for each country). - For 2016, the coverage is 56 percent of world’s GDP. - Country income classification among the 38 full public sector estimates: - 15 are advanced economies - 17 are emerging market economies - 6 are low income developing countries - Institutional subsectors presented: - General government (with central government data available) - Nonfinancial public corporations (natural resource corporations presented separately) - Financial public corporations, split to identify central bank, sovereign wealth funds (where they operate as financial corporations), and other financial public corporations - Central bank treatment: - Monetary liabilities (currency on issue) treated as liabilities by convention. - Central bank’s equity liability reported on a book value basis; central bank’s net worth is therefore zero. ### Conceptual framework and accounting integration - Compilation framework: IMF’s Government Finance Statistics Manual 2014 (GFSM 2014). - PSBS extends analysis beyond standard debt measures to include all assets (financial, infrastructure, natural resources) and liabilities rarely included in government debt (e.g., pension obligations). - Balance-sheet dynamics: changes decomposed using GFSM 2014 integrated stock-flow framework into fiscal deficits, investments, valuation changes, and other volume changes. - Identity used to analyze evolution of balance sheets: - NWt = NWt-1 + NOBt + OEFt - NWt − NWt-1 = NLBt + INVt + OEFt - Definitions preserved from source: NOBt = REVt − EXPt; NLBt = REVt − (EXPt + INVt). ### Coverage of stocks, valuation, and composition - Assets and liabilities included (as disclosed in the database): - ASSETS — Nonfinancial Assets: Fixed assets; Land; Mineral and energy resources; Other nonfinancial assets. - ASSETS — Financial assets: Monetary gold and Special Drawing Rights (SDRs); Currency and deposits; Debt securities; Loans; Equity and investment fund shares; Insurance, pension, and standardized guarantee schemes (ISPSG); Financial derivatives and employee stock options; Other accounts receivable. - LIABILITIES: SDRs; Currency and deposits; Debt securities; Loans; Equity and investment fund shares; Insurance, pension, and standardized guarantee schemes (ISPSG) — Pension entitlements; Claims of pension funds on pension managers; Other ISPSG liabilities; Financial derivatives and employee stock options; Other accounts payable. - Balancing item: Net Worth (= Assets − Liabilities). - Valuation guidance: - GFSM 2014 principle: market value where possible; other methods (nominal value, written-down replacement cost, book value) used where market prices unavailable. - Public corporation equity: set equal to net asset value where market prices not observable; may be reported at book value. - Nonfinancial nonproduced assets (mineral and energy resources and land): market value approximated by net present value of future economic benefits; stewardship land and heritage assets generally excluded from PSBS database. - Specific valuation procedures (preserved exactly): - Oil and gas valuation: future US dollar cash flows over an 85-year horizon; convert to domestic currency using WEO exchange rate forecasts; discount using average (2000–22) long-term (10-year) government bond yields in WEO plus a risk factor of 1 percentage point for advanced economies, 3 percentage points for emerging economies, and 6 percentage points for low-income developing countries; when government bond yields unavailable, central bank policy rate plus 5 percentage points used. - Coal, metals, and other minerals valuation: sources include World Bank’s The Changing Wealth of Nations 2018 and USGS 2016 reserves and 2014–16 production; convert constant 2014 US$ to current US$ using WEO commodity price index; country ownership adjustments prorated using alternative country-specific indicators. ### Pension liabilities: treatment and estimation - Scope: employment-related public sector pension entitlements (contractual payments to current and past public sector employees; accrued-to-date entitlements of existing beneficiaries). - Exclusions: implicit obligations under general social security arrangements excluded (treated as potentially subject to policy changes). - Preferred data source: authority estimates disclosed in government financial statements, sectoral accounts balance sheets, or supplementary tables. - IMF staff model (when authority estimates unavailable): - Accrued benefit share by age in 2015: from 100 percent for those ages 55 and older to 0 for those ages 25 and younger. - Population covered assumed to match structure of overall population (projections use the 2017 UN World Population Prospects—United Nations 2017). - Discount rate assumed to be 1 percentage point above the rate of GDP growth. - If estimates available only for a single year, entitlements as percentage of GDP are assumed constant over time. - Funding arrangements by scheme type (Box 2 preserved distinctions): - Nonautonomous pension schemes: assets/liabilities reflected in government unit that operates the scheme. - Autonomous pension funds under government control: classified as public financial corporations and display full assets/liabilities. - Schemes managed by insurance enterprises or pension funds: classification depends on control of managing entity. - Defined-contribution schemes: net worth neutral; deemed fully funded. - Defined-benefit schemes: funded (in segregated fund) or unfunded; funding status affects PSBS recording (pension reserve accounts, pension liabilities, employer claims/claims on pension fund). ### Data sources, compilation, and consolidation practices - Primary sources: - IMF’s Government Finance Statistics (GFS) database for central and general government. - IMF’s Monetary and Financial Statistics database for central bank data. - Statistical or government shareholding reports, public corporation financial statements, and IMF staff estimates for public corporations. - Compilation practices for public corporations: - Preferred: statistical estimates by authorities for aggregate subsector. - Otherwise: IMF staff estimates or conversion of financial statements of major state-owned enterprises; sample covering about 80–90 percent of total sector used and grossed up for non-sample units. - Empirical note: top 10 corporations normally account for around 90 percent of the assets of total public corporations. - Consolidation: public sector aggregates computed by summing general government, nonfinancial public corporations, and financial public corporations and eliminating significant cross-holdings and intra-public sector transactions. Key consolidation items include: - General government units’ deposits at the central bank or other public banks; - Central bank and other public corporations’ holdings of securities issued by government units; - General government units’ equity stakes in public corporations; - Loans between general government units and public corporations; - Loans provided by public banks to government units or other public corporations; - Property income (interest and dividends) on the aforementioned items; - Subsidies and other capital transfers provided by government units to public corporations. ### Data availability, time series, and gaps - Time-series availability: - Many advanced economies display continuous coverage from 2000-16 across multiple asset and liability categories (examples in appendix: Australia, Austria, Canada, Japan, United Kingdom). - Several emerging and developing economies show more limited or more recent coverage (examples: Armenia 2009-12 and 2016; China 2010-16; Uzbekistan 2016). - Appendix provides per-country per-category time spans (examples preserved exactly for selected countries such as Albania, Armenia, Australia, Austria, Brazil, Canada, China, India, Japan, United Kingdom, United States, Uruguay, Uzbekistan). - Database aggregate coverage: - PSBS database presents comprehensive annual balance sheet data for 75 countries/territories; full public sector estimates for 38 countries cover 63 percent of global GDP. - Basic balance sheets (excluding land, natural resources, and pension liabilities) available for another 30 countries. - Coverage gaps and IMF staff estimates: - Categories often not recognized in published balance sheets are covered using IMF staff estimates where possible: nonfinancial assets (particularly land and mineral and energy resources) and public sector employment-related pension liabilities. ### Key analytical indicators and balance-sheet findings - Indicators enabled by PSBS: Net worth; Net financial worth; Net liquid assets; Net foreign exchange assets. - Global trends from a 17-country time-series sample: - Liabilities increased by around 39 percentage points of GDP between 2007 and 2016. - Assets (excluding land and natural resources) increased by 22 percentage points of GDP during 2007–09; later retreated slightly to remain 14 percentage points of GDP above pre-crisis levels. - Net financial worth (post-crisis decade): deteriorated by US$ 11 trillion or 28 percentage points of GDP during the post-crisis decade, with a modest decline continuing in later years. - Net worth (including public investment effect): declined by 25 percentage points of GDP on average (slightly lower than net financial worth deterioration). - Country extremes: United Kingdom net worth declined by as much as 49 percentage points of GDP; Norway net worth increased by 167 percentage points of GDP (driven by strong valuation gains from equity holdings). - Decomposition of net worth changes (17-country weighted averages): - 2000–06 (expressed as percent of 2007 GDP): Net worth increased from 38 percent of GDP in 2000 to 42 percent in 2007; valuation changes around 41 percent of GDP; public investment 7 percent of GDP; fiscal deficits negative impact estimated at 36 percent of GDP. - 2007–16 (expressed as percent of 2016 GDP): Net worth fell from 42 percent of GDP in 2007 to 17 percent in 2016; fiscal deficits contributed 38 percentage points of GDP to the overall decline; denominator effect 9 percentage points of GDP; public investment raised net worth by 8 percentage points of GDP; valuations rebounded adding 16 percentage points of GDP to net worth. - Cross-country consolidated indicators (sample of 38 countries): - Assets average 218 percent of GDP; liabilities around 196 percent of GDP. - At general government level in sample of 38 countries, debt securities and loans are worth 93 percent of GDP. - Existing pension obligations to public servants amount to 45 percent of GDP in these countries. - For sample of 17 countries with public corporations data, contribution of public corporations to public sector net worth in 2016 averages 19 percent of GDP (predominance of nonfinancial public corporations). ### Balance-sheet snapshot examples (preserved table values) - Public sector balance sheet (percent of GDP snapshot rows preserved as in source): - Total assets: NA 285.8 30.2 33.7 309.3 -40.5 - Nonfinancial assets: NA 236.3 28.2 0.1 264.6 0.0 - Fixed assets: 8.0 49.8 28.0 0.1 77.9 0.0 - Land: 1.0 20.1 0.0 0.0 20.1 0.0 - Mineral and energy resources: NA 163.6 0.0 0.0 163.6 0.0 - Financial assets: 22.2 49.5 2.0 33.6 44.7 -40.5 - Debt securities: 9.4 13.4 0.1 12.0 13.4 -12.1 - Loans: 3.1 4.6 0.4 19.2 18.8 -5.4 - Equity and investment fund shares: 5.2 23.9 0.1 0.9 3.4 -21.5 - Liabilities: 53.4 76.6 30.2 33.7 100.0 -40.5 - Debt securities (liabilities): 28.5 28.6 0.0 0.0 16.5 -12.1 - Insurance, pension, and standardized guarantee schemes: 19.0 29.0 0.6 3.2 29.9 0.0 - Net financial worth: -31.2 -27.0 -28.2 -0.1 -55.4 0.0 - Net worth: NA 209.2 0.0 0.0 209.2 0.0 - Statement of operations (percent of GDP snapshot rows preserved): - Revenue: 24.3 34.0 4.8 1.6 40.4 0.0 - Expense: 26.3 35.3 5.1 1.8 42.2 0.0 - Net operating balance: -2.0 -1.4 -0.3 -0.2 -1.9 0.0 - Net investment in nonfinancial assets: 0.3 1.3 0.6 0.0 1.9 0.0 - Net lending/borrowing: -2.3 -2.6 -0.9 -0.2 -3.7 0.0 ### Policy implications, risks, and management guidance - Fiscal illusion and quasi-fiscal risks: - Traditional deficit accounting can mask reductions in net worth (example: maintenance cuts reduce deficits but lower infrastructure asset values). - Quasi-fiscal operations via public corporations can push fiscal costs outside general government. - Relevance of consolidation: - Consolidation of cross-holdings is necessary to avoid double-counting and to reveal transmission of fiscal risks across public sector units. - Empirical consolidation examples: Japan — gross outstanding public sector debt securities and loans worth 288 percent of GDP in 2017, with 138 percent of GDP in hands of private creditors; United States — 164 and 110 percent of GDP in 2016. - Asset and liability management: - Consolidated examination of financial assets can reveal asset-management opportunities and identify encumbered assets tied to specific uses or liabilities. - Additional indicators beyond net worth: gross debt, risk mismatches, degree of hedging, liquidity and currency breakdowns. ### Practical compilation guidance and quality assurance - Steps to compile complete government balance sheet: - (i) a full register of assets and liabilities of public sector units; - (ii) adoption of the accrual basis of recording; - (iii) accurate valuation of all assets and liabilities. - Preferred alternative data sources: - Central government debt statistics; banking surveys; IIP data; administrative registries for government loans; public corporation balance sheets; tax administration systems; commitment registers; sovereign wealth fund reports. - Converting financial statements to GFS/PSBS: - Identify reporting entity consolidation level; use notes to disaggregate; reconcile valuation bases (fair value, historic cost) to GFSM 2014 market-value guidance. - Empirical rule: sample and extrapolate — top 10 corporations normally account for around 90 percent of public corporation assets. - Validation and QA checks: - Stock-flow consistency, consolidation consistency, reconciliation with external sources, time-series consistency checks (suggested significance thresholds in source such as "+/- 5 percent and +/- $500m" used as examples), ratio checks for plausibility. - Dissemination and revisions: - Revisions expected due to improved source data, methodological changes, or corrections; recommended disclosure and explanation of revisions and a predetermined release schedule identifying data status (estimate, preliminary, final). ### Key limitations, gaps, and way forward - Remaining gaps and improvement areas: - (i) the number of countries and institutions with available data; - (ii) the length of the time series, with many countries still having only one year of data available; - (ii i) the quality and cross-country comparability of estimates, particularly where valuation/measurement posed difficulty; - (iv) the availability of balance sheet strength and risk indicators; - (v) the limited scope of intertemporal analysis. - Way forward: expand the database as more data become available from Fiscal Transparency Evaluations (FTEs) or authorities/IMF team compilations; rely on user feedback for omissions or supplementary data sources. *Source: wpiea2020130-print-pdf — REFERENCES and selected sections (PSBS database description and methodological overview).* ### REFERENCES ___________________________________________________________________________________ 51 ### REFERENCES ### Role and relevance of Public Sector Balance Sheets (PSBS) - PSBSs provide the most comprehensive picture of public wealth by bringing together all the accumulated assets and liabilities that governments control, including public corporations, natural resources, and pension liabilities. - PSBSs account for the entirety of what the state owns and owes, offering a broader fiscal picture beyond debt and deficits. - PSBSs increase transparency and allow closer scrutiny of the government's financial position, potentially increasing return on assets, reducing risks and the costs of borrowing, and improving fiscal policymaking. - The PSBS database focuses on all assets and all liabilities of the public sector and considerably expands the traditional focus on government debt. - The dataset extends institutional coverage beyond general government to encompass nonfinancial public corporations (also referred to as state-owned enterprises (SOEs) or parastatals) and financial public corporations including the Central Bank. ### Historical evolution of fiscal reporting and accounting frameworks - Early 1970s: A draft of A Manual on Government Finance Statistics was released, eventually evolving into the IMF’s A Manual on Government Finance Statistics of 1986, which focused primarily on cash constraints and outstanding debt. - IMF developed the Government Finance Statistics Manual 2001, incorporating for the first time an accrual basis of recording and resulting in an integrated balance sheet approach. - Government Finance Statistics Manual 2014 built on this framework, harmonized it with the International Public Sector Accounting Standards (IPSAS), and elaborated on how to include public corporations in the fiscal framework. - Following the financial crisis, the IMF pushed for countries to extend fiscal reporting coverage and pay greater attention to fiscal risks, leading to the development of the Fiscal Transparency Code. - The Fiscal Transparency Code (IMF, 2019) expands the coverage of fiscal reporting to the public sector to capture all fiscal activities and risks by looking at stocks of assets and liabilities as reflected in balance sheets. ### Current coverage, limitations, and dataset specifics - Only a few countries currently undertake the compilation of a PSBS; the PSBS database presents estimates of balance sheets for a broad sample of 38 countries. - The data in this working paper generally cover data up to 2016; the database does not cover the current crisis, but work has commenced to update and expand the database. - Data sources and compilation: - Central and general government data generally were sourced from the IMF’s Government Finance Statistics (GFS) database. - Where GFS data fail to cover all categories of assets and liabilities, they are complemented by other data reported by national statistical authorities or other international organizations, or by IMF staff estimates. - Data for public corporations are compiled from three main sources: - (i) data for the central banks are from the IMF’s Monetary and Financial Statistics database; - (ii) data for other public corporations were sourced from statistical or government shareholding reports; - (iii) where the latter were not available, a conversion of the financial statements of the largest corporations was used instead. - Sources of country data and country-specific compilation methods were captured in metadata for each country and are published as part of the PSBS database. ### Motivations and policy implications - The demand for internationally comparable data is increasing in a more globalized world that requires better information to evaluate government performance, interconnectedness, and the longer-term sustainability of policy decisions. - The traditional focus on cash and government debt misses large swaths of government activity and can lead to illusory fiscal practices. - A broader balance sheet approach helps identify fiscal risks that traditional fiscal frameworks may overlook, including contingent liabilities and balance sheet exposures within public corporations. - Improving coverage of stocks and institutions in fiscal reporting remains necessary for many governments (Figure 1 referenced in source). ### Methodological notes and supporting materials referenced in the document - The PSBS database includes boxes, figures, tables, and appendices that support methodology and results; examples listed in the source include: - BOXES: Illustrative Impact of Various Pension Arrangements on PSBS; Funding Arrangements by type of Employment-Related Pension Schemes; Valuation Methods for Assets and Liabilities. - FIGURES: Fiscal Transparency Evaluation Scores; Institutional Coverage of the PSBS Dataset; GG and PS Coverage; Coverage by Income Group; Coverage of Stocks Positions by Income Group and Level of Government; Public Sector Balance Sheets, 2000–16; Decomposition of Changes in Net Worth; Equity Liabilities of Public Corporations, 2016; Australia: Public Sector Net Worth, 2007–2017; Public Sector Debt by Holding Sector, 2001–17; Public Sector Balance Sheets; Additional Elements of the Public Sector Balance Sheet; Equity Liabilities of Public Corporations, 2016; General Government Balance Sheets, 2016. - TABLES: Public Sector Balance Sheet Database Coverage; Composition of the Public Sector Balance Sheet; Australia: Public Sector Balance Sheet, 2016. - APPENDICES: I. Time Series Availability in the PSBS Database; II. Illustrative Conversion of Financial Statements to the PSBS Template. *Source: wpiea2020130-print-pdf - REFERENCES (extracted content) — PSBS database description and methodological overview* ### 1. Coverage of Stocks 2. Coverage of Institutions ### 1. Coverage of Stocks 2. Coverage of Institutions ### Overview and database coverage - The PSBS database presents comprehensive annual balance sheet data for a total of 75 countries and territories at different degrees of institutional coverage. - Estimates covering the full public sector are available for 38 countries. - These 38 full public sector estimates were produced in two contexts: standalone time series compilation for the October 2018 IMF Fiscal Monitor (17 countries); and single-year data compiled as part of Fiscal Transparency Evaluations (21 countries). - Central government data can be shown for 74 countries and territories. - General government data are available for 66 countries and territories. - The database covers 91 percent of the world’s GDP at the general government level, while coverage for public sector is close to 63 percent of world’s GDP. - Based on the latest available year for each country. For 2016, the coverage is 56 percent of world’s GDP. - Of the 38 countries with public sector data: - 15 are advanced economies - 17 are emerging market economies - 6 are low income developing countries - Narrowing scope to general government (66 countries and territories): - 34 are advanced economies - 24 are emerging market economies - 8 are low income developing countries - Narrowing scope to central government (74 countries and territories): - 34 are advanced economies - 30 are emerging market economies - 11 are low income developing countries - Advanced economies tend to disclose more balance sheet elements than emerging market economies or low-income developing countries; balance sheets are generally more comprehensive at the general government level than at the central government level in advanced and emerging market economies. ### Conceptual framework and institutional coverage - The PSBS database is compiled using the conceptual framework of the IMF’s Government Finance Statistics Manual 2014 (GFSM 2014). - The PSBS brings together accumulated assets and liabilities that the government controls, extending fiscal analysis beyond standard debt measures to include: - all assets (financial, infrastructure, natural resources) - liabilities rarely included in government debt (e.g., pension obligations toward public sector employees) - perimeter expanded from general government to the entire public sector, including public corporations and the central bank. - Changes in the balance sheet are explained using the integrated stock-flow framework from GFSM 2014, decomposing changes in net worth into fiscal deficits, investments, valuation changes, and other volume changes. - Public sector definition (conceptual): - All resident institutional units controlled by the government: all general government units (nonmarket entities) and corporations controlled by government. - Control of a corporation is established when the general corporate policy is determined by government. - Public corporations include government-controlled market producers in both financial and nonfinancial sectors. - Legally incorporated nonmarket producers are reclassified to general government following GFSM 2014 criteria based on whether output is provided at economically significant prices. ### Institutional subsectors presented - The PSBS presents consolidated public sector data and subsectors: - General government (with central government data available) - Nonfinancial public corporations (natural resource corporations presented separately) - Financial public corporations, split to identify: - central bank - sovereign wealth funds (where they operate as financial corporations) - other financial public corporations - Central banks are included in the public sector and separately identified: - Monetary liabilities (currency on issue) are irredeemable and have no ongoing financing costs but are treated as liabilities by convention. - The equity liability of the central bank is reported on a book value basis; as the difference between assets and nonequity liabilities, the central bank’s net worth is therefore zero. ### Coverage of stocks and valuation - The PSBS includes all assets (financial and nonfinancial) owned and liabilities owed by the public sector or relevant subsector at the end of each reporting period, using economic ownership as reference. - Net worth is a balancing item representing the extent to which market values of liabilities are covered by market value of assets. - Financial assets and liabilities are further broken down by currency of denomination and residual maturity, where available. - GFSM 2014 guidance: where public corporation shares are not market-observable or the corporation is fully government-owned, “equity and investment fund shares” are valued as net asset value (assets minus liabilities other than equity). In these cases, the statistical net worth of the subsector is zero; therefore, the value of net worth plus shares and equity (often “own funds”) should be used to calculate the subsector’s contribution to overall public sector net worth. ### Composition of the public sector balance sheet (as disclosed in the database) - ASSETS - Nonfinancial Assets - Fixed assets - Land - Mineral and energy resources - Other nonfinancial assets - Financial assets - Monetary gold and Special Drawing Rights (SDRs) - Currency and deposits - Debt securities - Loans - Equity and investment fund shares - Insurance, pension, and standardized guarantee schemes (ISPSG) - Financial derivatives and employee stock options - Other accounts receivable - LIABILITIES - SDRs - Currency and deposits - Debt securities - Loans - Equity and investment fund shares - Insurance, pension, and standardized guarantee schemes (ISPSG) - Pension entitlements - Claims of pension funds on pension managers - Other ISPSG liabilities - Financial derivatives and employee stock options - Other accounts payable - Net Worth (= Assets – Liabilities) ### Key analytical indicators enabled by PSBS - Net worth - Net financial worth - Net liquid assets - Net foreign exchange assets ### Coverage gaps and IMF staff estimates - Coverage of categories of assets and liabilities in published balance sheets varies significantly across countries. - PSBS covers categories often not recognized in published balance sheets by using IMF staff estimates when data sources permit, most notably: - nonfinancial assets—particularly land and mineral and energy resources - public sector employment-related pension liabilities ### Treatment and inclusion of public sector employment-related pension liabilities - Public sector employment-related pension liabilities refer to pension entitlements of civil servants and public corporation employees under various pension arrangements. - These pension liabilities are contractual obligations of the public sector employer toward employees and have rarely been included in government balance sheets; PSBS recognizes these obligations. - Distinction from social security old age benefits: some old age benefits acquired through social security arrangements are of a contingent nature and recorded differently. - Pension arrangements vary across and within countries; PSBS impacts differ by arrangement type (see Box 1 illustrations). ### Illustrative impact of various pension arrangements on PSBS (Box 1) - Pension benefits provided on an “as needed basis” (no contributions or scheme participation): - Benefits subject to policy changes; no liability for future benefits is included in PSBS. - Classified as social assistance benefit expense; impact limited to reduction in cash and deposits when payments are made. - Example: Australian means tested old age pensions. - Social security scheme benefits financed by contributions (contributors receive benefits after making contributions): - No liability for future social security benefits is recognized in PSBS (benefit levels subject to policy changes). - Functions like nonlife insurance; contributions constitute government social insurance revenue and redistribution across population. - Impact on PSBS limited to net change in cash and deposit assets when contributions and payments occur. - Example: US Social Security. - Notional or funded individual account arrangements (contributions accumulate assets; defined contribution or defined benefit possible): - Contributions are conditions of employment and establish contractual liability of the employer; withdrawals reduce that liability. - If government operates the scheme: contributions recorded as increase in cash and incurrence of a pension liability for the operator; withdrawals reduce pension liabilities and currency and deposits. - If private operator: government’s role is primarily employer making contributions—government accounts do not show pension liabilities toward households; pension liabilities reflected in private operator’s accounts. - Employer responsibility for deficits or claims on pension fund can create additional PSBS impacts: pension fund claims on government or employer claims on pension fund recorded as liabilities or financial assets respectively. - Example: South African Government Employees Pension Fund. *Source: IMF staff estimates; PSBS database documentation and GFSM 2014 guidance as described in the source content.* ### Box 2. Funding Arrangements by type of Employment-Related Pension Schemes ### Box 2. Funding Arrangements by type of Employment-Related Pension Schemes ### Types of employment-related pension schemes - Employment-related pension schemes cover schemes specific for government employees, including cases where they receive pensions from the general social security scheme but under conditions different from the general population. - Three types: - Nonautonomous pension schemes: integral part of the employer operating the scheme; do not meet criteria to be separate institutional units; all operations reported as part of the unit that operates the scheme. - Autonomous pension funds: separate institutional units operating independently in the financial corporations sector; classified as public financial corporations or private financial corporations depending on who controls the entity. - Schemes managed by an insurance enterprise or pension fund on behalf of the employer: these managing entities are regarded as financial corporations; classification into private or public financial corporations depends on control. ### Recording and balance-sheet implications by institutional form - If government operates a nonautonomous pension scheme: - All assets and liabilities of the pension scheme are reflected on the accounts of the government unit that controls the scheme. - If an autonomous pension fund is under government control: - The fund is classified as a public financial corporation and displays all assets and liabilities of the pension scheme on its balance sheet. - If a scheme is managed by an insurance enterprise on behalf of the government: - The control of the enterprise determines classification in the private financial corporations sector or the public financial corporations sector. - By definition, unfunded schemes cannot be considered a separate institutional unit. ### Defined-contribution versus defined-benefit; funding status - Defined-contribution scheme: - Benefits are determined by the actual contributions made to the scheme and the investment income and holding gains and losses earned on these and previous contributions. - These schemes are by definition net worth neutral because their assets equal their liabilities. - By definition, defined-contribution schemes are deemed to be fully funded. - Defined-benefit scheme: - Ultimate benefit is calculated by means of a formula embodied in the terms of the scheme, usually determined by employment undertakings made by the employer toward employees. - Funding options for defined-benefit schemes: - Funded: contributions are held in a segregated fund (reserve) from which future benefits will be payable. Contributions increase the pension reserve account (cash) and pension liabilities; benefit payments reduce the reserve and pension liabilities. If the fund is sufficient to finance the present value of future benefits payable, the scheme is fully funded; if insufficient, it is underfunded; if more than sufficient, it is overfunded. - Unfunded: contributions are not held in a segregated fund. Contributions increase general resources of currency and deposits with a corresponding increase in pension liabilities; benefit payments reduce general resources and pension liabilities. ### Cross-country comparability and alternative aggregates (when pension assets/liabilities not estimable) - When types of pension assets and liabilities could not be estimated, main aggregates were marked as “not available.” Alternative main aggregates calculated and disclosed as separate indicators: - Nonfinancial assets, excluding land and mineral and energy resources; - Total assets, excluding land and mineral and energy resources; - Liabilities, excluding pension-related liabilities (pension entitlements and claims of pension funds on pension managers); - Net financial worth, excluding pension liabilities; and - Net worth, excluding land, mineral and energy resources, and pension liabilities. ### Integration with PSBS/GFS accounting framework (flows and stocks) - Transactions and other economic flows are separated in the database; transactions correspond to interactions between units by mutual agreement or through operation of law. - Main transaction aggregates in PSBS: - Revenue and expense — transactions that increase or decrease net worth, respectively. - Expenditure — sum of expense and net acquisition of nonfinancial assets. - Net acquisition (acquisitions less disposals) of nonfinancial and financial assets, and net incurrence (incurrence less repayment) of liabilities — transactions that change the composition of assets and liabilities but not net worth. - Balancing items: - Net operating balance (NOB) = REVt − EXPt (difference between revenue and expense, with expense including consumption of fixed capital). - Net lending or borrowing (NLB) = REVt − (EXPt + INVt) (difference between revenue and expenditure; often referred to as the “fiscal balance” or the “deficit/surplus”). - Stocks integrate transactions and other economic flows (OEFs); accounting identity for net worth: - NWt = NWt-1 + Transactions affecting NW + Changes in NW due to OEFs - Equivalent expression: NWt = NWt-1 + NOBt + OEFt - With definitions NOBt = REVt − EXPt and NLBt = REVt − (EXPt + INVt), rearranged identity: - NWt − NWt-1 = NLBt + INVt + OEFt - This identity is used to analyze evolution of balance sheets, where change in net worth is explained by the sum of the fiscal balance, investment, and valuation effects. ### Data sources, estimation practices, and consolidation - PSBS time series compiled for a set of 17 countries using IMF GFS and Monetary and Financial Statistics databases, and publicly available information on public corporations; PSBS standalone data for 21 countries from Fiscal Transparency Evaluations also used. - Staff used publicly available data and prepared estimates of infrastructure, natural resources assets, and public sector pension liabilities where not publicly available or inconsistent with PSBS methodology. - For general government, data generally replicate country-reported GFS data; supplemented by national statistics, Eurostat, OECD, IMF capital stock database (IMF 2017), or IMF staff estimates where gaps exist. - Central bank data generally replicate Monetary and Financial Statistics; where standardized report forms are not submitted, central bank financial statements converted to PSBS template. - Other public corporations: preferred sources are statistical estimates by authorities for aggregate subsector; otherwise IMF staff estimates or converted aggregate financial statements of state-owned enterprises; when aggregate data unavailable, conversion of individual financial statements for major state-owned enterprises is used, considering materiality — a sample covering about 80–90 percent of the total sector is used and grossed up to account for non-sample units. - Public sector aggregates computed by summing estimates for general government, nonfinancial public corporations, and financial public corporations, and by identifying and consolidating (eliminating) significant cross-holdings and intra-public sector transactions. Key consolidation items include: - General government units’ deposits at the central bank or other public banks; - Central bank and other public corporations’ holdings of securities issued by government units; - General government units’ equity stakes in public corporations; - Loans between general government units and public corporations; - Loans provided by public banks to government units or other public corporations; - Property income (interest and dividends) on the aforementioned items; - Subsidies and other capital transfers provided by government units to public corporations. ### Valuation guidance - In accordance with GFSM 2014, assets and liabilities are valued at market value where possible (normally for debt securities and equity of listed corporations). - Other financial assets and liabilities often reported at nominal value as a proxy for market value when instruments are not traded. - Some countries present debt securities at valuations other than market, such as nominal or face value. - Produced nonfinancial assets (fixed assets, inventories, valuables) are usually reported at written-down (depreciated) replacement cost when market values are not available. *Source: GFSM 2014.* ### Box 3. Valuation Methods for Assets and Liabilities ### Box 3. Valuation Methods for Assets and Liabilities ### Valuation methods: definitions and usage - Market prices: refer to current exchange value, that is the value at which assets/liabilities are exchanged or else could be exchanged for cash on the reporting date—this is the main valuation method used in the statistical basis of reporting. - Fair values: refer to the amount for which an asset could be exchanged, or a liability settled between knowledgeable, willing parties in an arm’s length transaction—this is the valuation method often used for traded goods and instruments in accounting standards. It is akin to market value. - Nominal value: refers to the amount that the debtor owes to the creditor at any moment in time. It reflects the value of the instrument at creation and subsequent economic flows such as transactions (interest and principle payments) and valuation changes such as exchange rate changes but excludes market price changes. (Should market price changes be included, the price will represent a market value.) - Historic cost: refers to the cost at the time of acquisition but could sometimes also reflect occasional revaluations. - Face value: refers to the undiscounted amount of principal to be repaid at maturity. - Written-down replacement cost: refers to the current acquisition price of an equivalent new asset minus the accumulated consumption of fixed capital, amortization, or depletion. - Book value: refers to the value recorded in an entities records—it may have different meanings because their values are influenced by accounting standards, rules and policies. - Source: GFSM 2014. ### Nonfinancial assets and public corporation valuations - Nonfinancial nonproduced assets (mineral and energy resources and land): market value can be approximated by the net present value of the future economic benefits expected from such assets. - Land includes land under buildings or other structures as well as stewardship land like that where national parks or other heritage sites are located. Because of difficulties in valuing stewardship land or historical heritage buildings, national estimates of nonfinancial assets normally do not include an estimation for these types of assets. - PSBS database: In the absence of alternative data sources for these estimations, the PSBS database does not attempt to value stewardship land or similar heritage assets. - Public corporations’ assets and liabilities: generally reported based on fair value, following accounting standards such as International Financial Reporting Standards. - Equity of public corporations: often reported at book value; in the PSBS database the equity value of public corporations is set equal to their net asset value. This includes reserves, adjusted for provisions and deferred tax assets, which are not recognized in macroeconomic statistics. - Data limitations: in some cases no adjustment is done to reflect the difference between the book and market values of listed shares. ### Methodology used to estimate specific categories of assets and liabilities Fixed Assets - Use existing government estimates for fixed assets other than historical/heritage assets where available. - Sources include detailed asset management registers or authorities’ application of the perpetual inventory method on detailed asset-level information. - Perpetual inventory method: value of the stock is based on estimates of acquisitions and disposals accumulated (after deduction of the accumulated consumption of fixed capital, amortization, or depletion) and revalued over a long enough period to cover the acquisition of all assets in the category. - Gaps: where data are missing or poorly reported, IMF’s capital stock and investment database (IMF 2017) is used; that database includes estimates for the public capital stock compiled through the perpetual inventory method and calculated for the overall level of investment rather than detailed asset-level investment. Mineral and Energy Resources - PSBS database follows GFSM 2014 valuation guidelines: estimates correspond to the net present value of the expected pretax cash flows resulting from commercial exploitation. - Choice of estimation method determined by availability of source data and attempts to consider country-specific economic conditions. Valuation of oil and gas stocks — data sources and procedure - Data sources: - (1.1) production over the lifetime of the asset, from the Rystad database (Rystad Energy 2018); - (1.2) current and forward prices (in US dollars) from World Economic Outlook (WEO) available at the end of the reference year; - (1.3) costs of production (in US dollars), from the Rystad database; - (1.4) exchange rates, from WEO forecasts available at the end of the reference year. - Procedure: - Use sources (1.1), (1.2), and (1.3) to calculate future US dollar cash flows over an 85-year horizon (for years beyond those for which WEO forward prices are available, it was assumed that prices remain constant at the latest forward price). - Convert these US dollar cash flows to domestic currency using WEO exchange rate forecasts (source 1.4). - Calculate the net present value of the domestic currency cash flows using a discount rate equivalent to the average (2000–22) long-term (10-year) government bond yields in WEO plus a risk factor: - 1 percentage point for advanced economies, - 3 percentage points for emerging economies, - 6 percentage points for low-income developing countries. - When government bond yields were not available from the WEO, the central bank policy rate plus 5 percentage points was used. Valuation of coal, metals, and other minerals — data sources and procedure - Data sources: - (2.1) estimates (in constant 2014 US$ prices), from the World Bank’s The Changing Wealth of Nations 2018 (World Bank 2018); - (2.2) United States Geological Survey data on 2016 reserves and 2014–16 production by commodity and by country (Wilburn, Bleiwas, and Karl 2016), where available; - (2.3) prices (in US$) from WEO commodity prices for 2000–16; - (2.4) exchange rates, from the current vintage of WEO exchange rates. - Procedure: - Estimates for 2015 and 2016 are based on the changes in reserves in those years, where reserve data are available (source 2.2). - Where reserve data are not available, assume the value of the stocks is unchanged from 2014 onward. - Convert constant 2014 US$ estimates to current US$ prices using the price index from WEO commodity prices (source 2.3), then convert to domestic currency using WEO exchange rates (source 2.4). - Ownership adjustments: - For countries where subsoil assets can be owned by units other than government, calculated estimates were prorated using alternative country-specific indicators on ownership of land under which the mineral and energy resources lie. Country-specific adjustments are disclosed in the database documentation. Pension Liabilities - Employment-related public sector pension entitlements: claims that current and past public sector employees hold against their employers; represent contractual payments established as part of the compensation agreement and must be paid (accrued-to-date entitlements of existing beneficiaries). - Exclusions: these employment-related pension liabilities exclude implicit obligations to households under general social security arrangements, as these are potentially subject to policy changes. - Preferred data source: estimates produced by country authorities disclosed in government financial statements, sectoral accounts balance sheets, or supplementary tables on pensions. - IMF staff model (when authority estimates unavailable): - Uses actuarial projections of pension expenditure of employment-related pension schemes. - Accrued benefit share by age in 2015: from 100 percent for those ages 55 and older to 0 for those ages 25 and younger. - Population covered by the pension system assumed to match the structure of the overall population (projections use the 2017 UN World Population Prospects—United Nations 2017). - Discount rate assumed to be 1 percentage point above the rate of GDP growth. - If estimates are available only for a single year, entitlements as percentage of GDP are assumed constant over time. Maturity and currency breakdowns (estimation rules) - Liquid assets: include “currency and deposits” and “other accounts receivable.” - Short-term liabilities: defined as the sum of “currency and deposits,” “other accounts payable,” and “current debt” (debt securities and loans issued with less than one-year maturity, and long-term debt securities and loans, with a remaining maturity of less than one year). - Current and noncurrent breakdown of debt securities and loans: obtained from three sources — World Bank’s Quarterly Public Sector Debt database, Eurostat, and the Dealogic database on debt securities. Repayments of outstanding IMF loans in the year after the reference period are subtracted from the short-term loans. - Foreign and domestic currency breakdowns of debt securities: extracted from the Dealogic database; general government gross debt in foreign currency from the WEO database used as a proxy of total liabilities in foreign currency. Data are cross-checked against the outstanding amount of IMF loans (denominated in special drawing rights, SDRs). ### Global trends and fiscal-balance-sheet findings (PSBS evidence) - Sample: 17 countries for which full PSBS time series data have been compiled. - Liabilities: increased by around 39 percentage points of GDP between 2007 and 2016. - Assets (excluding land and natural resources): increased by 22 percentage points of GDP during 2007–09 in the immediate wake of the crisis; in subsequent years these assets retreated slightly to remain 14 percentage points of GDP above pre-crisis levels. - Net financial worth (post-crisis decade): deteriorated by US$ 11 trillion or 28 percentage points of GDP during the post-crisis decade, with a modest decline continuing in later years. - Net worth (including public investment effect): declined by 25 percentage points of GDP on average (slightly lower than net financial worth deterioration); country extremes: - United Kingdom: net worth declined by as much as 49 percentage points of GDP. - Norway: net worth increased by 167 percentage points of GDP (much of it because of strong valuation gains from its equity holdings). - Balance sheet effects: including land and natural resources as well as pension liabilities introduces volatility driven by asset price changes and sensitivity to discount rates. Decomposition of net worth changes (17-country weighted averages) - 2000–06 (expressed as percent of 2007 GDP): - Net worth increased from 38 percent of GDP in 2000 to 42 percent in 2007. - Positive valuation changes: around 41 percent of GDP. - Public investment: 7 percent of GDP. - Fiscal deficits: negative impact estimated at 36 percent of GDP. - 2007–16 (expressed as percent of 2016 GDP): - Net worth fell from 42 percent of GDP in 2007 to 17 percent in 2016. - Fiscal deficits were the largest factor, contributing 38 percentage points of GDP to the overall decline. - Denominator effect: 9 percentage points of GDP (impact of moving from 2007 to 2016 GDP in the denominator). - Public investment raised net worth by 8 percentage points of GDP. - Valuations fell during the crisis but rebounded in subsequent years, adding another 16 percentage points of GDP to net worth. - Interpretation: large balance sheet effects are common across countries and emphasize the usefulness of a PSBS approach. Public corporations and equity liabilities - Contribution of public corporations to public sector net worth (measured by equity value): sizeable, averaging around 10 percent of GDP in 2016. - Nonfinancial corporations: contribute on average 2 percentage points more than financial corporations. This difference declined slightly after the main financial sector interventions but reverted once some large nationalized financial institutions were re-privatized. - Valuation rule: where data permit, equity liabilities of corporations with shares traded in the market are at market value; for other corporations or when market valuations are not available, they are at book value. Single-country example — Australia (end-2016, PSBS database) - Over the past ten years (to end-2016), cumulative deficits amounted to 25 percent of GDP. - Public investment created assets worth 20 percent of GDP—a third of which was undertaken by public corporations that are not included in the general government sector. - The net value of assets (excluding natural resources) and liabilities on the PSBS increased considerably due to price changes, despite some volatility over the time series. *Source: GFSM 2014; PSBS database; IMF staff estimates (as presented in the source content).* ### Section II.B, Coverage of Flows). Traditional accounting of the deficit does not take account of the asset built up ### Section II.B, Coverage of Flows). Traditional accounting of the deficit does not take account of the asset built up ### Balance sheet snapshot (public sector, percent of GDP) - Total assets: NA 285.8 30.2 33.7 309.3 -40.5 - Nonfinancial assets: NA 236.3 28.2 0.1 264.6 0.0 - Fixed assets: 8.0 49.8 28.0 0.1 77.9 0.0 - Land: 1.0 20.1 0.0 0.0 20.1 0.0 - Mineral and energy resources: NA 163.6 0.0 0.0 163.6 0.0 - Other nonfinancial assets: 1.4 2.8 0.2 0.0 3.0 0.0 - Financial assets: 22.2 49.5 2.0 33.6 44.7 -40.5 - Monetary gold and SDRs: 0.0 0.0 0.0 0.6 0.6 0.0 - Currency and deposits: 0.5 2.0 0.6 0.6 2.7 -0.5 - Debt securities: 9.4 13.4 0.1 12.0 13.4 -12.1 - Loans: 3.1 4.6 0.4 19.2 18.8 -5.4 - Equity and investment fund shares: 5.2 23.9 0.1 0.9 3.4 -21.5 - Other financial assets: 4.0 5.7 0.7 0.3 5.8 -0.9 - Liabilities: 53.4 76.6 30.2 33.7 100.0 -40.5 - SDRs: 0.4 0.4 0.0 0.0 0.4 0.0 - Currency and deposits: 0.2 0.5 0.0 8.8 8.8 -0.5 - Debt securities: 28.5 28.6 0.0 0.0 16.5 -12.1 - Loans: 0.9 9.1 7.5 20.5 31.7 -5.4 - Equity and investment fund shares: 0.0 0.0 2.0 11.4 0.0 -21.5 - Insurance, pension, and standardized guarantee schemes: 19.0 29.0 0.6 3.2 29.9 0.0 - Financial derivatives and employee stock options: 0.0 0.0 0.3 2.2 2.5 0.0 - Other accounts payable: 4.4 8.9 1.7 0.6 10.4 -0.9 - Net financial worth: -31.2 -27.0 -28.2 -0.1 -55.4 0.0 - Net worth: NA 209.2 0.0 0.0 209.2 0.0 ### Statement of operations (percent of GDP) - Revenue: 24.3 34.0 4.8 1.6 40.4 0.0 - Expense: 26.3 35.3 5.1 1.8 42.2 0.0 - Net operating balance: -2.0 -1.4 -0.3 -0.2 -1.9 0.0 - Net investment in nonfinancial assets: 0.3 1.3 0.6 0.0 1.9 0.0 - Net lending/borrowing: -2.3 -2.6 -0.9 -0.2 -3.7 0.0 ### Key findings and decomposition insights - Overall, net worth deteriorated by 17 percent of GDP over the decade, significantly less than the increase in debt. - Decomposition of changes in public wealth distinguishes: - Changes directly attributable to fiscal policy measures (transactions of public sector entities). - Events outside direct control (changes in value or volume of assets and liabilities). - Decomposition can be applied to historical data and fiscal projections to add transparency and avoid fiscal illusion. ### Fiscal illusion and quasi-fiscal risks - Policies that reduce deficits and debt on the face of traditional accounts can leave net worth unchanged or reduced (example: cutting maintenance reduces deficits but also reduces infrastructure asset values due to depreciation). - Quasi-fiscal policies executed via public corporations (e.g., obliging profitable public corporations to fund fuel subsidies) can push deficits outside general government. ### Relevance of consolidation (including public corporations) - Including public corporations requires consolidation of cross-holdings of assets and liabilities to prevent double-counting. - Cross-holdings can transmit fiscal risks across public sector units (example: central government holdings of public corporation bonds can erode with poor corporation performance, reducing central government assets). - Consolidation examples: - Elimination of debt securities issued by government held by public corporations and vice versa. - Elimination of equity of general government held in public corporations. - Elimination of currency and deposits or loan positions with public banks. - Consolidations are country-specific; largest cross-holdings typically between government and the central bank and other financial public corporations. - Empirical examples: - Japan: gross outstanding public sector debt securities and loans were worth 288 percent of GDP in 2017, with 138 percent of GDP in the hands of private creditors. - United States: equivalent figures are 164 and 110 percent of GDP in 2016. - Quantitative easing (QE) expanded central bank asset holdings, but from a consolidated public sector perspective QE did not significantly expand public sector asset holdings because purchases were mainly claims on other public sector units. ### Cross-country balance sheet evidence - Sample of 38 countries with public sector data: assets average 218 percent of GDP; liabilities around 196 percent of GDP. - Net worth is positive on average but varies; most G7 countries have negative net worth, except Canada. - Resource-rich countries with high natural resources have the largest assets and therefore positive net worth. - At the general government level in the sample of 38 countries, debt securities and loans are worth 93 percent of GDP. - Existing pension obligations to public servants amount to 45 percent of GDP in these countries (contractually required payments under social insurance or employment-related pension schemes). - Government assets comprise financial and nonfinancial assets, including natural resources. - Financial assets: 97 percent of GDP (often marketable and liquid, except direct loans and unlisted equity). - For the sample of 17 countries with public corporations data, contribution of public corporations to public sector net worth in 2016 averages 19 percent of GDP, with predominance of nonfinancial public corporations. ### Additional balance sheet indicators and management implications - Beyond net (financial) worth, indicators include gross debt and measures of risk mismatches and degree of hedging. - These indicators form a dashboard for assessing fiscal health and resilience and inform asset and liability management opportunities. - Consolidated examination of financial assets can reveal benefits from improved asset management, accounting for encumbered assets tied to specific uses or liabilities. *Source: https://www.imf.org/-/media/files/publications/wp/2020/english/wpiea2020130-print-pdf.pdf* ### 3. Public Corporation Assets 4. Pension Liabilities ### 3. Public Corporation Assets 4. Pension Liabilities ### Coverage and cross-country comparability - United States’ nonfinancial public corporations are accounted for in General Government and are excluded from Figure 13. - Expanding cross-country analysis can be achieved by narrowing coverage of institutions and stocks (for example, general government “basic” balance sheets that exclude land, natural resources, and pension liabilities). - The modular structure of the database allows focus on narrower data subsets and additional breakdowns (e.g., by liquidity, currency, and volatility). ### Key summary statistics (sample of 75 countries and territories) - “Basic” balance sheet assets average 100 percent of GDP. - Asset range: 398 percent of GDP in Norway to 15 percent of GDP in Tunisia. - Assets are roughly evenly split between financial and nonfinancial assets. - Average liabilities: 69 percent of GDP. - Static net worth in the sample ranges from –111 percent of GDP in Greece to 348 percent of GDP in Norway. - Average positive net worth: 34 percent of GDP. - Net financial worth averages –20 percent of GDP, with Greece and Norway at the extremes. - Note: For 7 countries the data are only available for central government. - Note: Total assets excluding land and natural resources. ### Equity liabilities of public corporations (Figure 13 notes) - Where data permit, equity liabilities of corporations with shares traded in the market are at market value; for other corporations or when market valuations are not available, they are at book value. - The contribution measured is the difference between corporations’ assets and liabilities other than equity and investment fund shares—equivalent in government finance statistics to net worth. ### Practical guidance for compiling government balance sheets - Establishing a complete government balance sheet consistent with international accounting/statistical standards requires: - (i) a full register of assets and liabilities of public sector units; - (ii) adoption of the accrual basis of recording (additions, disposals, transfers, deterioration comprehensively recorded); - (iii) accurate valuation of all assets and liabilities. - Compilation difficulties and long reform horizons are common, especially in developing countries with limited accounting capacity. - Where comprehensive accounting systems are absent, analysts can still estimate main categories for the main central government unit. ### Preferred alternative data sources and compilation approaches - Central government debt statistics or debt management unit reports for stock of debt securities and loans. - Banking surveys for domestic currency and deposits; International Investment Position (IIP) data for foreign currency and deposit holdings. - Administrative registries for government loans (employee, student, farmer, housing schemes). - Public corporation balance sheets for government equity investments. - Tax administration systems for tax receivables, corrected for uncollectable elements using historical collection trends or time-adjusted cash basis methods. - Commitment registers/control systems for government liabilities related to goods acquired but not yet paid; where absent, analyze financial statements of major suppliers and impute material claims. - Specialized social security or sovereign wealth fund reports for those entities’ financial positions. - Public corporations’ supervisory unit records for government shareholding and net worth information. ### Use of other macroeconomic statistics and sectoral linkages - National accounts (1993 SNA, 2008 SNA), GFSM 2014, and BPM6 integration facilitate PSBS compilation by providing counterparty data; if one sector lacks data, exposures can be estimated from counterparties. - When compiled, national balance sheets by institutional sector are the best data source for PSBSs, incorporating estimates for fixed assets, land, natural resources, and pension liabilities. - Monetary and Financial Statistics (MFS) can provide data on government currency and deposit assets (e.g., “Liabilities to central government” lines) and claims on central government when direct government data are missing. - International Investment Position (IIP) and External Debt Statistics (EDS) are useful where governments finance through nonresident units or hold large foreign assets; BOP/IIP identify general government flows and stocks and are largely consistent with GFS classifications. - BOP clusters financial instruments by functional categories (including direct and portfolio investment), which compilers should consider when using BOP/IIP data. ### Handling administrative dataset limitations and estimation issues - Tax and customs registers provide declarations/assessments but must be adjusted for uncollectable claims to avoid overstatement of assets; compilers should reference historical collection trends or adopt time-adjusted cash-basis recording. - Where commitment registers are absent, use suppliers’ financial statements to identify material government payables and impute balances. - Nonfinancial assets and pension liabilities are often missing from administrative sources; in their absence, compilers may need to estimate these categories using available methods and approaches. *Source: IMF staff estimates, PSBS compilation and guidance (excerpts).* ### Section II.C above: ### Section II.C: Converting Financial Statements into Government Finance Statistics ### Relationship between financial statements and GFS - Financial statements compiled under accrual-based accounting standards (IPSASs, IFRSs) disclose broadly the same information as GFS but in a different manner. - Application of high-quality accrual accounting standards, policies and procedures facilitates preparation of reliable fiscal statistics. - Audits of financial statements provide quality assurance and improvements in financial statements tend to translate into improvements in GFS data. - Where public sector statistics are unavailable, compilers may: - identify public corporations according to statistical standards; - rank units by size (e.g., total assets); - select a sample covering a significant share of the universe; and - convert financial statements of the sample and aggregate/extrapolate to the full universe using the original ranking indicator. - Empirical note: "The experience of compilation for the PSBS database shows that the top 10 corporations normally account for around 90 percent of the assets of the total public corporations." ### Purpose and comparability differences - GFS objective: analyze and evaluate fiscal policy outcomes and linkages with the remainder of the economy and the rest of the world; enables analysis of government contribution to aggregate demand, investment and savings, and assessment of fiscal sustainability. - Financial statements objective: evaluate financial performance and position, provide transparency and accountability to the public and resource providers. - Balance sheets in both systems present stocks at a point in time; financial statements’ balance sheet is a good proxy to the GFS balance sheet but conceptual, presentational and terminological differences require adjustments and reconciliation. ### Classifications, aggregation, and terminology - Accounting standards classify assets/liabilities as current (maturity ≤ one year) and non-current (maturity > one year); PSBS compilers must aggregate across current and non-current to derive total nonfinancial assets and similar aggregates. - Notes to financial statements are a primary source to disaggregate aggregated face-sheet items (e.g., residence of counterparties, currency, maturity, cross-holdings). - GFS requires disaggregation of changes in assets/liabilities into transactions, revaluations, and changes in volume; combination of notes and cash-flow statements can help derive these components. - Terminology mismatch example: a term like “loans” in financial statements may include debt securities; item labels should not substitute for analysis of characteristics. - Practical recommendation: scrutinize notes and original-language versions of financial statements when translations create ambiguity. ### Accounting standards and policies - Review notes on significant accounting policies to determine: - the accounting standard or policy used; - any policy changes since the previous publication; and - the basis of compilation (cash, accrual, or mixed). - Policy indicators: e.g., fixed assets at original historical cost signal need to revalue to market prices for PSBS. - If material assets (e.g., subsoil assets) are omitted from financial statements, compilers should estimate or disclose deficiencies in PSBS metadata. ### Recognition criteria - GFS (accrual basis) recognizes economic events when economic value is created/transformed/exchanged/transferred/extinguished, recorded symmetrically across parties at irrevocable change of economic ownership. - Financial statements recognize past events when amounts can be reliably estimated and future outflows/inflows are probable; therefore financial statements may recognize items without a counterparty entry. - Items often recognized in financial statements but excluded from GFS: - Provisions for bad debts (offset against the asset in analysis). - Contingent assets and liabilities (recognized based on probability, e.g., guarantees, deferred tax assets). - Practical guidance: disclose reconciliation between financial statements and GFS; compilers may treat changes in provisions as a proxy for revaluations (i.e., as another economic flow) to avoid integration discrepancies. ### Valuation (measurement) methods - GFS valuation principle: current market prices for all assets and liabilities; alternative valuation methods allowed where active market prices do not exist (e.g., nonmarketable loans presented at nominal value). - Accounting standards may use fair value, historic cost, or other bases and require disclosure of valuation bases. - If financial statements report fair value, these are usually good proxies for market prices; if reported at historical cost, PSBS compilers need to adjust to GFS valuation principles, generating reconciliation items between systems. ### Reporting entities and levels of consolidation - Macroeconomic statistics reporting unit: institutional unit; focus on consolidated groups of institutional units by sector/subsector based on control and economic nature. - Public sector includes resident institutional units controlled, directly or indirectly, by government units or resident public corporations; subsectors within general government are determined by level of government (central, state, local). - Financial statements reporting unit: individual economic entity or group reporting entity; group reporting entities consolidate entities under control. - Implications for compilers: - Determine whether statements are individual or group-level and the consolidation method used (line-by-line vs. equity consolidation). - If financial statements include consolidated public corporations, eliminate those results from general government balance sheets when compiling PSBS. - Identify counterparts to transactions to enable elimination of intra-sector transactions and stock positions for consolidation (examples include counterpart positions with controlled entities, local government market enterprises, other local governments, and other general government/public corporation units). ### Data validation and quality assurance - PSBS compilation methods are provisional and require validation and quality assurance similar to other GFS datasets: internal consistency, reflection of material units and categories, no unexplainable breaks, and analytically sensible ratio scales. - Internal consistency checks: - Stock-flow consistency: opening balance + transactions + other economic flows = closing balance; unexplained residuals should be identifiable (e.g., depreciation of currency, price changes, discovery of natural resources, change in discount rate). - Consolidation consistency: amounts eliminated from one subsector’s assets must equal amounts eliminated from counterpart subsector’s liabilities; net aggregates (net worth or net financial worth) of the public sector must equal the sum of subsectors’ net aggregates. - Consistency with external sources: reconcile PSBS aggregates against financial statements of major public sector units, media articles, third-party estimates, government operations, and financial market data. - Time series consistency checks: - Analyze significant changes in main PSBS aggregates between periods and identify contributing units. - Suggested thresholds for significance: both percentage and absolute changes (example thresholds: "+/- 5 percent and +/- $500m"); require compilers to check changes outside these thresholds. - Ratio checks: - Verify ratios such as assets/liabilities to GDP, transactions to stock of relevant assets (e.g., interest revenue/expense relative to stock of debt securities and loans, dividends relative to stock of equity assets, rents to the stock of land). - Check nonfinancial/financial assets to total assets to detect anomalies (e.g., nonfinancial public corporations with predominance of financial assets or vice versa). ### Dissemination and revisions policy - PSBS data are subject to revisions mainly due to incorporation of improved and/or more comprehensive source data—reflecting the trade-off between accuracy and timeliness. - Other revision causes: correction of errors and omissions; adoption of new or revised statistical/accounting methodologies. - Revisions should be disseminated and explained; the IMF’s Fiscal Transparency Code contains a principle on historical major revisions requiring disclosure and explanation. - Recommended dissemination practices: - Provide analysis of differences between successive releases for all major aggregates and studies on historical trends of revision size and direction. - If large revisions show a directional bias, adjust data sources or compilation methods to eliminate bias. - Follow a predetermined regular release schedule (advance release calendar) that identifies expected data status (estimate, preliminary, final) and explains reasons underlying each revision. - Explain in detail reasons behind data revisions outside the predetermined schedule. ### Conclusions and way forward - The PSBS database contains comprehensive assets and liabilities data for the public sector and subsectors for 38 countries covering 63 percent of global GDP; it also includes basic balance sheets (excluding land, natural resources, and pension liabilities) for another 30 countries. - The database expands institutional and stock coverage available to fiscal policy decisionmakers and resulted from multi-year IMF staff compilation culminating in the October 2018 Fiscal Monitor on Managing Public Wealth. - Integrity of datasets benefited from extensive validation with country officials and IMF country desks. - Remaining gaps and improvement areas include: - (i) the number of countries and institutions with available data; - (ii) the length of the time series, with a significant number of countries still having only one year of data available; - (ii i) the quality and cross-country comparability of estimates, particularly where valuation/measurement posed difficulty; - (iv) the availability of balance sheet strength and risk indicators; and - (v) the limited scope of intertemporal analysis. - Way forward: expand the database as more data become available from FTEs or authorities/IMF team compilations; rely on user feedback for omissions or supplementary data sources (notifications welcomed and will be acknowledged). *Source: Section II.C above, wpiea2020130-print-pdf* ### Appendix I. Time Series Availability in the PSBS Database ### Appendix I. Time Series Availability in the PSBS Database ### Notes and definitions - “Level” indicates the institutional coverage of central government data in the database, where: - CGin = central government, including social security funds; - CGex = central government, excluding social security funds; - BCG = budgetary central government. - Asset and liability abbreviations: - NFAx = nonfinancial assets excluding land and natural resources; - FA = financial assets; - Lx = liabilities, excluding pension-related liabilities; - LNR = land and natural resources; - PENS = pension-related liabilities; - NA = not available. - Dotted-line items in illustrative conversions denote items requiring additional information for accurate classification (e.g., assets held for sale, deferred tax assets/liabilities). ### Time-series availability (selected country entries — as presented) - Albania - NFAxFA,LxLNR: 2011-16 - PENSNFAx: 2011-16 - FA,LxLNR: 2011-16 - PENS: 2011-16 - NFAxFA,Lx: 2011-16 - LNR: 2013 - PENS: 2013 - Armenia - NFAxFA,LxLNR: 2016 - PENSNFAx: 2009-12 - FA,LxLNR: 2009-12 - PENS: 2016 - NFAxFA,Lx: 2016 - LNR: 2016 - PENS: 2016 - Australia - NFAxFA,LxLNR: 2000-16 - PENSNFAx: 2000-16 - FA,LxLNR: 2000-16 - PENS: 2000-16 - NFAxFA,Lx: 2000-16 - LNR: 2000-16 - PENS: 2000-16 - (additional repeated 2000-16 entries appear in the table) - Austria - Multiple series entries: 2000-16 (repeated across categories) - PENS: 2015 - Other category entries: 2015 - Brazil - NFAxFA,LxLNR: 2006-16 - PENSNFAx: 2014-16 - FA,LxLNR: 2010-14 - PENS: 2014-16 - NFAxFA,Lx: 2006-16 - LNR: 2014-16 - PENS: 2010-14 - Additional entries: 2014, 2014, 2014 (as presented) - Canada - NFAxFA,LxLNR: 2000-16 - PENSNFAx: 2000-16 - FA,LxLNR: 2000-16 - PENS: 2000-16 - NFAxFA,Lx: 2000-16 - LNR: 2000-16 - PENS: 2000-16 - Additional repeated 2000-16 entries appear in the table - China - NFAxFA,LxLNR: 2010-16 - (single entry shown: 2010-16) - India - NFAxFA,LxLNR: 2003-16 - PENSNFAx: 2003-16 - FA,LxLNR: 2003-16 - PENS: 2004-16 - NFAxFA,Lx: 2004-16 - LNR: 2004-16 - PENS: 2004-16 - Japan - NFAxFA,LxLNR: 2000-16 - PENSNFAx: 2000-16 - FA,LxLNR: 2000-16 - PENS: 2000-16 (multiple 2000-16 entries across instrument breakdown) - United Kingdom - NFAxFA,LxLNR: 2000-16 - PENSNFAx: 2000-16 - FA,LxLNR: 2000-16 - PENS: 2000-16 - NFAxFA,Lx: 2000-16 - LNR: 2000-16 - PENS: 2000-16 - United States - NFAxFA,LxLNR: 2001-16 - PENSNFAx: 2001-16 - FA,LxLNR: 2001-16 - PENS: 2001-16 - NFAxFA,Lx: 2001-16 - LNR: 2001-16 - PENS: 2001-16 - Uruguay - NFAxFA,LxLNR: 2001-16 - PENSNFAx: 2001-16 - FA,LxLNR: 2001-16 - PENS: 2001-16 - Uzbekistan - Multiple category entries: 2016 - Several repeated 2016 entries across categories (as presented) ### Observations from the appendix table - Many advanced economies display continuous coverage from 2000-16 across multiple asset and liability categories (e.g., Australia, Austria, Canada, Japan, United Kingdom). - Several emerging and developing economies show more limited or more recent coverage (examples include Armenia: 2009-12 and 2016; China: 2010-16; Uzbekistan: 2016). - Some country entries include multiple repeated year strings across categories, reflecting the template’s per-category availability reporting. *Source: Appendix I. Time Series Availability in the PSBS Database (from the provided IMF content).* --- _Source: https://www.imf.org/-/media/files/publications/wp/2020/english/wpiea2020130-print-pdf.pdf_