## user-guide-soe-stt-jan-2023 ## Source details **Canonical URL:** [user-guide-soe-stt-jan-2023](https://www.imf.org/-/media/files/topics/fiscal/fiscal-risks/tool/user-guide-soe-stt-jan-2023.pdf) ## Other formats - [Markdown version](/-/media/files/topics/fiscal/fiscal-risks/tool/user-guide-soe-stt-jan-2023.pdf.md) - [Structured JSON version](/-/media/files/topics/fiscal/fiscal-risks/tool/user-guide-soe-stt-jan-2023.pdf.json) --- ### Purpose and scope - The IMF user guide describes steps to run and interpret the SOEs Benchmarking and Stress Test Tool. - Objectives of the tool: - Assess relative financial soundness of SOEs against sector comparators. - Project SOE financial performance and quantify impact on government accounts. - Interface with Debt Sustainability Analyses, Public Sector Balance Sheets and Fiscal Stress Tests. - Fiscal impact measured as net inflows into the budget (taxes, dividends, interest payments less subsidies and transfers) and contribution to public net worth (including outstanding debt and publicly guaranteed share). - Projections combine accounting identities and simple economic relations. ### Structure and modules - Two main analytical modules: - Benchmarking module (backward-looking): compares key financial and economic ratios with SOEs worldwide in the same NACE sector. - Stress testing module (forward-looking): projects IS, BSS and CFS over a 6-year horizon; synthesizes into ratios (profitability, liquidity, solvency, productivity); quantifies fiscal consequences; produces two scenarios: - BAS: baseline central assumptions. - SS: stress scenario capturing negative shocks to fundamentals and SOE markets. - Spreadsheet architecture: - Input spreadsheets: Input 1, Input 2, Input 3, Assumptions, Stress (user-populated). - Intermediate spreadsheets: IS, BASS, CFS, Debt, GFS — separate sets for BAS and SS. - Output spreadsheets: Benchmarking, PERF, RG, CHARTS (distinct outputs per scenario). ### Inputs: minimal requirements and examples - Minimum data requirement: financial statements for at least the last 2 years prior to first projection year (simplified IFRS format). - Input 1 (Basics) examples: - Country: Peru - Country code: 293 - Is your country an advanced economy? No - Currency: Sol - Unit: Million - SOE name: Airlines X - SOE sector: Air transport - NACE: 51 - Current year (last of financial statement): 2018 - First year of projections: 2019 - Input 2 (Income Statement) conventions: - Operating balance (row 22) = operating revenues (row 9) − operating expenses (row 14). - Profits before taxes (row 39) = operating balance + non-operating balance. - Profit after taxes (row 43) = profits before taxes − income taxes (row 41). - Memorandum: Number of employees (row 47). - Input 3 (simplified IFRS balance sheet) sample historical figures (units: Million; Currency: Rand; first year of projections 2019): - A. Current assets (2015, 2016, 2017): 7207.0, 10276.0, 9163.0 - Cash and cash equivalent: 1295.0, 2701.0, 2872.0 - Receivables: 4998.0, 6741.0, 5349.0 - Inventories: 725.0, 727.0, 879.0 - B. Non-current assets (2015, 2016, 2017): 7459.0, 6982.0, 6753.0 - Property, plant and equipment: 4587.0, 4474.0, 4574.0 - C. Total assets (2015, 2016, 2017): 14666.0, 17258.0, 15916.0 - D. Current liabilities (2015, 2016, 2017): 9000.0, 11000.0, 13000.0 - E. Non-current liabilities (2015, 2016, 2017): 16414.0, 18622.0, 20718.0 - F. Stockholders' Equity (2015, 2016, 2017): -10748.0, -12364.0, -17802.0 - Accounting identity confirmed: Assets = Liabilities + Equity = Yes for provided years. ### Assumptions spreadsheet: types and WEO linkage - Assumptions comprises: - Projections: macro and market fundamentals over 6 years (generally differ BAS vs SS). - Parameters: structural, behavioral, policy-related — single value over horizon by default. - Business plan assumptions: investment/divestment, staff recruitment, subsidies, doubtful receivables over 6 years. - Default WEO-linked variables (auto-filled, rows 6-26) include: - Real GDP growth (2015–2024): 1.2, 0.4, 1.4, 0.8, -7.5, -5.4, 2.5, 4.8, 4.7, 4.2 - Nominal GDP in national currency (Billions): 4049.9, 4359.1, 4653.6, 4873.9, 4817.3, 4829.2, 5149.8, 5668.0, 6205.5, 6793.5 - Inflation (period average): 1.0, 6.3, 5.3, 4.6, 6.4, 5.7, 4.1, 5.3, 4.8, 5.3 - Oil price (USD): 50.8, 42.8, 52.8, 68.3, 50.4, 47.2, 47.4, 51.5, 52.1, 52.9 - Exchange rate (LC per USD, average): 12.8, 14.7, 13.3, 13.2, 16.4, 17.2, 16.7, 16.7, 17.0, 17.3 - User-populated macro items (sample entries to fill): - Short-term nominal interest rate (domestic): 0.0, 0.0, 1.5, 2.3, 2.8, 2.8, 2.5, 2.3, 2.3, 2.3 - Long-term nominal interest rate (domestic): 0.0, 0.0, 9.5, 10.3, 21.3, 17.3, 14.8, 12.3, 12.0, 11.0 - Market-specific sales volume growth (optional): 0.0, 0.0, 0.0, 0.0, 0.0, 0.0 ### Behavioral and structural parameters - Key behavioral elasticities (sample values): - Sales volume elasticity to domestic GDP growth: 0.5 - Sales volume elasticity to world GDP growth: 0.5 - Purchases of goods (volume) elasticity to sales volume: 0.4 - Indexation of wages to inflation: 1 - Indexation of domestic sale prices to domestic inflation: 0.2 - Indexation of export prices to international inflation: 0.8 - Structural parameters examples (Assumptions Table 8): - Initial share of sales in domestic market (volume): 0.8 - Share of oil/gas in sales: 0 - Share of non-oil commodities in sales: 0 - Share of imports in purchases of goods and services (volumes): 0.7 - Share of oil in imports of goods and services: 0.4 - Policy parameters (Table 10) sample/defaults: - Corporate income tax (CIT) rate: 0.25 - Sale tax rate/VAT: 0.15 - Dividend pay-out ratio: 0.1 - Leverage ceiling (debt-equity ratio threshold): 1.5 - Liquidity target / Liquidity floor (quick ratio): 0.6 - Commercial component of capital injections: 0 ### Debt assumptions and modeling - Debt profile defaults/examples: - Average maturity of new FX-denominated debt (years): 5 - Average maturity of new domestic debt (years): 5 - Average maturity of existing FX-denominated debt (years): 4 - Share of new borrowing in domestic currency to total new borrowing: 0.5 - Share of existing domestic debt that is publicly guaranteed: 0 - Variability of interest rates on domestic debt: 1 - Variability of interest rates on FX-denominated debt: 0.5 - Effective interest rate dynamics: - ERI_t = α × MIR_t + (1 − α) × ERI_(t−1), where α = variability parameter (Assumptions rows 67 and 68). - Example existing debt stock and related items (selected rows preserved exactly): - Existing debt stock: 9968.0 (2016), 15620.0 (2017), 15608.0 (2018), 11835.4 (2019), 8441.1 (2020), 4178.6 (2021), 0.0 (2022), 0.0 (2023), 0.0 (2024) - Of which in foreign currency (in LC): 4984.0, 7810.0, 7804.0, 5933.4, 4506.4, 2211.2, 0.0, 0.0, 0.0 - Total interest payments: 634.0 (2016), 1030.0 (2017), 1630.0 (2018), 1451.4 (2019), 1118.8 (2020), 724.0 (2021), 360.6 (2022), 0.0 (2023), 0.0 (2024) - Debt stock in percent of GDP: 0.2, 0.3, 0.3, 0.2, 0.2, 0.1, 0.0, 0.0, 0.0 ### Stress scenario design and shocks - Stress inputs entered in Stress P7–U23; shock categories: - Macroeconomic shocks: domestic/world real GDP growth, domestic/world inflation, GDP deflator, exchange rate, short-term domestic interest rates, long-term domestic/foreign interest rates. - Market-specific shocks: market-specific growth, commodity price shocks (oil/other), client liquidity shock (receivables), shock on share of receivables to materialize, shock on degree of price indexation, shock on sales tax rate. - Shock mechanics: - Most shocks are additive: SS value = BAS value + shock. - Two multiplicative shocks: liquidity shock (affects share of sales received in cash) and shock on share of delinquent receivables (affects write-offs). - Calibration guidance: - For ~30–40 percent likelihood use one standard deviation; for extreme events use 2–3 standard deviations. - Market-specific shocks > 10–15 percent of baseline usually considered very large. - Sales tax pass-through default: intermediate pass-through coefficient = 0.6 (user-modifiable). ### Projection mechanics: IS, BSS, CFS - Operating revenues and costs driven by sales volume and price growth, which are functions of: - Sales volume growth = weighted average of domestic and foreign sales volume growth (elasticities applied to domestic/world GDP and market-specific growth). - Price growth: domestic price growth linked to domestic inflation via sensitivity parameter or to commodity international prices if commodity producer. - Income Statement sample (selected rows and values preserved exactly): - Operating revenues (A) series: 30492.0, 30716.0, 30986.0, 32167.4, 32588.5, 33516.2, 34542.8, 35575.9, 36619.1 - Operating expenses (B) series: 33407.0, 30194.0, 40048.0, 41765.6, 41018.3, 45755.5, 46797.5, 48311.0, 50101.2 - Operating loss/income (C): 0.0, -2915.0, 522.0, -9062.0, -9598.2, -8429.9, -12239.3, -12254.2, -12735.1 - Profit/loss before tax (H): 0.0, -6130.0, -1378.0, -11652.0, 2224.4, 3744.0, 2978.4, 1567.1, -427.5 - Profit for the year after tax (J): 0.0, -6142.0, -1478.0, -11871.0, 2224.4, 3744.0, 2978.4, 1567.1, -427.5 - Balance Sheet dynamics: - Asset evolution: current + non-current; property, plant and equipment evolve via acquisitions (Assumptions row 75), disposals (Assumptions row 76), depreciation and revaluation. - Receivables modeled as constant share of gross sales (average receivables-to-gross-sales ratio over two years prior to first projection year); in SS augmented by liquidity shock. - Written-down receivables: BAS entry in Assumptions row 79; in SS computed by applying shock on share of receivables to materialize. - Cash-Flow Statement (CFS): - Final cash balances = beginning balances + cash flows from operations (row 7) + investing (row 15) + financing (row 20) + capital injections (row 31). - Sample CFS aggregates (selected values preserved exactly): - Cash flow from operating activities (A): -10363.3, -9127.1, -11482.1, -13036.9, -13536.5, -14347.4 - Cash flow from investing activities (B): 100.0, 0.0, 0.0, 0.0, 0.0, 0.0 - Cash flow from financing activities (C): -5197.2, -5294.3, -4863.0, -4519.1, 4.8, 5.0 - Total capital injections (F): 14455.8, 14126.0, 17027.6, 15302.6, 13531.7, 14342.4 - Cash at the end of the year (G): 2872.0, 1867.3, 1572.0, 2254.4, 1.0, 1.0, 1.0 ### Financing logic and capital injections - Financing priority order encoded in template: 1. Use cash/liquid assets. 2. New borrowing (subject to leverage ceiling). 3. Capital injections as residual if liquidity gap remains. - Targeted cash balances (TC) formula (symbolic preserved): - TC_t = η × (CL_t − rec_t − FA_t) [presented in tool as t t t t TC CL rec FA η = − − (9)] - η = targeted quick ratio (Assumptions, row 48). - Liquidity gap = final liquidity before transfers and new borrowing − targeted cash balances. - Unconstrained new borrowing rules ensure debt-to-equity ≤ leverage cap (Assumptions, row 47); if equity before injections is negative new borrowing = 0. - Counterfactual (no capital injections) mechanics: - New borrowing in counterfactual equals liquidity gap in scenario with capital injections adjusted for incremental interest, amortizations, and incremental current liabilities; example incremental series preserved exactly: - New borrowing (counterfactual) by issuance year: 2019: 14455.8; 2020: 17436.7; 2021: 25421.3; 2022: 30377.6; 2023: 36678.0; 2024: 46904.8 - Total outstanding new borrowing (counterfactual): 2019: 14455.8; 2020: 31892.5; 2021: 54422.6; 2022: 78421.8; 2023: 103637.0; 2024: 133003.5 - Incremental interest payments (counterfactual): 2019: 0.0; 2020: 1576.0; 2021: 3410.2; 2022: 5646.0; 2023: 8038.2; 2024: 10622.8 ### Fiscal mapping, RG outputs and NPV metrics - RG worksheet summarizes: - Net inflows to budget by year, NPV of intertemporal net inflows, government assets and explicit contingent liabilities. - Tax bases and rates: - Income tax base = pre-tax profits; CIT rate default 0.25. - Sales tax base = gross sales; sales tax rate default 0.15. - Dividend pay-out ratio default 0.1. - Representative fiscal flows (selected values preserved exactly): - Taxes paid series (2015–2024): 0.0; 3988.4; 4091.8; 4244.0; 4060.5; 3930.6; 4023.0; 4090.3; 4144.3; 4195.4 - Transfers (capital transfers above the line): 2019: 14455.8; 2020: 14126.0; 2021: 17027.6; 2022: 15302.6; 2023: 13531.7; 2024: 14342.4 - Total net flows to the budget: 2019: -10395.3; 2020: -10195.4; 2021: -13004.6; 2022: -11212.3; 2023: -9387.3; 2024: -10147.0 - NPV fiscal flows (baseline example): - NPV taxes (billion LCU): 17.6 - NPV dividends (billion LCU): 0.0 - NPV transfers (billion LCU): 64.1 - NPV inflows (billion LCU): -46.5 - NPV inflows (in percent of GDP): -1.0 - Discount rates examples (annual): 0.9, 0.9, 0.9, 0.9, 0.9, 0.9 ### Benchmarking, PERF and charts - Benchmarking module automatically selects comparators from ORBIS using NACE sector and income level; indicators include: - Profitability: return on equity, return on assets. - Liquidity: current ratio, interest cover. - Capital structure: non-current liabilities to total assets. - Operating efficiency: operating revenue per employee, labor cost per operating revenue. - PERF computes ratios and counterfactual adjustments (selected illustrative ratio values preserved exactly): - Current ratio series: 0.8, 0.9, 0.7, 0.7, 0.7, 0.7, 0.7, 0.7, 0.7 - Quick ratio series: 0.7, 0.9, 0.6, 0.6, 0.6, 0.6, 0.6, 0.6, 0.6 - Debt-to-equity ratio series: -2.4, -2.4, -1.9, -1.9, -2.1, -2.4, -2.4, -2.3, -2.2 - Consolidated net financial worth series: -17496.0, -18819.0, -24344.5, -20955.4, -17254.3, -13607.9, -11633.6, -11726.3, -11893.4 - Labor cost per operating revenue examples: 18.7, 19.0, 19.8, 19.8, 20.2, 20.5, 20.8, 21.1, 21.4 - CHARTS and CHARTS-stress visualize PERF and RG variables; CHARTS-stress compares BAS vs SS counterfactuals. ### Practical notes and optional recommendations (selection) - Holdings and sector assignment: - If SOE is a holding concentrated in one sector, select that sector and capture secondary activities via Other Operating revenues (IS, row 11). - For highly diversified holdings, study main non-financial companies separately when feasible. - Optional assumptions may be set to zero (Table 5 examples): market-specific sales growth, price change of non-oil commodities, increase in doubtful receivables, revaluation effects, net investment in fixed assets, capital gains/losses, staff recruitment, government subsidies. - Treatment of capital injections per GFSM 2014: - Share of capital injections expected to be commercially remunerated (row 49): default 0 (treat as transfer above the line for prudence unless clearly commercially remunerated). - Debt and guarantee inputs: - Users should specify shares of government loans and guarantees in existing and new borrowing separately for domestic and FX-denominated debt (Assumptions rows 61–66). - Stress scenario asymmetries: - Users may replace default tie-ins between Stress and Assumptions to reflect realistic asymmetric SS responses (e.g., cut investments, change dividend pay-out, alter maturities). *The IMF user guide for the SOE Stress-Testing Tool (January 2023).* ### 1. This manual describes the steps necessary to run and interpret the analytical results ### This manual describes the steps necessary to run and interpret the analytical results of the SOEs Benchmarking and Stress Test Tool ### Purpose and scope - The tool aims to assess the relative financial soundness of SOEs against a set of comparators, and project in different scenarios the financial performance of the company and its impact on government’s accounts. - Projections are based on a combination of accounting and simple economic relations. - The fiscal impact of SOEs’ performance relates to their net inflows into the budget (i.e., taxes, dividends, and interest payments less subsidies and transfers) and their net worth, including their outstanding debt and the publicly guaranteed share. - The tool can be interfaced with other fiscal risk assessment tools, such as Debt Sustainability Analyses, Public Sector Balance Sheets and Fiscal Stress Tests. - The manual provides guidance on: - the financial information of the company that the user has to enter; - the calibration of the economic, financial and policy parameters necessary to conduct the projections; - the meaning of the tool’s outputs and the economic rationale underlying them. ### Structure of the tool: modules and analytic approach - The tool combines backward- and forward-looking analysis via two modules: - Benchmarking module (backward-looking) - Compares key financial and economic ratios of the company with a broad set of SOEs worldwide in the same sector. - Rationale: financial ratios vary across productive sectors due to technologies, demand characteristics and commercial channels; therefore relative assessment against sector peers is useful. - Stress testing module (forward-looking) - Projects the SOE’s Income Statement (IS), Balance Sheet (BSS) and Cash Flow Statement (CFS) over a 6-year horizon. - Synthesizes projections into financial and economic ratios (profitability, liquidity, solvency, productivity). - Quantifies consequences of SOE performance on fiscal accounts. - Produces two scenarios: baseline (BAS) and stress scenario (SS). - BAS: projections based on central assumptions (most likely given available information). - SS: captures negative shocks on economy fundamentals and the SOE’s market causing deviations from baseline; used to assess resilience and differential fiscal contribution. ### Spreadsheet architecture: inputs, intermediate calculations, outputs - Spreadsheet categories: - Input spreadsheets (Input 1, Input 2, Input 3, Assumptions, Stress) — populated by the user. - Input 1: basic coordinates of SOE activity and country; first year of projections. - Input 2: past Income Statement observations. - Input 3: past Balance Sheet observations. - Assumptions: macroeconomic and market fundamentals, parametric assumptions, baseline sales projections. - Stress: user-entered shocks and stress-scenario projections (imports Assumptions by default). - Intermediate calculations spreadsheets — detailed projections of IS, BASS, CFS, Debt, and GFS; separate sets for BAS and SS. - Intermediate spreadsheets interlink to determine stock and flow variables simultaneously (e.g., accrual revenues → cash balances; changes in assets/liabilities → cash flows). - Output spreadsheets (Benchmarking, PERF, RG, CHARTS) — condense key results. - Benchmarking: compares SOE financial ratios with peers (based on financials before projections). - PERF: projected financial ratios and contribution to public net worth. - RG: government budget inflows and outflows generated by the SOE. - CHARTS: visual distillation of PERF and RG variables. - For the stress-testing module there are distinct output spreadsheets per scenario (BAS and SS) with essentially identical formats. ### Key interlinkages and data flows (selected examples) - Input spreadsheets feed both BAS and SS intermediate spreadsheets: - Input 1 (country, sector, first year of projections) → NACE codes and income level to Benchmarking; first year of projections to all projection spreadsheets. - Input 2 (past IS) → past observations to IS (baseline and stress). - Input 3 (past BSS) → past observations to BASS (baseline and stress). - Assumptions → baseline projections of sales (volume and prices), shares in domestic/export markets; parametric and macro projections exported to BAS spreadsheets and to Stress. - Stress → stress-scenario macro and market projections; stress sales projections; exports to stress projection spreadsheets. - Examples of intermediate-output linkages: - IS → after-tax profit to BASS and RG; operating/non-operating items to CFS and GFS; profits to PERF. - BASS → asset/liability positions to IS, CFS, PERF; contribution to public wealth (GFS) to PERF. - CFS → cash balances and new borrowing; capital injections to IS, BASS and GFS; new borrowing to Debt. - Debt → outstanding debt, interest payments and amortizations; interest payments to IS; amortizations to CFS; outstanding debt to BASS. - GFS → SOE’s statement of operations in GFSM 2014 and gross financing needs. ### Inputs: user data requirements and conventions - Minimum data requirement: - Financial statements of the SOE for at least the last 2 years prior to the first year of projections (simplified IFRS format). More years improve analysis quality. - Input 1 (examples and conventions): - User selects country from dropdown; tool assigns country code and identifies if country is an advanced economy for benchmarking. - Currency and units selected by user; recommended to match WEO units if nominal GDP projections are imported from WEO. - User enters SOE name and sector; tool assigns a NACE code for benchmarking peers. - User enters last year of observed financial data (year T); projections start from T+1. Tool assumes natural years = accounting years unless user specifies differently. - Example values shown in Input 1 (cells highlighted as user-entered vs auto-filled): - Country: Peru - Country code: 293 - Is your country an advanced economy? No - Currency: Sol - Unit: Million - SOE name: Airlines X - SOE sector: Air transport - NACE: 51 - Current year (last of financial statement): 2018 - First year of projections: 2019 - Input 2 (Income Statement) conventions: - Input 2 mirrors IS structure; past data appear in columns C-F. - Some items are calculated residually and are auto-populated (blue): other operating revenue, other operating expenses, other non-operating revenues, other non-operating expenses. - Key aggregated balances are auto-calculated: - Operating balance (row 22) = operating revenues (row 9) − operating expenses (row 14). - Non-operating balance (row 35) = non-operating revenues (row 24) − non-operating expenses (row 30). - Profits before taxes (row 39) = operating balance + non-operating balance. - Profit after taxes (row 43) = profits before taxes − income taxes (row 41). - Memorandum item: Number of employees (row 47) used for productivity ratios and projections via net staff recruitment assumptions. - Input 3 (Balance Sheet) example values and format (units: Million; first year of projections 2019; currency shown as Rand in example header): - Years shown: 2015, 2016, 2017, 2018 - A. Operating revenue (a.1+a.2+a.3) - 2015: 30492.0 - 2016: 30716.0 - 2017: 30986.0 - a.1 Net Sales (net of taxes and other deductions) - 2015: 29160.0 - 2016: 29273.0 - 2017: 29517.0 - a.2 Other operating revenue - 2015: 1332.0 - 2016: 1443.0 - 2017: 1469.0 - a.3 Subsidies from government - 2015: 0.0 - 2016: 0.0 - 2017: 0.0 - B. Operating expenses (b.1+b.2+b.3+b.4+b.5+b.6) - 2015: 33407.0 - 2016: 30194.0 - 2017: 40048.0 - b.1 Personnel (wages, salaries, benefits) - 2015: 5698.0 - 2016: 5831.0 - 2017: 6131.0 - b.2 Cost of sales of goods & services - 2015: 22559.0 - 2016: 19984.0 - 2017: 22874.0 - b.3 Depreciation & amortization - 2015: 825.0 - 2016: 732.0 - 2017: 1033.0 - b.6 Other operating expenses - 2015: 4325.0 - 2016: 3647.0 - 2017: 10010.0 - C. Operating loss/income (A−B) - 2015: -2915.0 - 2016: 522.0 - 2017: -9062.0 - D. Non-operating revenue (d.1+d.2+d.3+d.4) - 2015: 240.0 - 2016: 240.0 - 2017: 240.0 - d.2 Interest received - 2015: 26.0 - 2016: 26.0 - 2017: 40.0 - d.4 Other non-operating revenues - 2015: 214.0 - 2016: 214.0 - 2017: 200.0 - E. Non-operating expenses (e.1+e.2) - 2015: 3455.0 - 2016: 2140.0 - 2017: 2830.0 - e.1 Interest payments - 2015: 634.0 - 2016: 1030.0 - 2017: 1630.0 - e.2 Other non-operating expenses - 2015: 2821.0 - 2016: 1110.0 - 2017: 1200.0 - F. Non-operating loss/income (D−E) - 2015: -3215.0 - 2016: -1900.0 - 2017: -2590.0 - H. Profit/loss before tax (C+F) - 2015: 0.0 - 2016: -6130.0 - 2017: -1378.0 - 2018: -11652.0 - I. Corporate income tax/benefit - 2015: 12.0 - 2016: 100.0 - 2017: 219.0 - J. Profit for the year after tax (H−I) - 2015: -6142.0 - 2016: -1478.0 - 2017: -11871.0 - Memorandum item: Number of employees - 2015: 10071.0 - 2016: 10071.0 ### Outputs, interpretation and user guidance - Benchmarking output: - Imports the SOE’s financial ratios from performance and peer ratios from the ORBIS database; uses Input 1 income level and NACE sector to identify peers. - Produces tables and charts comparing the SOE’s financial performance with peers. - Stress-testing outputs (PERF, RG, CHARTS) — per scenario: - PERF: operating/non-operating revenues/expenses and profits from IS; cash balances from CFS; assets/liabilities and contribution to public net worth from BASS; computes financial and economic ratios. - RG: taxes and after-tax profit from IS; interest payments to government from Debt; capital injections from CFS; government’s guaranteed debt from Debt; computes SOE’s net inflows to the budget (by period and NPV). - CHARTS: visualizes financial ratios, contributions to budget and public sector balance sheet variables. - Intermediate outputs (GFS): - Produces SOE’s statement of operations in GFSM 2014 and gross financing needs. - Boxes and notes in the manual: - Explanations focus on BAS when BAS and SS structures are identical. - Boxes provide detailed interpretation notes and recommendations classified as “Basic” (essential) or “Optional” (advanced/adaptive uses). ### Practical notes and optional recommendations - Note (Optional) on holdings and sector assignment: - When an SOE is a holding of public companies operating across sectors: - If activities are mostly concentrated in one sector, select that sector; capture secondary activities via Other Operating revenues (IS, row 11) with simplified rules. - For highly diversified holdings, it is recommended to study separately the main non-financial companies within the holding to avoid cumbersome and less accurate aggregations. - Residual calculations in IS and automated aggregation help avoid inconsistencies when mapping IFRS statements into the tool’s simplified statements. *The manual.* ### 11. The structure of Input 3 ### 11. The structure of Input 3 ### Structure and role of Input 3 (simplified IFRS balance sheet) - Input 3 represents a simplified IFRS statement of financial position (balance sheet). - Past observations are imported from Input 3 into the BSS (columns C-F). - Input 3 is essentially the same as BSS except for memorandum items present only in BSS: - Stock of written-down receivables (asset side) - Net acquisition and revaluation of non-financial assets (asset side) - Asset/liability revaluations within equity - Memorandum items are used during the projection horizon but play no role before the first year of projections. - The stock of written-down receivables before the first year of projections is entered in Assumptions, row 79; if unavailable, it can be set equal to zero in Assumptions. ### Residual calculations and shadowed cells - Some items in Input 3 are calculated residually to avoid mapping inconsistencies from IFRS to the tool format; these cells are shadowed in blue. - Categories automatically calculated by the tool (past observations): - Other current assets (row 14) = Current assets (row 10) − Cash (row 11) − Receivables (row 12) − Inventories (row 13) - Other non-current assets (row 19) = Non-current assets (row 16) − Property, plant and equipment (row 17) − Investment property (row 18) - Other current liabilities (row 30) = Current liabilities (row 25) − Accounts payable (row 26) − Employee benefit liabilities (row 28) − Current long-term liabilities (row 29) - Other non-current liabilities (row 35) = Non-current liabilities (row 32) − long-term loans and borrowings (row 33) − long-term employee benefit liabilities (row 34) ### Accounting consistency checks computed by Input 3 - Total assets (row 21) = Current assets + Non-current assets. - Total liabilities (row 43) = Current liabilities + Non-current liabilities. - Total equity and liabilities = Equity (row 37) + Total liabilities. - Row 48 verifies Assets = Liabilities + Equity; if not fulfilled, users should search for inconsistencies in past data. ### Sample historical balance sheet figures (units: Million, Currency: Rand; Blue cells auto-populated; First year of projections: 2019) - Assets (2015, 2016, 2017, 2018): - A. Current assets (a.1+a.2+a.3+a.4): 7207.0, 10276.0, 9163.0 - a.1 Cash and cash equivalent: 1295.0, 2701.0, 2872.0 - a.2 Receivables: 4998.0, 6741.0, 5349.0 - a.3 Inventories: 725.0, 727.0, 879.0 - a.4 Other current assets: 189.0, 107.0, 63.0 - B. Non-current assets (b.1+b.2+b.3): 7459.0, 6982.0, 6753.0 - b.1 Property, plant and equipment: 4587.0, 4474.0, 4574.0 - b.2 Investment property: 0.0 - b.3 Other non-current assets: 2872.0, 2508.0, 2179.0 - C. Total assets (A+B): 14666.0, 17258.0, 15916.0 - Liabilities (2015, 2016, 2017, 2018): - D. Current liabilities (d.1+d.2+d.3+d.4): 9000.0, 11000.0, 13000.0 - d.1 Accounts payable: 7148.0, 6797.0, 8285.0 - of which taxes: 0.0, 0.0, 0.0 - d.2 Employee benefit liabilities: 0.0, 0.0, 0.0 - d.3 Loans and borrowings: 984.0, 3810.0, 3804.0 - d.4 Other current liabilities: 868.0, 393.0, 911.0 - E. Non-current liabilities (e.1+e.2+e3): 16414.0, 18622.0, 20718.0 - e.1 Loans and borrowings: 8984.0, 11810.0, 11804.0 - e.2 Employee benefit liabilities: 121.0, 128.0, 91.0 - e.3 Other non-current liabilities: 7309.0, 6684.0, 8823.0 - F. Stockholders' Equity (f.1+f.2): -10748.0, -12364.0, -17802.0 - f.1 Share capital: 12892.0, 12892.0, 12892.0 - f.2 Accumulated other comprehensive income - f.3 Retained earnings: -23640.0, -25256.0, -30694.0 - G. Total liabilities (D+E): 25414.0, 29622.0, 33718.0 - H. Total equity & liabilities (F+G): 14666.0, 17258.0, 15916.0 - Accounting identity confirmed: Assets = Liabilities + Equity = Yes (for provided years) ### IV. Assumptions ### IV.1 Introduction — role of user judgement - The tool requires the user to input fundamentals and structural parameters; it does not automatically generate them. - Inputs require prior analysis of company fundamentals (demand nature, price-setting, non-commercial mandates, market power, perception in markets). - Gathering assumptions may require interaction with the SOE’s management, main shareholder, regulators, and lenders. - Where only ranges of plausible values exist, sensitivity exercises are recommended. ### IV.2 Types of elements in the Assumptions spreadsheet - The Assumptions spreadsheet comprises three element types: - Projections: macroeconomic and market-specific fundamentals, entered over a 6-year period and generally different in BAS and SS. - Parameters: structural (operating and financial structure), behavioral (sensitivity of revenues and costs), and policy-related (tax, dividend, transfer policy). Parameters take a single value over the projection horizon and by default are the same in BAS and SS. - Business plan assumptions and other changes in assets: investment/divestment, capital gains/losses, staff recruitment, government subsidies, revaluation effects, and the path for doubtful receivables; entered over a 6-year period. ### IV.3 Optional vs. basic assumptions (Table 5 summary) - Optional assumptions can be set to zero or linked to other cells; examples and how to populate: - Market-specific sales growth: Can be set equal to zero - Price change of commodities other than oil: Can be set equal to zero, except for producers of these commodities - Increase in doubtful receivables: Can be set equal to zero - Revaluation effects of fixed assets and investment property: Can be set equal to zero - Share of publicly guaranteed debt and government's loans in local currency and FX-denominated new borrowings: Can be set equal to the same parameters relative to existing debt - Net investment in fixed assets and investment property: Can be set equal to zero - Capital gains and losses from asset sales: Can be set equal to zero - Staff recruitment: Can be set equal to zero - Government's subsidies: Can be set equal to zero ### IV.2 (continued) Macroeconomic and market-specific projections (rows 6-26) - Operating revenues and costs are driven by macroeconomic and market-specific variables entered in rows 6-26 of Assumptions. - Default linkages to the IMF April World Economic Outlook (WEO): - Variables linked to WEO and updated annually in the template: real domestic GDP growth (row 7), world real GDP growth (row 17), domestic GDP at current prices (row 8), domestic GDP deflator (row 12), domestic and world inflation (rows 10 and 19), oil prices in US$ (row 14), average-of-period and end-of-period exchange rates (rows 15 and 16). - The tool imports indexes from the WEO and calculates inflation as the rate of change of those indexes; oil prices are imported in US$ and oil price growth is calculated by the tool. - The user can replace WEO values with other projections. - Users invited to enter: - Short-term domestic interest rates - Long-term domestic and foreign interest rates (should include risk premia applicable to new borrowings) - For SOEs producing commodities other than oil, price projections in US$ should be entered (row 26); the tool does not link these automatically. - Optional idiosyncratic growth component for revenues: row 25. ### WEO-linked cells and user-populated cells - Cells linked to WEO are shadowed in blue and auto-calculated once Basics is populated. - Cells not provided by WEO and market-specific projections are highlighted in yellow for user input. - Users must populate all macroeconomic projections (rows 7-24) to avoid formula errors (VALUE, DIV0) in worksheets; market-specific sales volume growth is optional. ### Sample macroeconomic assumptions (2015–2024) — WEO-derived and user-fillable - Macroeconomic assumptions — automatically filled in (2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, 2023, 2024): - Real GDP growth: 1.2, 0.4, 1.4, 0.8, -7.5, -5.4, 2.5, 4.8, 4.7, 4.2 - Nominal GDP in national currency (Billions): 4049.9, 4359.1, 4653.6, 4873.9, 4817.3, 4829.2, 5149.8, 5668.0, 6205.5, 6793.5 - Inflation (period average): 1.0, 6.3, 5.3, 4.6, 6.4, 5.7, 4.1, 5.3, 4.8, 5.3 - CPI: 92.0, 97.8, 103.0, 107.8, 114.6, 121.1, 126.1, 132.8, 139.1, 146.5 - GDP deflator (period average): 132.2, 141.7, 149.2, 155.0, 164.9, 174.2, 181.4, 191.0, 200.2, 210.8 - Oil price (based on WEO projections): 50.8, 42.8, 52.8, 68.3, 50.4, 47.2, 47.4, 51.5, 52.1, 52.9 - Oil price growth (in USD): -15.7, 23.3, 29.4, -26.3, -6.3, 0.3, 8.7, 1.1, 1.5 - Exchange rate (LC per US dollar, average): 12.8, 14.7, 13.3, 13.2, 16.4, 17.2, 16.7, 16.7, 17.0, 17.3 - Exchange rate (end of period): 15.6, 13.7, 12.3, 14.4, 16.4, 17.2, 16.7, 16.7, 17.0, 17.3 - World GDP growth (based on WEO projections): 3.5, 3.4, 3.8, 3.6, -4.0, -2.6, 4.6, 6.1, 5.9, 5.1 - World price index (based on WEO projections): 147.9, 152.0, 156.8, 162.5, 163.2, 164.9, 172.3, 180.8, 187.9, 194.3 - World inflation: 2.8, 3.2, 3.6, 0.4, 1.1, 4.5, 5.0, 3.9, 3.4 - Macroeconomic assumptions (to be filled-in) — sample entries (2015–2024): - Short-term nominal interest rate (domestic): 0.0, 0.0, 1.5, 2.3, 2.8, 2.8, 2.5, 2.3, 2.3, 2.3 - Long-term nominal interest rate (domestic): 0.0, 0.0, 9.5, 10.3, 21.3, 17.3, 14.8, 12.3, 12.0, 11.0 - Long-term nominal interest rate (FX): 0.0, 0.0, 7.5, 7.2, 9.4, 9.9, 9.4, 8.9, 8.4, 7.4 - Market-specific sales volume growth (optional): 0.0, 0.0, 0.0, 0.0, 0.0, 0.0 - Price growth of commodities other than oil in USD (only if the SOE is a commodity producer): 0.0, 0.0, 0.0, 0.0, 0.0, 0.0 ### IV.3 Parameters linking fundamentals to operating behavior (behavioral parameters) - The tool links macroeconomic and market-specific fundamentals to revenues and costs using structural elasticities/behavioral parameters (Table 7). - Key behavioral parameters (sample values shown): - Sales volume elasticity to domestic GDP growth: 0.5 - Sales volume elasticity to world GDP growth: 0.5 - Purchases of goods (volume) elasticity to sales volume: 0.4 - Indexation of wages to inflation: 1 - Indexation of domestic sale prices to domestic inflation: 0.2 - Indexation of export prices to international inflation: 0.8 - Functional linkages and notes: - Real domestic and world GDP growth are linked to sales volume growth via elasticities (rows 29 and 30); default unitary elasticity to market-specific fundamentals. - Elasticities should be interpreted as percent change in a variable when its driver increases by 1 percent (e.g., elasticity 0.5 implies 3 percent GDP → 1.5 percent sales volume growth). - Where econometric estimation is infeasible, a range of plausible elasticities should be defined and sensitivity analysis conducted. - Strategies to combine GDP and market-specific drivers are provided (e.g., set market-specific growth to zero and use GDP elasticity, or vice versa; or enter external projections directly in rows 98 and 100). - Domestic and world inflation link to local and export prices via sensitivities (rows 36 and 37); two elasticities allow price discrimination between markets when plausible. - Commodity producers are identified with dummy parameters (oil/gas producers: row 34 = 1; other commodity producers: row 35). - Wages are indexed to contemporary domestic inflation via a parameter (row 33) that typically ranges between 0 and 1 (but can be >1 or negative in exceptional circumstances). - International oil prices apply 1 to 1 to the imported inputs bill. - Purchases of goods and services (other than labor) are linked to sales volume through a fixed technical coefficient (row 32) and are indexed 1 to 1 to domestic and foreign inflation as appropriate. - Average-of-period exchange rates apply 1 to 1 to convert value of exports/imports of inputs and amortization of FX-denominated debt; end-of-period rates apply 1 to 1 to outstanding FX-denominated debt. - Short-term interest rates apply without transformation to cash balances; long-term rates apply to interest payments on debt through an indexation mechanism reflecting debt contract nature (see debt assumptions in IV.5). *Source: user-guide-soe-stt-jan-2023 (IMF).* ### 21. The user is also invited to enter several structural parameters regarding revenues ### 21. The user is also invited to enter several structural parameters regarding revenues ### Structural parameters for revenues and costs (Assumptions, Table 8) - Purpose: these parameters interact with behavioral elasticities and projections of fundamentals; best sourced from notes to SOE financial statements or company prospectuses. - Parameters and guidance: - Initial share of sales in volume in domestic market to total sales in volume (row 31). This share is endogenous over the projection horizon but an initial value is required for IS calculations; refers to the primary activity if multiple goods/services are produced. - Share of oil/gas in sales (row 34). Usually 0 or 1. When =1, the price of sales links to projections of oil prices. - Share of non-oil commodities in sales (row 35). When =1, prices link to user-entered projections for these commodity prices (row 26). - Share of imports in purchases of goods and services (row 38). Defined in nominal terms, held constant over the projection horizon and treated as a coefficient at constant prices; recommended to use a historical average rather than last-year share. - Share of oil in imports of goods and services (row 39). - Example parameter values (last observed year or default entries): - Share of sales (volume) in domestic markets in the last observed year: 0.8 - Share of oil/gas in sales: 0 - Share of non-oil commodities in sales: 0 - Share of imports in purchases of goods and services (volumes): 0.7 - Share of oil in imports of goods and services: 0.4 ### Effects of macroeconomic and market-specific variables on revenues and expenses (Table 9) - Directional effects summarized: - Domestic and foreign GDP real GDP growth - Effect on revenues: Positive (higher sales) - Effect on expenses: Positive (higher demand for inputs) - Market-specific growth - Effect on revenues: Positive (higher sales) - Effect on expenses: Positive (higher demand for inputs) - Domestic and foreign inflation - Effect on revenues: Positive (higher prices) - Effect on expenses: Positive (higher personnel expenses and costs of inputs) - Higher oil prices - Effect on revenues: Positive only for oil producers - Effect on expenses: Positive if oil is an input - Higher commodity prices other than oil - Effect on revenues: Positive only for producers of these commodities - Effect on expenses: Null, unless these prices are reflected in higher foreign inflation - Exchange rate depreciation - Effect on revenues: Positive (higher value of exports in local currency, higher incomes from FX-denominated assets) - Effect on expenses: Positive (higher cost of imported inputs in local currency, higher interest payments on FX-denominated debt expressed in local currency) - Higher interest rates - Effect on revenues: Positive (higher asset income) - Effect on expenses: Positive (higher interest payments to the extent they are variable) - Net sign: ambiguous and depends on relative levels of revenues and expenses, and structural and behavioral parameters. Illustrative implications: - Robust GDP growth increases probability that operating income improves, but high elasticity of input demand to sales growth can dampen gains. - Higher expenses relative to revenue make operating income more vulnerable to inflation accelerations, especially if personnel expense indexation to domestic inflation is high. - Greater export orientation and lower import intensity increase likelihood that depreciation benefits operating income; however, high FX interest payments or low FX asset income can make non-operating income suffer. ### Policy parameters linking SOE performance to budget net inflows (Assumptions rows 42–49, Table 10) - Parameters to enter and guidance: - Tax rates: - Corporate income tax (CIT) rate: 0.25 - Sale tax rate/VAT: 0.15 - Royalty rate (for oil producers): 0 - Fees rates on sales: 0 - Dividend pay-out ratio (row 44): 0.1 — share of after-tax profits distributed to shareholders; use effective past rates if no policy framework. - Note: where government is sole shareholder, high dividend pay-out ratios can extract liquidity and aggravate financing gaps; perform sensitivity exercises for different values. - Leverage ceiling (debt-equity ratio threshold for new borrowing): 1.5 - Liquidity target / Liquidity floor (quick ratio): 0.6 - Commercial component of capital injections (share commercially remunerated): 0 - Guidance and considerations for liquidity floor and leverage cap: - Quick ratios below 1 present significant risks; debt-to-equity ratios above 2 considered a serious solvency threat; ratios between 1.5 and 2 considered from high to very high. - Set these parameters considering past government behavior in bail-outs, fiscal space, market perceptions and ratings, strategic role of the company, and moral hazard/adverse incentives. - Policy parameters are constant by default but can vary over the projection horizon to reflect changing policies or restructuring stages; tool allows entry of annual differences from initial values. - Treatment of capital injections: - Share of capital injections expected to be commercially remunerated (row 49): per GFSM 2014, if rate of return of equity purchases is not realistic, treat as capital transfer (included in deficit); otherwise treat as acquisition of a financial asset (below-the-line). For prudence, set this parameter equal to zero unless company clearly profitable in baseline. ### Assumptions relative to debt and asset structure (Table 11 and Table 12) - Debt profile parameters (examples/defaults): - Average maturity of new FX-denominated debt (years): 5 - Average maturity of new domestic debt (years): 5 - Average maturity of existing FX-denominated debt (years): 4 - Average maturity of existing domestic debt (years): 4 - Grace period of new domestic debt (years): 1 - Grace period of new FX-denominated debt (years): 1 - Share of new borrowing in domestic currency to total new borrowing: 0.5 - Share of existing domestic debt that is publicly guaranteed: 0 - Share of new domestic borrowing that is publicly guaranteed: 0 - Share of domestic government loans in existing domestic debt: 0 - Share of FX-denominated government loans in existing FX-denominated debt: 0 - Share of new domestic government loans in domestic new borrowing: 1 - Share of new FX-denominated government loans in FX-denominated new borrowing: 0 - Variability of interest rates on domestic debt: 1 - Variability of interest rates on FX-denominated debt: 0.5 - Debt modeling guidance: - Grace periods refer only to new borrowing; existing debt assumed paid from first projection year. A one-year grace period means payments start in period T+2 for debt borrowed in T; interest is paid during grace periods. - Amortization years of existing debt count from the first year of projections inclusive. - The template synthesizes multiple instruments into two representative types (local currency and FX) for tractability; weighted averages can be used but may reduce accuracy. - Government loans to SOE and government guarantees should be identified and entered as shares of existing debt and new borrowing; guaranteed debt by default applies to local-currency debt but this assumption can be relaxed. - Government guarantees and loans guidance: - Shares of government’s loans in existing debt entered in separate rows for local and FX-denominated debt; shares for new borrowing also entered separately. - Users can differentiate coefficients for existing debt and new borrowing to reflect practical differences in access to private financing. - If governments guarantee FX-denominated borrowing, additional parameters should be added; guaranteed debt is treated as a memorandum item in Debt projections and does not change total debt. - Interest-rate variability: - Degree of variability ranges from 0 (fixed rates) to 1 (fully variable). Intermediate values imply interest rates are a linear combination of past effective rates and new prevailing rates. - Variability can differ between local currency- and FX-denominated debt but is assumed the same for existing debt and new borrowing within each currency type. - Asset-related parameters: - Share of non-disbursed taxes to accrued taxes (row 40): 0 - Share of investment property in domestic currency (row 41): 1 - Rationale: accrued but unpaid taxes are payables (do not generate cash outflows); investment property currency composition affects asset income, revaluation effects and capital gains calculations. ### Assumptions for consolidation of SOE assets and liabilities in the public sector balance sheet (Table 13) - Parameters (assumed constant over projection horizon) and example/default values: - Share of the company’s financial assets in other public sector units (row 84): 0 - Share of equity owned by other public sector units in the last observed year (row 85): 1 - Share of liabilities other than equity and debt in other public sector units (row 86): 0 - Share of non-financial assets in other non-current assets (row 87): 0.5 - Purpose and guidance: - These coefficients determine consolidation when calculating the SOE’s contribution to public net worth and net financial worth under GFSM 2014. - Examples: financial assets held by other public units (e.g., government debt securities) are consolidated; liabilities to other SOEs or the government (including accrued but unpaid taxes) are consolidated as a fraction. - For mapping IFRS categories to GFSM 2014 financial vs non-financial assets, the share of non-financial assets in other non-current assets helps allocate heterogeneous items (e.g., patents vs tax assets). If detailed information is unavailable, setting this coefficient to zero is recommended. *The IMF user guide for the SOE Stress Testing Tool (Assumptions and parameter guidance).* ### 32. The tool can factor the purchase and disposal of fixed assets and investment ### 32. The tool can factor the purchase and disposal of fixed assets and investment ### Data entry for purchases, disposals, and valuation effects - Purchases and disposals of fixed assets and investment property are entered as: - Row 74: acquisition of fixed assets (positive sign). - Row 75: divestment of fixed assets (positive sign). - Row 72: net acquisitions of investment property (purchases minus disposals) (positive sign). - Purchases and disposals are valued at current prices in local or foreign currency, using current exchange rates, and expressed in local currency. - Valuation (revaluation/devaluation) effects on fixed assets and investment property can be entered in Assumptions: - Fixed assets valuation: row 76. - Investment property price change rates entered as price change rates in local currency (row 73), with a positive sign for revaluation and negative for devaluation. - Price change rates are defined as the net rate of the asset price variation between two consecutive periods. ### Default Assumptions (Momorandum Items) - Default values (by year) are set as follows (exact values preserved): - Net acquisition of investment property (in LC): 2015 0; 2016 0; 2017 0; 2018 0; 2019 0.0; 2020 0.0; 2021 0.0; 2022 0.0; 2023 0.0; 2024 0.0 - Investment property revaluation rate (in LC): 2015 0.0; 2016 0.0; 2017 0.0; 2018 0.0; 2019 0.0; 2020 0.0; 2021 0.0; 2022 0.0; 2023 0.0; 2024 0.0 - Acquisition of fixed assets: 2015 0.0; 2016 0.0; 2017 0.0; 2018 0.0; 2019 0.0; 2020 0.0; 2021 0.0; 2022 0.0; 2023 0.0; 2024 0.0 - Divestment of fixed assets: 2015 0.0; 2016 0.0; 2017 0.0; 2018 0.0; 2019 100.0; 2020 0.0; 2021 0.0; 2022 0.0; 2023 0.0; 2024 0.0 - Revaluation rate of fixed assets: 2015 0.0; 2016 0.0; 2017 0.0; 2018 0.0; 2019 0.0; 2020 0.0; 2021 0.0; 2022 0.0; 2023 0.0; 2024 0.0 - Realized capital gains/losses from fixed assets: 2015 0.0; 2016 0.0; 2017 0.0; 2018 0.0; 2019 -5.0; 2020 0.0; 2021 0.0; 2022 0.0; 2023 0.0; 2024 0.0 - Realized capital gains/losses from investment property: 2015 0.0; 2016 0.0; 2017 0.0; 2018 0.0; 2019 0.0; 2020 0.0; 2021 0.0; 2022 0.0; 2023 0.0; 2024 0.0 - Employment growth rate: 2015 0.0; 2016 0.0; 2017 0.0; 2018 0.0; 2019 0.0; 2020 0.0; 2021 0.0; 2022 0.0; 2023 0.0; 2024 0.0 - Government subsidies: 2015 0.0; 2016 0.0; 2017 0.0; 2018 0.0; 2019 0.0; 2020 0.0; 2021 0.0; 2022 0.0; 2023 0.0; 2024 0.0 ### Revaluation and realized gains/losses: accounting and entry rules - Market price changes give rise to unrealized capital gains/losses that affect end-period asset stock values; these are treated in the BSS as unrealized until disposal. - Realized capital gains/losses occur on disposal and are entered in: - Row 77: realized capital gains (local currency). - Row 78: realized capital losses (local currency). - Sign convention: - Positive amounts = capital gains. - Negative amounts = capital losses. - Accounting treatment: - Realized capital gains/losses are part of profits before taxes. - Unrealized capital gains/losses are incorporated in comprehensive income and do not affect profits. - Guidance for entering realized gains/losses: - Example: If SOE sells land for LC 100 million where LC 20 million are capital gains, enter LC 100 million under divestment in fixed assets and LC 20 million as capital gains from fixed assets. - Consider variables: years on balance sheet; cumulative revaluations/depreciations before and after first projection year; market liquidity (less liquid implies higher fire-sale loss probability); SOE liquidity needs at sale time (larger needs increase probability of incurring losses). ### Receivables, doubtful assets, employment, and subsidies - Doubtful receivables: - Clients may face liquidity or solvency problems; doubtful receivables may be written down when probability of default is high. - User-specified stock of doubtful receivables for the baseline (BAS): row 79. - In the stress scenario (SS), the stock is calculated by applying a specific shock to the stock of receivables (see section VII.3). - Prior to the first year of projections, doubtful receivables stock is the same in BAS and SS. - Employment: - Expected rate of net employment growth can be entered in row 80. - This rate reflects recruitment and dismissals and can be positive or negative. - Government operating subsidies: - Entered in row 81. - Often multi-annual and may be conditional on reforms; assumptions should reflect consistency (e.g., not combining recurrent subsidies with ambitious recruitment/investment plans for a loss-making SOE). ### Stress scenario design: shocks, categories, and implementation - Stress scenario (SS) shocks are entered in cells P7-U23 of Stress and classified into: - Macroeconomic shocks on: Domestic and world real GDP growth, domestic and world inflation, GDP deflator, exchange rate variation, short-term domestic interest rates, long-term domestic and foreign interest rates. - All shocks impact y-o-y rates except interest rate shocks which affect nominal levels. - Market-specific shocks including: - Market-specific growth shock (affects sales volume fraction uncorrelated to GDP). - Shock on y-o-y change price of oil or other commodities. - Shock on liquidity of company’s clients (increases receivables as share of revenues received rather than cash). - Shock on share of receivables to materialize (solvency shock leading to write-offs; higher shock = larger write-off fraction). - Shock on degree of indexation of domestic prices to inflation (expressed as x percent below elasticity*domestic inflation in SS). - Shock on sales tax rate (expressed in times one); affects sales tax rate and sale prices assuming pass-through. - Sales tax pass-through formula (default pass-through 0.6): - Sale prices increase factor = (1 / (1 - 0.6 * (t - shock) / (1 - t))) [presented in source as the factor where t is sales tax rate in the BAS and shock is size of tax rate shock; the formula assumes intermediate pass-through of 0.6; the user can modify the coefficient]. - Note guidance: - Shocks on GDP deflator help determine nominal GDP in the SS. - Shocks on interest rates can reflect macro conditions or company-specific risk-premium changes. - Long-term interest rate shocks can reflect increased company-specific risk premia (e.g., loss of bailout expectations). ### Shock mechanics: additive vs multiplicative; calibration guidance - Most shocks are additive: - SS value = BAS value + shock (operational from first projection year). - Example: BAS domestic real GDP growth 5 percent with shock -6 yields SS growth -1 percent. - Projections of variables affected by additive shocks are in Stress, rows 5-27; sales tax rate adjustments at Stress cell D51 and row 102. - Two multiplicative shocks: - Liquidity shock affecting share of sales received in cash (shock > 1 => share received in cash decreases => receivables increase). - Shock on share of delinquent receivables (shock < 1 => share of delinquent receivables greater than zero; shock > 1 may indicate unexpected recoveries of previously written-off receivables). - Receivables adjusted for both shocks available in BSS-Stress, row 10; adjustment formula in section VII.3. - Calibration recommendations: - Commonly set shock sizes based on standard deviation (historical volatility) of each variable and desired SS probability. - For ~30-40 percent likelihood, use one standard deviation; for extreme-event analysis, use 2-3 standard deviations. - For market-specific shocks, deviations > 10-15 percent of baseline usually considered very large. - Design SS around an overarching narrative ensuring consistent correlation signs across variables (e.g., demand shock -> GDP growth and inflation slowdown; possible exchange rate depreciation if monetary easing or confidence crisis). - When interfacing with a fiscal stress test (FST), shock causality can be bidirectional (government solvency affecting SOE risk premia and vice versa). ### When to modify Stress parameters from Assumptions - By default, Stress parameters are tied to Assumptions to ensure comparability; users may replace formulas with numerical values to reflect realistic SS asymmetries. - Examples where asymmetric SS values enhance analysis: - Capacity-constrained SOE in BAS may have low sensitivity of sales to real GDP growth, but in SS underutilized capacity may change sensitivity. - Heavy import reliance may lead to substitution toward domestic inputs if exchange rate depreciates. - Investment/recruitment plans may be cut in SS; asset divestment in distress may generate capital losses. - Valuation effects may differ between BAS and SS if asset prices move with activity prospects. - Government may cut dividend pay-out ratio in SS to ease liquidity. - New borrowing maturity may shorten in SS if solvency perception deteriorates. - Share of government loans or guaranteed debt in new borrowing may increase in SS to maintain market access. *Source: IMF User Guide - SOE Stress-Testing Tool, January 2023.* ### 41. The benchmarking module is automatic and provides a comparison with those SOEs ### user-guide-soe-stt-jan-2023 - 41. The benchmarking module is automatic and provides a comparison with those SOEs ### Benchmarking module (template features and inputs) - The template's benchmarking module is automatic and provides a comparison with those SOEs available in the ORBIS database operating in the same sector. - Starting from a potential dataset of 22,000 comparators, the company automatically selects the productive sector of operations and the year of the comparison on the basis of the information entered by the user. - User input requirements: - Line 12 of the "Input 1 – Basics" sheet asks the name of the SOE (optional; used to provide a polished output table in the sheet "Benchmarking"). - Line 13 of the "Input 1 – Basics" sheet requests the sector of the SOE; it offers about 83 sectors or sub-sectors. - The template automatically determines the NACE classification of the SOEs once line 13 is populated. - The year immediately before the first year of projections selected in Input 1–Basics is used to anchor the comparison with ORBIS data. - Benchmarking by income level: - Once the user provides the name of the country in which the SOE operates in "Input 1 – Basics" (row 8), the template automatically determines the income level (advanced or not-advanced economy) of the country and offers benchmarking by income level. ### Financial indicators used in benchmarking - The template provides benchmarking with respect to many financial indicators, grouped in these categories: - Profitability: return on equity and return on assets. - Liquidity: current ratio and interest cover. - Capital structure: the ratio of non-current liabilities to total assets. - Operating efficiency: operating revenue per employee and labor cost per operating revenue. - The template provides standardized charts for all these financial indicators; users may use the data in the "Benchmarking" sheet to draw custom charts. ### Debt projections — structure and key mechanics - Debt stocks in domestic and foreign currency (Debt, rows 8 and 10) are obtained over the projection period as: stock of the previous year, minus amortizations plus new borrowings. - The stock of debt in foreign currency is also expressed in local currency (row 6) by applying the end-of-period exchange rate (Assumptions, row 16). - Projections of government’s loans (rows 11 and 9) and debt guaranteed by the government (row 12) are constructed the same way. - Table excerpt of existing debt stock and related items (selected rows and years preserved exactly): - Existing debt stock: 9968.0 (2016), 15620.0 (2017), 15608.0 (2018), 11835.4 (2019), 8441.1 (2020), 4178.6 (2021), 0.0 (2022), 0.0 (2023), 0.0 (2024) - Of which in foreign currency (in LC): 4984.0, 7810.0, 7804.0, 5933.4, 4506.4, 2211.2, 0.0, 0.0, 0.0 - Of which in foreign currency (in USD): 364.3, 634.0, 542.9, 410.6, 273.7, 136.9, 0.0, 0.0, 0.0 - Of which in domestic currency: 4984.0, 7810.0, 7804.0, 5902.0, 3934.7, 1967.3, 0.0, 0.0, 0.0 - Total interest payments: 634.0 (2016), 1030.0 (2017), 1630.0 (2018), 1451.4 (2019), 1118.8 (2020), 724.0 (2021), 360.6 (2022), 0.0 (2023), 0.0 (2024) - Interest paid in foreign debt (in USD): 61.6, 45.1, 31.2, 19.8, 9.7, 0.0, 0.0 - Effective interest rate foreign debt (in USD): 9.7, 8.3, 7.6, 7.3, 7.1, 7.0, 6.9 - Effective interest rate domestic debt: 10.4, 10.3, 10.3, 10.3, 10.3, 10.3, 10.3 - Total amortization: 984.0, 984.0, 3810.0, 3814.1, 4220.6, 4178.6, 4213.7, 0.0, 0.0, 0.0 - Amortization of foreign debt (in LC): 1912.1, 2253.2, 2211.2, 2246.4, 0.0, 0.0, 0.0 (years shown in table) - Debt stock in percent of GDP: 0.2, 0.3, 0.3, 0.2, 0.2, 0.1, 0.0, 0.0, 0.0 ### Allocation and calibration rules for debt breakdowns and amortizations - Currency breakdown before first projection year P: - The breakdown of debt by currency is obtained by applying the ratio of debt denominated in domestic currency to the total debt stock (Assumptions, row 59) to year P-1 and previous years by default. - The user may manually change this breakdown in rows 10 and 8 of Debt for years prior to P-1 if known and different. - Breakdown is necessary at least until year P-2 to calculate effective interest rates in year P-1. - Government loans and guaranteed debt before P: - Determined by coefficients in Assumptions (rows 61, 63 and 64), applied to debt denominated in domestic and foreign currency. - Amortization rules for debt outstanding before P: - First year of projections: total amortization is based on current loans and borrowings of year P-1 (BSS, cell F31). - Amortization of domestic currency debt in P is obtained by applying the share of domestic debt in total debt in P-1 (Assumptions, row 59) to current loans and borrowings in P-1. - The residual current liabilities in P-1 represent amortizations of foreign currency debt in P; these are converted to US$ at end-of-period exchange rate in P-1, then back to local currency at average-of-period exchange rate in P—so total amortizations in local currency can differ from current loans and borrowings in P-1 when exchange rates differ between P-1 and P. - After the first year of projections: a constant amortization profile is applied to the remaining stock at the end of that year; no default grace period is applied to existing debt (but grace periods can be proxied via a longer amortization period in Assumptions). - Amortization profile for new borrowings (from or after P): - Constant profile: outstanding stock after the grace period is repaid in equal installments over the amortization period. - Bonds can be replicated by setting maturity years equal to 1 and the grace period equal to years until the single payment. - Amortizations of existing and new debt summarized in Debt rows 51 and below, with separate profiles for domestic and foreign-denominated debt. - Example amortization table structure (illustration for debt denominated in local currency, P=2019): - Rows numbered from P+1 (2020) to last year of projections plus one (2025). - Second column displays years to maturity (drawn from Assumptions, rows 53 to 56). Example: existing debt maturity set to 4, implying full repayment by 2022=2018+4. - Third and successive columns contain amortizations by year under the constant schedule. - Amortizations must be computed for the first year after projection horizon to determine current loans and borrowings in the BSS for the last year of projections. - User override note: - If averaging maturities distorts cash flow analysis (e.g., heterogeneous amortization schedules), the user is recommended to replace formulas in Debt, H53–M53 and H60–M60 by actual values of maturing debt denominated in local currency and FX, respectively. ### Aggregation of amortizations and classification of specific debt types - Total amortization projections rely on amortization tables and are located in row 25; breakdowns between local and foreign currency appear in rows 30 and 28 respectively. - Amortization of FX-denominated debt, expressed in local currency, uses current average-of-period exchange rate (Assumptions, row 15) and is shown in row 26. - First-year P: only existing debt is amortized (per earlier rule). - From P+1 onwards: amortizations are drawn from amortization tables (Table 16 and FX twin-table) with totals obtained by summing the relevant columns for each projection year. - Amortization of government’s loans and debt guaranteed by the government: - In P: calculated by applying shares in P-1 debt (Assumptions, rows 61, 63 and 64) to total amortizations of debt in local and foreign currency. - From P+1: amortization equals i) their share in P-1 debt multiplied by the amortizations of that debt from the first row of amortization tables, plus ii) their share in new borrowing (Assumptions, rows 62, 65 and 66) multiplied by total amortizations of new debt as computed from the amortization tables (sum of all rows except the first). - New borrowings: - Determined consistently with the financing policy of the company derived in CFS, row 40. - Total borrowings are split between domestic and foreign currency using coefficient in Assumptions, row 59 (foreign = 1 − domestic coefficient). - New borrowings are calculated in domestic currency (Debt, row 35) including those denominated in foreign currency; converted to foreign currency using current average-of-period exchange rate (Assumptions, row 15). - New borrowings guaranteed by the government: apply coefficient in Assumptions, row 62 to total new borrowing in domestic currency. - New borrowings from the government: apply coefficients in Assumptions, rows 65 and 66 to total new borrowing in domestic and foreign currency, respectively. ### Interest payment calculations and effective interest rate dynamics - Interest payments in local currency (row 14) are calculated separately for local (row 20) and foreign currency (row 15) debt. - Interest payments in period T = effective interest rate in T × stock of debt at end of T-1. - Effective interest rate formula (preserved notation): - ERI_t = α × MIR_t + (1 − α) × ERI_(t−1) - Where the effective interest rate in each period is a linear combination of the market interest rate MIR in that period (Assumptions, row 23 for domestic debt and row 24 for foreign debt) and the effective interest rate of the last period. The parameter α (Assumptions, rows 67 and 68) measures the degree of variability of interest rates. - Definition for P-1: - The effective interest rate in P-1 is defined as the ratio of interest payments in P-1 to the outstanding debt at the end of P-2. - If debt is issued at fixed interest rates, the effective interest rate in P-1 will be applicable during the whole projection horizon. - Effective interest rates obtained are displayed in rows 23 (domestic currency) and 19 (foreign currency) and applied to compute interest payments each period. - Conversion of interest payments in foreign currency to local currency uses current average-of-period exchange rates (Assumptions, row 15). - Government loans and guaranteed debt are assumed to bear the same interest rates as debt in domestic and foreign currency; their interest payments are presented as memorandum items (rows 16, 18, 21 and 22). ### Financial statements — projection approach and economic equations - Projection aims: - Represent stylized commercial and financial behavior of SOEs. - Commercial assumptions: each SOE sells one type of non-financial good or service domestically and/or internationally; purchases labor and other inputs in domestic and foreign markets; prices can be freely determined or regulated; domestic revenues and costs affected by local conditions and inflation; foreign revenues and costs affected by global variables and exchange rates. - Financing channels: i) divestment of financial and non-financial assets; ii) depletion of cash balances; iii) borrowing; iv) government subsidies and capital injections. Government support is subsidiary to other financing sources. - Tool is not designed to model government agencies where commercial activities play a residual role. - Methodology: - Projections are not based on econometric estimates but on accounting identities and basic economic modelling. - Accounting relations are used to: combine flow items to obtain main aggregates (profit after taxes, changes in cash flows, net contributions to budget); link stocks and flows to quantify changes; combine asset and liability stocks to obtain net financial worth and contribution to public sector balance sheet. - Economic equations quantify future revenues and expenses using parameters summarizing operating and financial structure and Assumptions. - General structure of economic equations (preserved notation and components): - I_i,t = f(MEF_t, MSF_t, FV_t; α_i, β_i, γ_i) - Where: - I denotes levels of revenues and expenses. - MEF = growth rate of macroeconomic fundamentals (GDP growth, inflation, exchange rates). - MSF = growth rate of market fundamentals (product-specific developments, commodity price changes). - FV = combinations of macroeconomic variables (interest and exchange rates) and company-specific financial variables (asset holdings and liabilities) used to compute capital income. - α and β = combinations of elasticities and structural parameters reflecting operating structure and measure contribution of macroeconomic and market-specific variables to revenue and expense growth. - γ = array of shocks that defines the stress scenario. - F = set of accounting aggregation rules. - Lagged values of revenues and expenses imply equations forecast growth rates applied to prior observed values. - If last observation is an outlier, it is recommended to use an average of past observations or an earlier observation. *Source: The template and user guide (user-guide-soe-stt-jan-2023), IMF.* ### 59. Projections of financial variables. The tool also projects financial stocks, such as the ### Projections of financial variables ### Projections of financial stocks and accounting consistency - The tool projects financial stocks, such as outstanding debt, cash balances, receivables and payables. - Some sub-components of the stock of debt are projected as memorandum items, for example government’s loans and debt guaranteed by the government. - Changes in stocks follow accounting laws of motion: value in each period = value in last period + investments/borrowing in current period − disposals/amortizations. - Net changes in assets and liabilities are fully consistent with flow projections; consistency is achieved either via basic accounting relations or via basic economic models (e.g., receivables and payables derived as constant shares of sales and operating expenses). *Source: IMF User Guide for SOE Stress-Test Tool (January 2023).* ### Income Statement structure and operating balance (VII.2) - Table 17: Structure of the Income Statement (referenced). - VII.2.A. OPERATING BALANCE — core relationships and key projected rows (table-format numbers preserved): - A. Operating revenues (a.1+a.2+a.3)0.030492.030716.030986.032167.432588.533516.234542.835575.936619.1 - a.1 Net Sales (net of taxes)0.029160.029273.029517.030637.731008.831869.032822.033777.734740.0 - o/w Gross sales0.033136.433264.833542.034698.134939.435892.036912.337922.038935.4 - o/w Sales taxes0.03976.43991.84025.04060.53930.64023.04090.34144.34195.4 - a.2 Other operating revenues0.01332.01443.01469.01529.71579.71647.21720.81798.21879.1 - a.3 Subsidies from government0.00.00.00.00.00.00.00.00.00.0 - B. Operating expenses (b.1+b.2+b.3+b.4+b.5+b.6)0.033407.030194.040048.041765.641018.345755.546797.048311.050101.2 - b.1 Personnel (wages, salaries, benefits)0.05698.05831.06131.06384.26592.86874.77181.87504.97842.7 - b.2 Costs of sales of goods & services0.022559.019984.022874.023901.822872.227049.627422.828193.729177.7 - b.3 Depreciation & amortization0.0825.0732.01033.01056.1789.2607.0466.8359.0276.1 - b.4 Other operating expenses0.04325.03647.010010.010423.510764.111224.311725.612253.312804.7 - b.5. Royalties0.00.00.00.00.00.00.00.00.00.0 - b.6. Fees0.00.00.00.00.00.00.00.00.00.0 - C. Operating loss/income (A-B)0.0-2915.0522.0-9062.0-9598.2-8429.9-12239.3-12254.2-12735.1-13482.1 - D. Non-operating revenues (d.1+d.2+d.3+d.4)0.0240.0240.0240.014728.714383.117287.215587.613776.514598.3 - d.1 Capital transfers and others0.00.00.00.014455.814126.017027.615302.613531.714342.4 - d.2 Interest received0.026.026.040.064.642.035.450.70.00.0 - d.3 Dividends received0.00.00.00.00.00.00.00.00.00.0 - d.4 Other non-operating revenues0.0214.0214.0200.0208.3215.1224.3234.3244.8255.8 - E. Non-operating expenses (e.1+e.2)0.03455.02140.02830.02906.02209.22069.51766.31468.91535.0 - e.1 Interest payments0.0634.01030.01630.01451.41118.8724.0360.60.00.0 - e.2 Other non-operating expenses0.02821.01110.01200.01454.61090.41345.61405.71468.91535.0 - F. Non-operating loss/income (D-E)0.0-3215.0-1900.0-2590.011822.712173.815217.613821.312307.613063.2 - H. Profit/loss before tax (C+F)0.0-6130.0-1378.0-11652.02224.43744.02978.41567.1-427.5-418.9 - I. Corporate income tax/benefit0.012.0100.0219.00.00.00.00.00.00.0 - J. Profit for the year after tax (H-I)0.0-6142.0-1478.0-11871.02224.43744.02978.41567.1-427.5-418.9 - Memorandum items (as presented): - Number of employees-10071.010071.010071.010071.010071.010071.010071.010071.0 - Other non-operating revenues linked to inflation0.0214.0214.0200.0208.3215.1224.3234.3244.8255.8 - Other non-operating costs linked to inflation0.02821.01110.01200.01249.61290.41345.61405.71468.91535.0 - Reallized capital gains0.00.00.00.00.00.00.00.00.00.0 - Realized capital losses0.00.00.00.00.05.00.00.00.00.0 - Other operating costs linked to inflation0.04325.03647.010010.010423.510764.111224.311725.612253.312804.7 - Write-down of receivables0.00.00.0200.0-200.00.00.00.00.0 ### Determinants of gross sales growth and sales volume (Table 18; Assumptions rows) - Determinants of gross sales change listed: - Sales volume growth - Domestic GDP growth - World GDP growth - Market-specific growth - Price change - Domestic inflation - World inflation - Commodity price changes - Exchange rate movements - Sales volume growth computation (Assumptions, row 90): - Calculated as a weighted average of domestic and foreign sales volume growth rates. - Domestic sales volume growth: - sensitivity of local sales to domestic real GDP growth (Assumptions, row 29) × domestic real GDP growth (Assumptions, row 7) + share of market-specific growth attributable to domestic sales. - The share is the weight of domestic sales in volume in total sales in volume in the previous period. - Foreign sales volume growth: - sensitivity to world real GDP growth (Assumptions, row 30) × world real GDP growth (Assumptions, row 17) + share of market-specific growth attributable to foreign sales (1 − weight of foreign sales in volume in previous period). - Weights in period T are the ratio of domestic sales in volume to total sales in volume in T-1 and 1 minus this ratio. - Normalization for indexes: - Total sales in volume in year before projections normalized to 100 (Assumptions, row 91) and grows with total sales in volume (Assumptions, row 91). - Initial index for domestic sales = 100 × initial share of domestic sales in volume (Assumptions, row 39) and grows with domestic sales in volume (Assumptions, row 93). - Quotient of row 93 by row 91 yields the weight of domestic sales in volume over the projection horizon. ### Price growth formulas (Assumptions, rows 94 and 95) - Domestic price growth: three cases based on commodity production dummies (Assumptions, rows 34 and 35): - If SOE is not a commodity producer: domestic price growth = sensitivity to domestic inflation (Assumptions, row 36) × domestic inflation (Assumptions, row 10). - If SOE is oil/gas producer (dummy of oil = 1): domestic prices of the commodity = international oil price (Assumptions, row 14) × exchange rate (Assumptions, row 15). - If SOE produces other commodity: domestic prices = international price of that commodity (Assumptions, row 26) × exchange rate (Assumptions, row 15). - Foreign price growth (in foreign currency): - If not a commodity producer: foreign prices = sensitivity to world inflation (Assumptions, row 37) × world inflation (Assumptions, row 19). - If commodity producer: assumed price-taker of international commodity prices. - For gross sales computation, domestic and foreign price growth rates in period T are weighted by the ratio of domestic sales in volume to total sales in volume in T-1; foreign prices are converted to domestic currency using average-of-period exchange rate. - Note 27 (Basic): Gross sales projections in year T apply computed growth rate to gross sales in year T-1. Base for P+1 uses projection; in P it is observed. If P-1 is an outlier, user may substitute another observation or use an average of pre-P observations. ### Sales taxes, retropolations, and other operating revenues - Sales taxes paid (row 10) computed by: - Identifying share of domestic sales in nominal terms to total sales in nominal terms (Assumptions, row 101) — obtained from indexes for domestic and foreign sales in nominal terms (Assumptions, rows 99 and 100). - Applying sales tax rate (Assumptions, row 43) to domestic sales in nominal terms. - Formula presented (preserved): - ( ) 1 GS DS FS GS DS DS    = = −  = + (4) - Where DS, FS and GS denote domestic sales, foreign sales and total gross sales in nominal terms, respectively, and β is the relative weight of domestic to foreign sales in nominal terms (Assumptions, row 101). - Retropolation of gross sales prior to first projection year (Note and formula preserved): - Formula: - ( ) ( ) 1 1 1 1 NS GS NS GS DS GS GS       + = − = −  = + + − (5) - Where NS = net sales, and μ = tax rate on domestic sales. - If a shock on the sales tax rate is different from zero, gross sales before the first year of projections in the SS use the same rate as in the baseline scenario. - Other operating revenues (row 11): - Include revenues from secondary activities; template assumes by default they are unrelated to primary activity and links growth to inflation (Assumptions, row 10). - Sales taxes are assumed to be paid only on primary activities. - Note 28 (Optional): If secondary activities are highly correlated with primary revenues, user may augment their growth rate by adding gross revenues growth to inflation. ### Subsidies, personnel, and costs of goods sold - Government subsidies (row 12): - Usually structural financial support for non-commercial mandates or quasi-fiscal activities; assumed lump-sum and drawn from Assumptions, row 81. - Personnel expenses (row 15): - Growth rate = inflation (Assumptions, row 10) × degree of indexation to inflation (Assumptions, row 33) + planned rate of expansion of staff (Assumptions, row 80). - Cost of sales (row 16) determinants (Table 19): - Growth rate = growth of volume of inputs purchased + change in composite input price + interaction term. - Growth of purchased inputs linked to growth of total sales in volume (Assumptions, row 90) × elasticity of demand of inputs to production volume (Assumptions, row 32). - Composite input price is weighted change of local and imported input prices: - Local inputs linked 1-to-1 to domestic inflation (Assumptions, row 10). - Imported inputs split: oil (Assumptions, row 14) and other imported inputs linked 1-to-1 to world inflation (Assumptions, row 19); weights given by share of oil in imported inputs (Assumptions, row 39) and share of imported inputs in total inputs (Assumptions, row 38). - Imported input prices converted to local currency at average-of-period exchange rates (Assumptions, row 15). ### Depreciation, other operating expenses, royalties, and fees - Depreciation & amortization (row 17): - In period T = constant fraction of stock of fixed assets at end of T-1. - Fraction = observed ratio of depreciation expenses to stock of capital in the last year before projections. - Note 29 (Optional): If intangible assets generate amortization, amortization in P-1 can be apportioned and asset values adjusted accordingly. - Other operating expenses (row 18): - Growth rate assumed driven by domestic inflation (Assumptions, row 10). - Note 30 (Optional): Availability payments (e.g., PPP) may require splitting formula into inflation-indexed component and availability payment component. - Royalties (row 19): - Applicable for some commodity producers; amount = royalty rate (Assumptions, row 45) × production value of commodity net of production costs (IS row 8 less rows 15 and 16). - Fees (row 20): - Indirect taxes linked to volume of sales = average fee rate (Assumptions, row 46) × gross sales (row 9). ### Non-operating profit (VII.2.B) components and computation - Non-operating revenues (row 24) include: - Share of capital injections considered capital transfers (row 25) = (1 − coefficient in Assumptions, row 49) × total capital injections (CFS, row 42) — used to ensure consistency with government registration. - Interest on investment property (row 26) = sum of: - Income from deposits in T = short-term domestic interest rate (Assumptions, row 22) × cash balances at end of T-1 (BASS, row 10). - Income from investment property denominated in local currency in T = long-term domestic interest rate (Assumptions, row 23) × share of assets denominated in local currency at end of T-1 (Assumptions, row 41). - Income from investment property denominated in foreign currency in T = long-term interest rate in foreign currency (Assumptions, row 24) × share of these assets denominated in foreign currency at end of T-1 (1 − Assumptions, row 41); stock converted to US$ at end-of-period exchange rate in T-1 and income reconverted at average-of-period exchange rate in T. - Note 31 (Basic): If paid both interest and dividends, reduce investment property stock by fraction that generates dividends to avoid double accounting; example method for estimating participated equity preserved. - Note 32 (Optional): Interest rates in Assumptions rows 23 and 24 may include market rate plus risk spread; if spread is significant, user may detract spread when applying rates to asset incomes to avoid overstatement. - Dividends received (row 27) driven by nominal GDP ≈ real GDP growth (Assumptions, row 7) + domestic inflation (Assumptions, row 10). User may replace domestic inflation with GDP deflator growth (Assumptions, row 12) if sale prices of participated companies influenced by export/import prices. - Other non-operating revenues (row 28) = realized capital gains (memorandum, row 48) + other operations indexed to domestic inflation. Share unrelated to capital gains determined by ratio of past capital gains to observed other non-operating revenues; if breakdown unavailable, recommended to assume all past non-operating revenues were capital gains and abstain from indexing any fraction to inflation. *Source: IMF User Guide for SOE Stress-Test Tool (January 2023).* ### 76. Non-operating expenses (row 31) comprises two elements: ### user-guide-soe-stt-jan-2023 - 76. Non-operating expenses (row 31) comprises two elements ### Non-operating expenses: composition and calculation - Non-operating expenses (row 31) comprises two elements: - Interest payments on debt (row 32), drawn from Debt, row 14. - Other non-operating expenses (row 33), which mirror the composition of other non-operating revenues and mainly include capital losses generated by asset disposals and asset write-downs or impairment. - Other non-operating expenses (row 33) are obtained as the sum of three elements: - i) capital losses, displayed as memorandum item in row 49 and drawn from Assumptions; - ii) write-down of receivables, another memorandum item in row 51; - iii) a residual component linked to domestic inflation. The procedure to obtain the inflation-linked component is analogous to the one followed for other non-operating revenues. - Note 33 (Optional): Non-operating expenses may also capture the realization of some contingent liabilities (e.g., legal claims, crystallization of guarantees when they do not involve debt assumption). When relevant, they can be factored by adding another memorandum row in IS and linking the formula of non-operating expenses to that row. ### Non-operating profit, pre-tax and after-tax profit, and CIT treatment - Non-operating profit (row 35) = non-operating revenues − non-operating expenses. - Pre-tax profit (row 37) = operating profit + non-operating profit. - Corporate income taxes paid (row 39): - Results from applying the CIT rate (Assumptions, row 50) to the CIT base, defined as pre-tax profit excluding subsidies and capital transfers from the government. - Assumption: CIT is only paid when its tax base is positive and no loss carry-forward is contemplated. - The tax base exclusion of subsidies and capital transfers maximizes the impact of government bail-outs on company liquidity; the user can relax this assumption by widening the tax base in the formula for row 39. - After-tax profit (row 41) = pre-tax profit − CIT paid. ### Balance Sheet Statement — assets (BSS) - Cash and cash equivalent (BSS, row 10) = drawn from CFS row 33; reflects end-of-period cash balances after new borrowing and capital injections. - Receivables (row 11): - Recalculated each period; previous year’s stock is assumed to fully materialize in cash receipts absent write-downs. - New receivables modeled as a constant share of current-year gross sales (IS, row 9); the coefficient is the average receivables-to-gross-sales ratio over the two-year period prior to the first projection year. - In the SS, this ratio is augmented by the liquidity shock (ST, row 9). - Memo example entries (selected): - a.1 Cash and cash equivalent: 1295.0 (2015), 2701.0 (2016), 2872.0 (2017), 1867.3 (2018), 1572.0 (2019), 2254.4 (2020), 1.0 (2021), 1.0 (2022), 1.0 (2023). - a.2 Receivables: 4998.0 (2015), 6741.0 (2016), 5349.0 (2017), 6082.4 (2018), 6326.1 (2019), 6498.6 (2020), 6683.3 (2021), 6866.1 (2022), 7049.6 (2023). - Pro memoria: Stock of written-down receivables: 0.0 (2015), 0.0 (2016), 0.0 (2017), 200.0 (2018), 0.0 (2019), 0.0 (2020), 0.0 (2021), 0.0 (2022), 0.0 (2023). - Inventories (row 12) = average inventories-to-gross-sales ratio over the two years prior to the first projection year multiplied by gross sales each period. - Other current assets (row 14) = heterogeneous; kept constant over projection horizon unless user replaces formula or indexes to domestic inflation. - Property, plant and equipment (row 16) presented net of depreciation and cannot be negative. Dynamic equation (7) governs the stock: - Equation reference: (7) - Stock evolution uses last period’s stock net of depreciation, revalued at current prices, plus acquisitions (Assumptions, row 75) less disposals (Assumptions, row 76). - Investment property (row 17) follows similar dynamics to property, plant and equipment but with depreciation rate = 0; net purchases and annual revaluation appear as memorandum items in rows 19 and 20. - Other non-current assets (row 20) are kept constant over the projection horizon. ### Written-down receivables: dynamics and example - The tool adopts a conservative approach: when significant probability that receivables will not generate cash flows next period, they are written-down. - Stock of written-down receivables displayed in row 12 as a memorandum item; in BAS entered in Assumptions, row 79. - In the SS, the template calculates the stock by applying the shock on the share of receivables to materialize (ST, cells P19-U19) to the level of receivables in absence of write-downs via formula (6): - Formula reference: (6) - Numerical illustration (from the guide): - If written-down receivables (WDR) in the last period were zero, and shockrec is set in year t to 0.8 (i.e., 20 percent of receivables generated in t will probably not be paid next period), and new rec = 100, then written-down receivables at end of t = 20 (=0.2 x 100). - If shock on receivables to materialize > 1, stock of written-down receivables can decrease (unexpected payments of previously written-down receivables). - Stock of written-down receivables can never be negative. - Whenever stock of written-down receivables increases, stock of receivables is adjusted downwards by the same amount; when it decreases, there is no adjustment to receivables (unexpected recoveries translate into cash payments during same period). ### Balance Sheet Statement — liabilities (BSS) - Accounts payable (row 27) = sum of: - Commercial payables = constant share of costs of goods and services sold each period (IS, row 16); coefficient = average commercial payables-to-costs ratio over two years prior to first projection year. - Payable taxes = constant coefficient (Assumptions, row 40) × total taxes accrued each period (RG, row 6). - Personnel expenses (IS, row 15) assumed fully disbursed in each period and do not give rise to payable accounts, though employee benefits may give rise to specific current liabilities. - Employee benefits current liabilities (row 29) = fraction payable next year; grows at same rate as personnel expenses. - Current loans and borrowings (row 31) = debt items payable next year; drawn from Debt (domestic, row 29, and in foreign currency, row 28, reflecting next period’s debt amortizations). Amortization of FX-denominated debt is valued at current end-of-period exchange rates. - Other current liabilities (row 32) = aggregation of heterogeneous items (kept constant over projection horizon). - Long-term loans and borrowings (row 35) = outstanding debt stock at end of each period (Debt, row 5) less fraction amortized next period (registered in current loans and borrowings). Stock comprises debt denominated in all currencies and is affected by end-of-period exchange rate movements. - Employee benefit non-current liabilities (row 36) grows at same rate as personnel expenses. - Other non-current liabilities (row 36) kept constant over projection horizon. ### Balance Sheet Statement — equity (BSS) - Share capital (row 42) changes only due to capital injections provided by the government. Value each period = last period’s value + capital injections effected during current period (row 43). - Note 34 (Basic): If capital injections are treated as acquisition of a financial asset for the government, only the fraction classified as financial asset is considered an increase in share capital on the BASS; fraction classified as transfers increases equity via retained earnings. - Accumulated other comprehensive income (row 44) = previous year’s stock + asset revaluation (row 45) + liability revaluation (row 46). Template does not constrain sign of accumulated other comprehensive income. - Note 35 (Optional): International accounting standards preclude negative revaluation reserves, but the tool does not constrain sign for practicality. - Asset revaluation = sum of revaluations experienced by fixed assets and investment property − realized capital gains/losses from disposals. - Liability revaluation reflects exchange rate movements on FX-denominated debt. Liability revaluation is proxied by formula (8): - Formula reference: (8) - Variables: LR (liability revaluation), B (new borrowing), A (amortizations), D (stock of outstanding debt), all in local currency. Difference is zero for local-currency debt, not necessarily zero for FX-denominated debt. - Retained earnings (row 47) = previous year’s stock ± new non-distributed earnings (earnings = after-tax profits (IS, row 41) − distributed dividends (RG, row 10)); earnings include capital injections classified as transfers. - The BSS includes a consistency check line (row 48) to verify assets = liabilities + equity. ### Cash-Flow Statement (CFS): objectives and structure - Objective: calculate cash balances at end of each accounting period and identify contribution of government capital injections to changes in those balances. - Final cash balances (row 32) = beginning-of-year balances (row 29) + cash flows generated over the year excluding capital injections (row 27) + capital injections (row 31). - CFS projections are generated by combining IS and BSS projections to ensure mutual consistency; no specific Input Sheet for cash flow data is necessary. - Selected CFS figures (annual series shown partially): - A. Cash flow from operating activities (a.1+a.2-a.3+a.4+a.5+a.6): -10363.3 (earliest shown), -9127.1, -11482.1, -13036.9, -13536.5, -14347.4. - a.1 Net income from operations: -10839.5, -9305.2, -13360.6, -13425.5, -13959.2, -14761.3. - a.2 Depreciation & Amortization: 1056.1, 789.2, 607.0, 466.8, 359.0, 276.1. - a.3 Change in account receivables: 733.4, 243.7, 172.5, 184.7, 182.8, 183.5. - a.4 Change in inventories: 45.2, -5.8, -22.9, -24.5, -24.3, -24.4. - a.5 Change in account payables: 108.4, -361.6, 1466.9, 131.0, 270.7, 345.5. - a.6 Income taxes: 0.0 (series). - B. Cash flow from investing activities (b.1+b.2+b.3): 100.0, 0.0, 0.0, 0.0, 0.0, 0.0. - b.1 Acquisition of property, plant and equipment: 0.0 (series). - b.2 Proceeds from sale of property, plant and equipment: 100.0, 0.0, 0.0, 0.0, 0.0, 0.0. - C. Cash flow from financing activities (c.1+c.2+c.3): -5197.2, -5294.3, -4863.0, -4519.1, 4.8, 5.0. - c.1 Net repayment of debt: -3810.4, -4217.5, -4174.4, -4209.2, 4.8, 5.0. - c.3 Net interest payments: -1386.8, -1076.8, -688.6, -309.9, 0.0, 0.0. - D. Increase/Decrease in cash (A+B+C): -15460.5, -14421.3, -16345.1, -17556.0, -13531.7, -14342.4. - E. Cash at beginning of the year: 2872.0, 1867.3, 1572.0, 2254.4, 1.0, 1.0. - F. Total capital injections: 14455.8, 14126.0, 17027.6, 15302.6, 13531.7, 14342.4. - G. Cash at the end of the year (D+E+F): 2872.0, 1867.3, 1572.0, 2254.4, 1.0, 1.0, 1.0. - Guidance: comparing baseline CFS projections with observed values can reveal whether past trends persist; unexplained breaks may indicate assumptions need revision. *Source: IMF user guide for the SOE fiscal risks tool (user-guide-soe-stt-jan-2023).* ### 106. The cash flow generated over the year are the sum of three components: cash flows ### 106. The cash flow generated over the year are the sum of three components: cash flows ### Cash flow components (summary) - Total cash flow over the year is the sum of: - Cash flows from operating activities (row 7) - Cash flows from investing activities (row 15) - Cash flows from financing activities (row 20) ### Cash flows from operating activities (row 7) - Computation: adjust pre-tax profit from the IS by: - interest and dividends received (IS, rows 26 and 27 respectively), with a negative sign - interest paid (IS, row 32), with a positive sign - realized capital gains and losses (IS, row 48 and 49), with negative and positive sign respectively - depreciation and amortization, with a positive sign (row 9) - changes in receivables, with a negative sign (row 10) - changes in inventories, with a negative sign (row 11) - changes in payables, with a positive sign (row 12) - paid income taxes, with a negative sign (row 13) - Data sources: - Changes in the stock of assets and liabilities are drawn from the BSS - Paid income taxes are imported from IS - Note 37 (Optional): writing-down of receivables as non-operating expenses is neutral for cash flows because it is registered both as a negative cash flow from operations and as a positive change in receivables. ### Cash flows from investing activities (rows 16–18) - Components: - Acquisition of property, plant and equipment (row 16), as given by Assumptions, row 75 - Proceeds from the sale of fixed assets (row 17), given by Assumptions, row 76 - Purchase and sale of other assets (row 18): other current assets, investment property and other non-current assets in the BSS - Capital gains or losses from disposal of assets are embedded in receipts from disposal and therefore generate cash flows. - Note 36 (Optional) — treatment of asset acquisitions and financing alternatives: - Default assumption: acquisitions of assets are fully disbursed in cash. - If financed via credit, three possible situations: i) If the liquidity floor is not binding (quick ratio remains above its floor after acquisition), no borrowing is necessary; user may manually increase borrowing in year of purchase. ii) If liquidity floor is binding but leverage floor is not (debt-to-equity still below its ceiling after acquisition), tool assumes SOE will borrow to reach minimum liquidity; new borrowing by formula can be manually increased up to full price of asset. iii) If both liquidity and leverage cap are binding, the leverage cap should be raised to accommodate the new loan (purchasing an asset in this circumstance is questionable). - Note 40 (Optional): when the user alters assets and liabilities that the tool treats as constant by default (e.g., pre-paid purchases), associated cash flows may need careful manual adjustment; minimize use of such manual entries unless critical for cash balances. ### Cash flows from financing activities (rows 21, 23, 24, 25, 41) - Components: - Net repayment of debt (row 21): increases less repayments of liabilities - Net dividend payments (row 23): dividends received less dividends paid - Net interest payments (row 24): interest on assets received less interest on liabilities paid - Data sources and effects: - Changes in stocks of liabilities other than loans and borrowings drawn from the BASS (not affected by valuation effects) - Loans and borrowings amortizations taken from Debt, row 25 (can be affected by exchange rate movements for FX-denominated debt) - New borrowing generated by the template and drawn from row 41 - Dividend and interest payments/receipts drawn from IS - Note 38 (Basic): template nets out dividend and interest receipts/payments within cash flow from financing activities for compactness, although IFRS presents them separately (investment vs. financing activities). - Note 39 (Basic): increases in some liabilities can have net-zero effect on total cash flows (e.g., employee benefit liabilities matched by operating expense; increases in provisions matched by operating expense). ### Capital injections, endogenous generation, and implications (rows 36, 42) - Capital injections are generated endogenously by the template (row 42) and are assumed to fully materialize in cash. - The CFS uses endogenous capital injection values to determine end-of-period cash balances; by construction these balances must equal the balances targeted by the government for each period (row 36). - Note 41 (Basic): When capital injections are positive, additional cash outflows triggered by alternative assumptions do not affect final cash balances because capital injections adjust (example in source: if capital injections equal LC 1 billion and equipment purchases increase by LC 0.1 billion, capital injections rise to LC 1.1 billion). Users should consider whether government budget would absorb extra cost, as it may be equivalent to an increase in government’s capital expenditure unless injections are registered as purchases of financial assets. ### Financing decisions and government bail-outs (Section VIII, overview) - Capital injections mirror realization of government’s implicit contingent liabilities; tool assumes capital injections, always in cash, occur when liquidity floor and leverage cap (inputs) are not met. - Criteria for government intervention (tool logic): - Priority order: cash first (if company has sound liquidity), then borrowing (if not overindebted), and capital injections as last-resort if cash and debt financing are not viable. - Liquidity and leverage triggers are user-adjustable and unbounded—user can set arbitrarily low liquidity floor or high leverage cap to reflect low probability of bail-outs. - Tool calculates quick and debt-to-equity ratios before and after capital injections every period to assess thresholds. ### Financing decision process with capital injections (Section VIII.2) - Sequential steps: i) Determine end-period liquidity without new borrowing or capital injections and assess against prudential liquidity targets ii) Identify liquidity gap = actual liquidity − targeted cash balances iii) Quantify share of liquidity gap that can be met through new borrowing given prudential leverage ceiling iv) Determine necessary capital injections as residual between liquidity gap and acceptable new borrowing - Note 42 (Basic): alternatives to borrowing/capital injections include reducing net purchases of fixed/financial assets, backloading staff hiring or downsizing, reducing wage indexation, lowering elasticity of input requirements to sales, changing dividend pay-out ratio, or increasing price sensitivity to domestic inflation. - Note 43 (Basic): template rules out accumulation of arrears and deposit overdrafts to fill liquidity gaps. ### Targeted cash balances and quick ratio (equation and notes) - Targeted level of cash balances computed in CFS, row 36 according to: - t t t t TC CL rec FA η = − − (9) - Where TC denote the targeted cash balances, CL current liabilities, rec the stock of receivables (after write-downs) and FA liquid financial assets (assumed all financial assets held are liquid). η is the targeted level of the quick ratio (Assumptions, row 48). - Bank overdrafts are ruled out; targeted cash balances cannot be negative (symbolically, at least equal to one 1 million, modifiable by user). - Note 44 (Basic): quick ratio numerator includes cash and equivalents plus receivables plus marketable securities; in simplified BSS, marketable securities proxied by stock of investment property (may include non-liquid securities → user adjustment recommended). - Note 45 (Basic): unconstrained targeted cash balances may be negative when: i) targeted quick ratio is lower ii) receivables and financial assets are higher iii) current liabilities are lower ### Liquidity gap and unconstrained borrowing (rows 37–41; sample memorandum figures) - Liquidity gap (row 38) = final liquidity before transfers and new borrowing (row 37) − targeted cash balances (row 36) - Positive sign: unmet liquidity needs; negative sign: company accumulates cash above target - Unconstrained new borrowing (row 39) aims to: i) fill liquidity gap ii) ensure debt-to-equity ratio ≤ cap at end of current period - Rule for unconstrained borrowing (formula (10) in source): - Formula presented in source determines B (new borrowing) as function of liabilities before new borrowing (D^0), equity before capital injections (E^0), liquidity gap (LG), and λ (debt-to-equity cap, Assumptions row 47). The rule implies: - New borrowing may equal the liquidity gap if after filling it the debt-to-equity ratio ≤ cap - Otherwise new borrowing fills only part of the liquidity gap - Constraints: i) If liquidity gap is negative, new borrowing = 0 ii) If equity before capital injections is negative, new borrowing = 0 (serious solvency problems) - Effective new borrowing (row 40): - Equals zero if unconstrained borrowing ≤ 0; positive otherwise - Effective new borrowing is the variable used in debt and cash flow projections - Note 46 (Optional): crystallization of guarantees can be represented by adding assumed debt to effective new borrowing in a particular year, potentially driving borrowing above leverage cap for that year. ### Capital injections composition (row 42) and checks - Capital injections comprise: - Residual between positive liquidity gap and new borrowing (ensures liquidity and solvency constraints met) - Possible augmentation to cover accumulated losses (e.g., large negative equity from past imbalances) - Total capital injections is the relevant cash flow variable regardless of accounting (above/below-the-line) classification from government perspective - Two checks to verify consistency: - Quick ratio after new borrowing and capital injections (row 44) must be ≥ liquidity floor (Assumptions) - Final quick ratio can be higher than floor if liquidity gap negative, or if non-overdraft constraint binding makes final cash balances higher than targeted quick ratio implies - Debt-to-equity ratio after new borrowing and capital injections (row 45) should not exceed leverage cap ### Guarantees, credit risk, and fiscal implications - Tool does not explicitly model crystallization of government guarantees or defaults on government loans, but: - Service of government-guaranteed debt and loans are part of company liquidity needs (row 48) - Capital injections can be interpreted as pre-emptively addressing defaults on these debts to avoid deterioration in market perception of government or public sector financial health - Row 49 indicates share of total capital injections that would address imminent guarantee/credit risks ### Counterfactual scenario without capital injections (Section VIII.3) - The tool provides counterfactuals (for BAS and SS) where SOE fills liquidity gap exclusively via borrowing and government abstains from bail-outs: - Leverage ceilings from scenarios with capital injections do not hold in counterfactuals - New borrowing in counterfactuals is assumed: - Available to fully fill financing gap - Denominated in local currency - Have a one-year grace period - Have the same maturity as in scenarios with capital injections - Liquidity floor (minimum quick ratio) remains the same as with capital injections *user-guide-soe-stt-jan-2023 (IMF)* ### 123. New borrowing in the counterfactual is calculated in row 52. New borrowing in period ### New borrowing in the counterfactual (user-guide-soe-stt-jan-2023) ### Mechanics for computing new borrowing in the counterfactual - New borrowing in period T equals the liquidity gap in the scenario with capital injections (row 38) adjusted by: - Plus additional interest payments in T stemming from higher debt (negative cash flows in T). - Plus additional amortizations faced by the company in T as a result of higher debt. - Plus additional current liabilities in T (i.e. additional amortizations in T+1) adjusted by the targeted liquidity ratio. - Minus additional cash held by the company in the counterfactual. - Additional cash raised in each period is not the same as additional cash held in the same period (previous periods’ cash raises can increase current cash held). - Effective interest rate applied to incremental interest payments in the counterfactual is the same as in the BAS and SS for domestic debt. - Incremental amortizations = amortizations in the counterfactual (row 61) minus amortizations in the scenario with capital injections (row 75). - Incremental current liabilities from new borrowing = current liabilities in the counterfactual (row 61) minus current liabilities in the scenario with capital injections (row 76). - Incremental cash held by the SOE in the counterfactual (row 63) = incremental cash raised in each period (row 53) minus cumulative incremental amortizations in the counterfactual minus cumulative incremental interest payments in the counterfactual. ### Key distinctions and optional enrichments - Note 47 (Basic): Counterfactual differs from standard BSS or SS with capital injections set to zero because: - (i) capital injections are not ruled out and can turn positive under different assumptions; - (ii) characteristics of new borrowing differ in the counterfactual (one-year grace period, domestic debt), while in standard BSS and SS they can be user-determined. - Note 48 (Optional): Possible enrichments while keeping calculations simple: - Interest rates of new borrowing assumed equal to those applied with capital injections, but risk premia could rise in severe distress. - Additional cash inflows in the counterfactual may remain idle or be invested (affecting the quick ratio). - Higher interest payments would reduce income tax payments relative to scenarios with capital injections. - Caveat: If the company faces severe limitations to increase borrowing (e.g., prohibitive interest rates), the counterfactual analysis may not be relevant. ### Implementation details and amortization schedule - Outstanding debt issued in the counterfactual after the first year is computed by years of issuance (rows 54-59), total stock in row 60. - An auxiliary system of year counters (rows 78-83) ensures amortization of new borrowing starts two years after issuance and occurs in equal installments. - Total debt in the counterfactual (row 69) = existing debt (row 65, same as in scenarios with capital injections) + outstanding debt issued after the first year. - The fraction of debt in T that will be amortized in T+1 (current liabilities out of debt) is shown in row 61. ### Numerical examples (from illustrative counterfactual table) - New borrowing (counterfactual) by issuance year: - 2019: 14455.8 - 2020: 17436.7 - 2021: 25421.3 - 2022: 30377.6 - 2023: 36678.0 - 2024: 46904.8 - Incremental cash (counterfactual) by year: - 2019: 0.0 - 2020: 3310.7 - 2021: 8393.8 - 2022: 15075.1 - 2023: 23146.3 - 2024: 32562.4 - Total outstanding new borrowing (counterfactual) over projection years: - 2019: 14455.8 - 2020: 31892.5 - 2021: 54422.6 - 2022: 78421.8 - 2023: 103637.0 - 2024: 133003.5 - Current long-term liabilities (out of new borrowing, counterfactual): - 2019: 0.0 - 2020: 2891.2 - 2021: 6378.5 - 2022: 11462.8 - 2023: 17538.3 - 2024: 24873.9 - Incremental interest payments (counterfactual): - 2019: 0.0 - 2020: 1576.0 - 2021: 3410.2 - 2022: 5646.0 - 2023: 8038.2 - 2024: 10622.8 - Quick ratio counterfactual (check) across years shown: 0.60, 0.60, 0.60, 0.6, 0.6, 0.6 ### Quick-ratio and consistency checks - A consistency check for the quick ratio in the counterfactual is provided (row 72). - The quick ratio can be higher than the floor entered in Assumptions (row 48) in years where the non-overdraft constraint becomes binding. ### GFS statements: Statement of Operations (SO) and gross financing needs - The tool maps IS, CFS, BASS items into a simplified GFS Statement of Operations (worksheet GFS). - Revenues in the SO are essentially a re-elaboration of Other Revenue (code 14) in GFSM 2014 for SOEs; typical government tax and social contribution items are not relevant. - The tool provides gross financing needs (GFN) as a memorandum item (row 30), proxied as: - net lending + debt amortizations (drawn from Debt) + capital injections received. - Note 49 (Basic): GFN identify financing gaps; given operating deficit, net transactions in non-financial assets and debt amortizations, GFN can be interpreted as the increase in net liabilities that will materialize, everything else equal. Liquidity floor and BSS projections of other items affect the required level of new borrowing. If new borrowing is constrained by a leverage cap, capital injections will reduce the operating deficit and the final increase in net liabilities. ### Example SO numeric snapshot (selected rows) - Revenue: - 2019: 46896.0 - 2020: 46971.5 - 2021: 50803.4 - 2022: 50130.4 - 2023: 49352.4 - 2024: 51217.4 - Expenditure: - 2019: 44666.6 - 2020: 43227.6 - 2021: 47825.0 - 2022: 48563.2 - 2023: 49779.9 - 2024: 51636.2 - Interest payments (SO): - 2019: 1451.4 - 2020: 1118.8 - 2021: 724.0 - 2022: 360.6 - 2023: 0.0 - 2024: 0.0 - Operating balance and net lending/borrowing: - Operating balance: - 2019: 2229.4 - 2020: 3744.0 - 2021: 2978.4 - 2022: 1567.1 - 2023: -427.5 - 2024: -418.9 - Net lending (+) / Net borrowing (-): - 2019: 3430.7 - 2020: 4527.3 - 2021: 3562.4 - 2022: 2009.4 - 2023: -92.7 - 2024: -167.1 - Gross Financing needs (ex-transfers): - 2019: 14839.2 - 2020: 13819.2 - 2021: 17643.7 - 2022: 17506.9 - 2023: 13624.4 - 2024: 14509.5 ### GFS-BSS mapping, balance sheet structure, and consolidation - The tool maps the BSS into a simplified GFS-BSS (BSS worksheet, rows 52 and below). - Asset blocks: rows 54-63 capture a GFS-like asset breakdown at two digits; liabilities broken at four-digit level. - Net worth (NW) and net financial worth (NFW) are computed (rows 67 and 65) and contributions to consolidated NW and NFW of the public sector are calculated (rows 68 and 66). - Consolidation rules: - Share of financial assets to consolidate given by Assumptions, row 84. - Share of liabilities other than debt and equity to consolidate given by Assumptions, row 86. - Share of equity to consolidate is recalculated every period: initial share from Assumptions, row 85, augmented each period by capital injections registered as government assets, divided by total shareholder capital (BSS, row 76), then applied to whole equity for consolidation. - GFS-equity is derived as a residual between GFS assets and liabilities other than equity under the assumption that shares are not traded (implying NW = 0 as per GFSM 2014 in those circumstances). - Mapping caveats (row references): - A parameter in Assumptions (row 87) proxies the share of non-financial assets in other non-current assets over the projection horizon. - Manual adjustments may be needed for item granularity (e.g., provisions, land in property investment, breakdown between loans and debt securities). - Note 51 (Basic): To assess the SOE’s total contribution to the public sector balance sheet, consider its net contribution to the budget (transfers/subsidies and tax treatment) as they affect PSBS net financial worth. *Source: IMF user guide — tool methodology and mappings (user-guide-soe-stt-jan-2023).* ### 134. The tool quantifies the contributions of SOEs to fiscal stock and flows consistently ### 134. The tool quantifies the contributions of SOEs to fiscal stock and flows consistently with their projected financial performance ### Quantification of SOE contributions to fiscal stock and flows - Tax and non-tax revenues other than interest payments are obtained by applying user-entered rates to tax bases projected in the IS. - Tax bases: - Income tax: pre-tax profits. - Sales tax: gross sales. - Royalties, fees, dividends: bases are value of production net of its costs, gross sales, and after-tax profits, respectively. - Interest payments to the government are derived from the outstanding stock of government loans. - Expenses: - Subsidies are exogenous (Assumptions, row 81). - Capital transfers represent the share of capital injections expected to be remunerated below market rates; this fraction is input by the user as an assumption. - Capital injections are calculated based on liquidity and solvency risks of the company (see section VIII). - Government assets in the company result from lending and bail-out decisions. ### Structure of Relations with the Government (RG worksheet) - RG summarizes changes in the government’s financial position due to SOE performance in three blocks: - Net inflows into the budget by year. - Intertemporal net inflows over the projection horizon. - Government’s assets and explicit contingent liabilities. - Net inflows into the budget are measured in accrual terms, in local currency at current prices (row 22) and as percent of GDP (row 28), calculated as revenues less expenses. - Revenues components: - Total taxes (row 6), including CIT, sales taxes, royalties, fees — determined in the IS. - Dividends paid to the government (row 10) = dividend pay-out ratio (Assumptions, row 44) × after-tax profit. Note: dividends are precluded when after-tax profits are negative unless replaced by lump-sum amounts. - Interest payments on government’s loans (drawn from Debt, rows 21 and 16). - Expenses components: - Government’s subsidies (Assumptions, row 81). - Government’s transfers = fraction of total capital injections registered above the line. ### Representative annual fiscal and balance-sheet figures (selected values from illustrative table) - Taxes paid (local currency units): - 2015: 0.0 - 2016: 3988.4 - 2017: 4091.8 - 2018: 4244.0 - 2019: 4060.5 - 2020: 3930.6 - 2021: 4023.0 - 2022: 4090.3 - 2023: 4144.3 - 2024: 4195.4 - Corporate income tax: - 2015: 0.0 - 2016: 12.0 - 2017: 100.0 - 2018: 219.0 - 2019–2024: 0.0 (each year) - Sales tax or VAT examples: - 2015: 3976.4 - 2016: 3991.8 - 2017: 4025.0 - 2018: 4060.5 - 2019: 3930.6 - 2020: 4023.0 - 2021: 4090.3 - 2022: 4144.3 - 2023: 4195.4 - Dividends paid to the government: - 2015–2024: 0.0 (each year shown) - Interests paid on government loans: - 2015–2024: 0.0 (each year shown) - Transfers (capital transfers as recorded above the line): - 2015–2018: 0.0 - 2019: 14455.8 - 2020: 14126.0 - 2021: 17027.6 - 2022: 15302.6 - 2023: 13531.7 - 2024: 14342.4 - Government assets and explicit contingent liabilities: - Share capital: 12892.0 (2015–2024 each year) - Equity: - 2015: -10748.0 - 2016: -12364.0 - 2017: -17802.0 - 2018: -15614.2 - 2019: -12696.4 - 2020: -9634.1 - 2021: -8102.1 - 2022: -8529.6 - 2023: -8948.4 - Loans: 0.0 (2015–2024 each year) - Guarantees: 0.0 (2015–2024 each year) - Total net flows to the budget: - 2015: 0.0 - 2016: 3988.4 - 2017: 4091.8 - 2018: 4244.0 - 2019: -10395.3 - 2020: -10195.4 - 2021: -13004.6 - 2022: -11212.3 - 2023: -9387.3 - 2024: -10147.0 - Total net flows to the budget (excluding transfers): - 2015: 0.0 - 2016: 3988.4 - 2017: 4091.8 - 2018: 4244.0 - 2019: 4060.5 - 2020: 3930.6 - 2021: 4023.0 - 2022: 4090.3 - 2023: 4144.3 - 2024: 4195.4 - Memorandum items: - Capital transfers (in percent of GDP): 0.00, 0.00, 0.28, 0.28, 0.32, 0.27, 0.23, 0.23 (years shown) - Total net flows to the budget (in percent of GDP): 0.09, 0.09, -0.20, -0.20, -0.24, -0.20, -0.16, -0.16 - Total net flows to the budget (in percent of GDP, excl. Transfers): 0.09, 0.09, 0.08, 0.08, 0.08, 0.07, 0.07, 0.07 - Equity (in percent of GDP): -0.27, -0.37, -0.31, -0.26, -0.18, -0.14, -0.14, -0.14 - NPV fiscal flows (baseline) and discounting: - Discount rates (annual series shown): 0.9, 0.9, 0.9, 0.9, 0.9, 0.9 - Composite discount rates (multi-year series shown): 0.9, 0.8, 0.7, 0.7, 0.6, 0.6 - NPV taxes (billion LCU): 17.6 - NPV dividends (billion LCU): 0.0 - NPV interest receipts (billion LCU): 0.0 - NPV subsidies (billion LCU): 0.0 - NPV transfers (billion LCU): 64.1 - Pre-shock at GDP market prices (billion LCU): 4873.9 - NPV capital injections (in percent of GDP): 1.3 - NPV inflows (billion LCU): -46.5 - NPV inflows (in percent of GDP): -1.0 ### Intertemporal net inflows and discounting - Intertemporal net inflows (rows 33–44) = difference between NPV of revenues and expenses over the projection horizon, expressed at current prices of the year before projections and in terms of that year’s nominal GDP. - Flows are discounted at a constant discount rate given by the domestic long-term interest rate observed in the last year before projections. - Notes on interpretation: - Metric indicates medium-term financial viability: profitable companies can yield net positive discounted inflows over a 4-5 year horizon despite short-lived distress; persistent adverse shocks can reverse medium-term profitability. - Optional sensitivity: re-calculate NPVs for different discount rates or floating period-specific rates (substitution in row 34). ### Government assets and explicit contingent liabilities - Government assets on the company include: - Public stake in equity and share capital (rows 18 and 17). - Loans to the company in domestic and foreign currency (row 19). - Explicit contingent liabilities (guaranteed debt, row 20). - Equity and share capital drawn from BSS; loans and guarantees drawn from Debt. - Joint analysis of net inflows and government financial position can reveal credit and bailout risks even when projected net inflows are positive. ### Linkages with Fiscal Stress Tests - Fiscal outputs can interface with Fiscal Stress Tests in two ways: - Realized bail-outs affect the fiscal balance of general government. - Baseline and stressed SOEs (after consolidation) can be exported into the PSBS of the Fiscal Stress Test if assumptions in the BS and SS across tools are compatible, especially macroeconomic fundamentals. ### Performance indicators and ratio computations (PERF worksheet) - PERF computes financial ratios summarizing profitability, liquidity, leverage/solvency, cost & efficiency, and size based on projected financial statements. - Selected illustrative ratio values (series excerpts): - Profitability: - ROA examples: -41.9, -8.6, -74.6, 15.4, 27.5, 21.5, 13.8, -3.8, -3.8 (years shown) - Operating ROA examples: -37.5, -2.0, -63.0, 25.4, 35.7, 26.7, 17.0, -3.8, -3.8 - Liquidity: - Current ratio series: 0.8, 0.9, 0.7, 0.7, 0.7, 0.7, 0.7, 0.7, 0.7 - Quick liquidity ratio series: 0.7, 0.9, 0.6, 0.6, 0.6, 0.6, 0.6, 0.6, 0.6 - Interest cover examples: -8.7, -0.3, -6.1, 2.5, 4.3, 5.1, 5.3 - Leverage and solvency: - Debt-to-equity ratio examples: -2.4, -2.4, -1.9, -1.9, -2.1, -2.4, -2.4, -2.3, -2.2 - Debt-to-assets ratio series: 1.7, 1.7, 2.1, 2.1, 1.9, 1.7, 1.7, 1.8, 1.8 - Consolidated net financial worth series: -17496.0, -18819.0, -24344.5, -20955.4, -17254.3, -13607.9, -11633.6, -11726.3, -11893.4 - Consolidated net worth series: -10748.0, -12364.0, -17802.0, -15614.2, -12696.4, -9634.1, -8102.1, -8529.6, -8948.4 - Cost & efficiency: - Labor cost per operating revenue examples: 18.7, 19.0, 19.8, 19.8, 20.2, 20.5, 20.8, 21.1, 21.4 - Size: - Number of employees: 10,071.0 (series shown) - Total assets examples: 14,666.0, 17,258.0, 15,916.0, 14,443.5, 13,608.4, 13,879.3, 11,368.3, 11,216.4, 11,148.1 - Asset-to-GDP examples: 0.3, 0.4, 0.3, 0.3, 0.3, 0.3, 0.2, 0.2, 0.2 ### Definitions and counterfactual adjustments for key ratios - Profitability ratios (PERF, rows 6–12): - ROE = Net Income / Equity (Net Income = after-tax profits; equity from BASS row 41). If numerator and denominator are both negative the ratio is not defined. Counterfactual adjustments: subtract subsidies, capital transfers, incremental interest payments from net income; cumulative capital injections removed from equity. - ROA = Net Income / Assets (Assets from BASS row 23). Counterfactual: same net income adjustments; assets augmented by additional cash held (CFS). - OROA = EBIT / Assets (EBIT = profits before interest and taxes). Counterfactual: detract subsidies and capital injections from EBIT; assets adjusted as in ROA. - Liquidity ratios (rows 14–20): - Current ratio (CR) = Current Assets / Current Liabilities (BASS rows 9 and 27). Counterfactual: current assets augmented by additional cash; current liabilities include current loans/borrowings from higher debt. CR values above 1.25 are usually associated with high liquidity risk levels. - Interest coverage (IC) = EBIT / Interest Payments (IS row 32). Counterfactual: EBIT adjusted and incremental interest payments added to denominator. IC values below 1.2 denote high liquidity risks. - Quick ratio (QR) = (Cash + Receivables + Marketable Securities) / Current Liabilities (cash and receivables from BSS rows 10 and 11; marketable securities proxied by investment property BSS row 18). QR floor is set in Assumptions, row 48. QR values below 0.8 tend to be associated with high liquidity risks. - Leverage/solvency ratios (rows 22–32): - Debt-to-equity ratio (DTER) = Liabilities / Equity (Liabilities BASS row 39; Equity BASS row 41). Counterfactual: liabilities include higher debt stock; cumulative capital injections subtracted from equity. With capital injections DTER should not exceed cap in Assumptions row 47. DTER values above 1.5 tend to be associated with high solvency risks. - Debt-to-assets ratio (DTAR) = Liabilities / Assets. DTAR values above 0.75 can reflect high solvency risks. - Non-current liabilities to assets ratio (NCLTAR) = Non-current liabilities / Assets (non-current liabilities BASS row 34). Counterfactual adjusts for the share of debt amortized next year (CFS rows 62 and 70). NCLTAR values above 0.5 tend to reflect high solvency risks. - Consolidated net financial worth (GFS terms, BSS row 66) assesses SOE contribution to public sector solvency. Counterfactual adds incremental cash held and replaces debt with counterfactual debt where relevant. ### Additional PERF metrics (productivity, efficiency, size) - Operating revenue per employee = IS row 7 ÷ number of employees (number of employees = last-year observed × hiring rate Assumptions row 80). - Average cost per employee = personnel expenses ÷ number of workers. - Labor cost per operating revenue = personnel expenses (IS row 15) ÷ operating revenue; proxy for unit labor costs to detect staff oversizing. - Size metrics include number of employees and total assets/liabilities as share of GDP (PERF rows 40–44). ### Charts and reporting (CHARTS and CHART-stress) - Default chart variables: - Profitability: ROE, ROA, operating ROA. - Liquidity: current and quick ratios. - Leverage: debt-to-equity and non-current liabilities to assets ratios; liabilities and equity in local currency. - Other SOE financials: revenue and expenditure in GFS/local currency, gross financing needs, contribution to public net financial worth (local currency), debt-to-GDP. - Contributions to government budget: taxes, dividends, capital transfers, net inflows (local currency; net inflows also as share of GDP) and NPV of net inflows as share of GDP previous to start of projections. - Differences between chart sets: - CHARTS (BAS) compare variables with capital injections and the counterfactual. - CHARTS-stress compare counterfactual (no capital injections) between BAS and SS; NPV of net inflows chart reflects only SS. - Charts are imported from Raw Charts (RC) and Raw Charts-ST (RC-stress) linked to PERF and RG (and PERF-stress / RG-stress). Time period typically starts 1–2 years before first projection year and updates automatically when projection start year is modified. - Optional additional charts the user may consider: - Composition of debt (local vs FX, government loans and guarantees). - Funding sources of liquidity gap (new borrowing vs capital injections). - Funding sources of gross financing needs (including all assets/liabilities and capital injections). - Share of debt service in the liquidity gap. - Share of capital injections associated with service of government-guaranteed debt and/or government loans. --- _Source: https://www.imf.org/-/media/files/topics/fiscal/fiscal-risks/tool/user-guide-soe-stt-jan-2023.pdf_