## _pam56

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### Foreword: purpose, scope, and contributors
- Designed to meet the needs of economists, statisticians, students, IMF staff training, external training, policymakers, and students of statistics.
- Broad survey of principles underlying four main sets of macroeconomic statistics—national accounts, balance of payments, monetary and financial, and government finance statistics—viewed as an integrated system.
- Highlights relationships between sectors of statistics and recent developments in statistical methodologies, data compilation, policy analysis, and evaluation.
- Provides numerical examples in each chapter to demonstrate application within an analytical framework.
- Project management and contributors:
  - Task force headed by Neil Patterson; members Edgar Ayales, Keith Dublin, Roberto Rosales, Robin Kibuka, Wipada Soonthornsima, Emmanuel Kumah.
  - Main draft chapters by Paul Cotterell and Kevin O’Connor.
  - Supplementary contributions from Kim Zieschang, Cor Gorter, Mick Silver, Jose Cartas.
  - Secretarial/editorial coordination: Carmen Diaz-Zelaya, Patricia Poggi, Joan Gibson; James McEuen coordinated copyediting and publication.

*Source: Foreword, _pam56 (IMF pamphlet).*

### Harmonization with international standards and evolution
- 1993 SNA sets overarching conceptual framework; incorporated full integration of stocks (balance sheets) and flows and complete sets of accounts.
- Balance of Payments Manual, fifth edition (BPM5; IMF, 1993) broadened scope to include the international investment position.
- IMF developed:
  - Monetary and Financial Statistics Manual (MFSM; IMF, 2000c).
  - Government Finance Statistics Manual 2001 (GFSM 2001; IMF, 2001).
- Macroeconomic statistical standards harmonized with 1993 SNA and oriented to policy variables not covered by national accounts (balance of payments surplus/deficit, fiscal position, money and credit measures).

### Core conceptual building blocks
- Institutional units and sectors:
  - Institutional unit: entity capable of owning assets, incurring liabilities, engaging in economic activities and transactions.
  - Five mutually exclusive institutional sectors: Nonfinancial corporations; Financial corporations; General government; NPISH (Nonprofit institutions serving households); Household sector.
  - Quasi-corporations treated as corporations when meaningful to compile a complete set of accounts.
- Residence:
  - Residency based on center of economic interest; economic territory includes geographic territory, airspace, territorial waters, continental shelf with exclusive rights, territorial enclaves (embassies, consulates, military bases).
  - General rule: one-year criterion for significant activity.
- Stocks and flows integration:
  - Stocks are measured at a point in time and valued at current market prices on the reporting date.
  - Flows are measured with reference to a period and include transactions and other economic flows (holding gains/losses, changes in volume).
  - Stock-flow identity: closing = opening + transactions + other economic flows.
  - Net worth = total assets (financial and nonfinancial) − total liabilities; shares and equity obligations are included in liabilities in macroeconomic accounts.

### Financial instruments and classification
- Eight categories of financial assets (recognized by statistical systems):
  - Monetary gold and SDRs; Currency and deposits; Securities other than shares; Loans; Shares and other equities; Insurance technical reserves; Financial derivatives; Other accounts receivable/payable.
- Monetary gold: asset without corresponding liability; SDRs: international reserve assets created by IMF.
- Currency and deposits: transferable deposits vs other deposits; transferable deposits exchangeable at par on demand.
- Financial derivatives: forward-type and option contracts; value derived from underlying assets or indices.
- Insurance technical reserves: include net equity of households in life insurance reserves and pension funds, unearned premiums, reserves for outstanding claims.

### Accounting rules, valuation, and recording bases
- Double-entry accounting: every flow recorded twice (debit and credit).
- Examples of credits: sales of goods and services, property income receivable, compensation of employees receivable, transfers receivable, increases in liabilities, decreases in nonfinancial assets, decreases in financial assets.
- Examples of debits: purchases of goods and services, property income payable, compensation payable, transfers payable, decreases in liabilities, increases in nonfinancial assets, increases in financial assets.
- Accrual vs cash recording:
  - Accrual basis records events when economic value is exchanged, transformed, created, transferred, or extinguished.
  - Cash basis records only when cash is received or disbursed; where source data are cash-based, analysts should adjust to approximate accrual.
- Valuation and currency conversion:
  - Use market prices where possible; where unavailable, use close substitutes or perpetual inventory/net present value methods for fixed assets.
  - Use exchange rates prevailing on transaction date (for transactions) or reporting date (for stocks); midpoint between buying and selling rates recommended as a rule of thumb.

### Data quality and practical analytical uses
- Data Quality Assessment Framework (DQAF) (introduced 2001, updated 2003): five dimensions—assurance of integrity, methodological soundness, accuracy and reliability, serviceability, accessibility.
- DQAF frameworks developed for seven macroeconomic datasets including national accounts, external debt, government finance, monetary, and balance of payments.
- Uses of integrated macroeconomic accounts in IMF surveillance:
  - Financial programming (FP): evaluates linkages among macroeconomic accounts, assesses exogenous shocks, formulates policy responses, prepares prospective medium-term scenarios.
  - Balance sheet approach (BSA): exploits sectoral and national balance sheets to examine vulnerabilities—financial position of key sectors; mismatches in maturity, currency, and term structure; potential propagation of sectoral weaknesses.
  - Vulnerability indicators point to potential risks that could trigger liquidity and solvency problems.

### System of National Accounts (1993 SNA) sequence and key identities
- Main account sets:
  - Current accounts: production account (measures GDP) and income accounts (derive national income, national disposable income, saving).
  - Accumulation accounts: capital account, financial account, accounts for other economic flows (revaluations and volume changes).
  - Balance sheets: stocks at beginning and end; balancing item net worth.
- Capital account balancing item: net lending/borrowing (NL/B).
  - If saving and capital transfers exceed net acquisition of nonfinancial assets → net lending.
  - If net acquisition of nonfinancial assets exceeds saving and capital transfers → net borrowing.
- Financial account classified by instrument; reflects NL/B.

### GDP measurement and worked numerical example (selected exact figures)
- GDP definition: sum of value added produced by all resident institutional units plus taxes less subsidies on products; value added = output less intermediate consumption.
- Three approaches to GDP:
  - Production approach: sample values—Output, basic prices 3,604; Intermediate consumption 1,883; Gross value added 1,721; Taxes less subsidies on products 133; GDP 1,854.
  - Income approach: Compensation of employees 762; Gross operating surplus/mixed income 901.
  - Expenditure approach: Final consumption expenditure — Government 368; Households and NPISH 1,031; Gross fixed capital formation 376; Changes in inventories 28; Acquisitions less disposals of valuables 10; Exports 540; Imports 499.
- Table excerpts (exact figures preserved):
  - Total supply and total use 4,236.
  - GDP 1,854; Domestic product, net 1,632 after consumption of fixed capital –222.
  - National income, gross 1,883; National disposable income, gross 1,854; Final consumption 1,399; Saving, gross 455; Saving, net 233.
  - Net lending (+)/net borrowing (–) 38.
- Balance sheet and accumulation excerpt (exact figures):
  - Opening balance sheet: Nonfinancial assets 9,922; Financial assets 6,792; Liabilities 6,298; Net worth 10,416.
  - Transactions: Acquisitions less disposals of nonfinancial assets 192; Net acquisition of financial assets 641; Net incurrence of liabilities 603; Changes in net worth due to saving and capital transfers 230.
  - Other changes in volume: Nonfinancial changes 10; Financial 5; Changes in net worth due to other changes in volume 17.
  - Revaluation: Nominal holding gains Nonfinancial assets 280; Financial assets 84; Liabilities 76; Changes in net worth due to nominal holding gains/losses 288.
  - Closing balance sheet: Nonfinancial assets 10,404; Financial assets 7,522; Liabilities 6,976; Net worth 10,951.

### Stocks, flows, and illustrative numerical identity
- Stock-flow identity example preserved:
  - Opening bank account stock $100; deposits $30 and withdrawals $10 (net transactions +$20) → end stock $120 (if no other changes).

### Terms of trade, real GDI, and volume measures
- Real gross domestic income (real GDI) adjusts for trading gain/loss from changes in terms of trade.
- Trading gain/loss formula (Box.7) preserved in source; interpretation emphasizes dependence on choice of deflators.
- Deflator choice issues:
  - Options: import price index, export price index, simple average of import and export price indices, implicit deflator for gross domestic expenditure.
- Volume and constant-price measurement:
  - Double-deflation preferred: measure output and intermediate consumption at constant prices and subtract to get gross value added at constant prices.
  - Chain-linking recommended by 1993 SNA with base-year updates about every five years; chained indices do not aggregate consistently to higher levels.
- Price indices definitions preserved: PPI, CPI, XMPIs; unit-value indices are surrogates for XMPIs but biased.

### Quarterly national accounts (QNA)
- QNA scope can encompass the whole 1993 SNA sequence of accounts.
- Prerequisites: timely and accurate quarterly source data; consistency of QNA with annual accounts for benchmarking.
- Benchmarking process uses annual data to adjust quarterly estimates and allows timely release with subsequent incorporation of updates.

### Balance of payments (BPM5) and IIP
- BPM5 harmonized with 1993 SNA; extended to include transactions, other economic flows, and stocks of external financial assets and liabilities (IIP).
- Balance of payments accounts:
  - Current account: goods and services, income, current transfers.
  - Capital account: capital transfers, nonproduced nonfinancial assets.
  - Financial account: transactions in external financial assets and liabilities (direct investment, portfolio investment, financial derivatives, other investment, reserve assets).
- Example standard presentation (exact figures):
  - Current.account 619 / 578
  - Goods and services 540 / 499 (Goods 462 / 392; Services 78 / 107)
  - Income 69 / 40
  - Current transfers 10 / 39
  - Capital account 1 / 4
  - Financial account 50 / 88 (selected components shown)
- Analytic presentation and balances example (selected balances and exact figures):
  - Balance on goods 70; Balance on goods and services 41; Balance on goods, services, and income 70.
  - Total groups A and B 38; Total groups A through C 1; Errors and omissions 0; Reserves and related items balance –1.

### International Investment Position (IIP) and external debt
- IIP reports stocks at beginning and end and changes via transactions, price and exchange rate changes, and other adjustments; Net IIP = external financial assets − external liabilities.
- Example IIP table entries (worked example, preserved format but note numeric layout in source):
  - Assets position at beginning: 5,735 (with component breakdowns).
  - Liabilities position at beginning: 2,978 (with component breakdowns).
- External Debt Statistics (IMF, 2003) aligns gross external debt with 1993 SNA: includes all liabilities (other than equity and financial derivatives) owed to nonresidents.
- Strong recommendations: compile debt-service schedules, currency composition, and net external debt (gross external debt less external assets in debt instruments).

### Monetary and financial statistics (MFSM) overview and monetary aggregates
- MFSM harmonized with 1993 SNA for residence, institutional sectors, recognition/timing, valuation.
- Financial sector split: central bank; other depository corporations; other financial corporations (including insurance and pension funds, other intermediaries, financial auxiliaries).
- Depository Corporations Survey (DCS) identity for monetary analysis:
  - M = NFA + NCG + CORS – OIN
  - Change form: ∆M = ∆NFA + ∆NCG + ∆CORS – ∆OIN
- DCS example annual changes (selected exact figures):
  - Net.foreign.assets 23
  - Broad.money 105 (Currency 23; Deposits 82; Securities other than shares 0)
  - Net.credit.to.central.government 16
  - Credit.to.other.resident.sectors 129
  - Other.items,.net 63
- Financial Corporations Survey (FCS) and flow of funds provide consolidated claims/liabilities and enable constructing financial accounts identical to national accounts’ NL/B.

### Sectoral financial accounts and flow-of-funds (selected exact figures)
- Net acquisitions of financial assets by sector:
  - Nonfinancial Corporations 71
  - Financial Corporations 237
  - General Government 120
  - Households 181
  - NPISH 32
  - Total Economy 641
- Net incurrence of liabilities by sector:
  - Nonfinancial Corporations 140
  - Financial Corporations 232
  - General Government 170
  - Households 33
  - NPISH 28
  - Total Economy 603
- Net lending (+)/net borrowing (–) by sector:
  - Nonfinancial Corporations –69
  - Financial Corporations 5
  - General Government –50
  - Households 148
  - NPISH 4
  - Total Economy 38
- Instrument breakdown (total economy, selected exactly):
  - Monetary gold and SDRs –1
  - Currency and deposits 119 (assets) / 132 (liabilities)
  - Securities other than shares 138 (assets) / 123 (liabilities)
  - Loans 244 (assets) / 217 (liabilities)
  - Shares and other equity 44 (assets) / 43 (liabilities)
  - Insurance technical reserves 36 (assets and liabilities)
  - Financial derivatives 0
  - Other accounts receivable 61; Other accounts payable 52

### Government finance statistics (GFSM 2001): implementation and analytical framework
- Three-stage implementation:
  1. Changing presentation of existing data (near term).
  2. Improving data reporting (medium term).
  3. Fully implementing accrual reporting and underlying systems (long term).
- Accrual accounting records economic events when value is created, transformed, exchanged, transferred, or extinguished and captures noncash transactions, arrears, and other economic flows.
- GFSM 2001 supports the Balance Sheet Approach (BSA) and provides four analytic statements:
  - Statement of government operations (accrual-based).
  - Statement of other economic flows (revaluations and volume changes).
  - Balance sheet (stocks at beginning and end).
  - Statement of sources and uses of cash (cash-based).
- Four core fiscal balances:
  - Net operating balance (NOB).
  - Net lending/borrowing (NL/B).
  - Net worth.
  - Cash surplus/deficit (cash statement).
- Statement of government operations structure (items preserved):
  - Revenue (1.1 Taxes; 1.2 Social contributions; 1.3 Grants; 1.4 Other revenue).
  - Expense (2.1 Compensation of employees; 2.2 Use of goods and services; 2.3 Consumption of fixed capital; 2.4 Interest; 2.5 Subsidies; 2.6 Grants; 2.7 Social benefits; 2.8 Other expense).
  - Net operating balance (1 − 2) and net acquisition of nonfinancial assets leading to NL/B; financing via transactions in financial assets and liabilities (domestic and foreign).
- Worked government example (exact figures):
  - Revenue 1,046 (Taxes 450; Social contributions 1 268; Grants 2 1; Other revenue 3 327).
  - Expense 1,084 (Compensation of employees 4 140; Use of goods and services 4 252; Consumption of fixed capital 4 30; Interest 35; Subsidies 44; Grants 2 58; Social benefits 1 451; Other expense 74).
  - Net operating balance –38.
  - Net acquisition of nonfinancial assets 12; Net lending/borrowing –50.
  - Financing: Net acquisition of financial assets 120; Net incurrence of liabilities 1 170.
- Integrated balance sheet for general government (selected exact figures):
  - Net worth opening 1,300; Transactions –38; Holding gains and losses 37; Other volume changes 2; Closing balance sheet 1,301.
  - Nonfinancial assets opening 1,591; Transactions 12; Holding gains/losses 43; Closing 1,646.
  - Financial assets opening 396; Transactions 120; Closing 518.
  - Liabilities opening 687; Transactions 170; Closing 863.
  - Securities other than shares (liabilities) closing 283; Loans (liabilities) closing 421.

### Public debt concepts and reporting guidance
- Public sector debt defined as liabilities requiring payments of interest and/or principal in future; all liabilities except shares/equity and financial derivatives are debt instruments.
- GFSM 2001 recommends valuing debt instruments at current market values, except loans normally at nominal prices.
- Gross public debt: total debt instruments issued by public sector units; Net public debt: public sector’s net position on debt instruments.
- Compilers should consolidate intra-public sector claims/liabilities and exclude them from gross/net public sector debt.
- Recommended granularity for vulnerability analysis: instrument, currency composition, residency, maturity structure.

### Classification frameworks and linkages among systems
- Four principal frameworks: 1993 SNA, BPM5, GFSM 2001, MFSM.
- Harmonized features: residence definitions, sector breakdowns, stocks vs flows distinction, accrual timing, market-price valuation, production and asset boundaries, integrated accounts reconciling opening and closing balance sheets.
- Key macroeconomic identities preserved exactly:
  - GDP = C + I + G + (X − M).
  - GDY = C + I + G + (X − M) + NY + NCT.
  - CAB = X − M + NY + NCT.
  - S = GDY − C − G; S = I + CAB; S − I = CAB.
  - NL/B = S − I + NKT + NPNFA = CAB + NKT + NPNFA.
- Noted system differences:
  - GFSM 2001 recognizes government liability for unfunded employee pensions (difference from other systems).
  - FISIM treatment differs across systems.
  - Reconciling counterparties requires detailed flow-of-funds matrices cross-classifying instruments and counterpart sectors.

### Functional and counterparty classifications in GFS
- Functional classification: COFOG with ten top-level divisions (1. General public services; 2. Defense; 3. Public order and safety; 4. Economic affairs; 5. Environmental protection; 6. Housing and community amenities; 7. Health; 8. Recreation, culture, and religion; 9. Education; 10. Social protection).
- Counterparty classification for stocks/transactions by resident sector: central bank; other depository corporations; other financial corporations; nonfinancial corporations; households; NPISH; nonresident counterpart sectors include general government, international organizations, financial corporations, other nonresidents.

*Source: _pam56 (IMF pamphlet).*

### Foreword. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 

### Foreword

### Purpose and scope
- Designed to meet the needs of economists, statisticians, students, and others.
- Broadly surveys the key principles underlying the four main sets of macroeconomic statistics—national accounts, balance of payments, monetary and financial, and government finance statistics—when viewed as an integrated system.
- Highlights relationships between sectors of statistics and discusses recent developments in:
  - statistical methodologies,
  - data compilation,
  - policy analysis and evaluation.
- Updates Macroeconomic Accounts: An Overview, published by the IMF in 1979 under the authorship of Poul Høst-Madsen.
- Aims to simplify concepts for exposition and to help readers understand the main relationships underlying the sets of macroeconomic statistics.
- Provides numerical examples in each chapter to demonstrate practical application and uses of the concepts within an analytical framework.

### Audience and uses
- Intended for:
  - students of economics and statistics,
  - IMF staff training,
  - the IMF’s external training,
  - policymakers and students of statistics seeking an integrated view of macroeconomic statistics.
- Serves both specialists and nonspecialists by bridging various statistical manuals and explaining how the four key statistical areas harmonize.
- For more in-depth understanding of international concepts and frameworks in each macroeconomic account, readers may refer to the relevant statistical manuals or guides.

### Relationship to international standards
- Takes account of new developments in standards for macroeconomic statistics.
- Notes the 1993 SNA (System of National Accounts 1993) as setting out the overarching conceptual framework for all macroeconomic statistics.
  - The 1993 SNA incorporated two significant enhancements: the full integration of stocks (balance sheets) and flows, and a complete sets of accounts covering production, income, consumption, saving, investment, and financial activities for sectors of the economy as well as for the economy as a whole.
- Notes that, coincident with the publication of the 1993 SNA, the IMF revised the methodology for balance of payments statistics and published the Balance of Payments Manual, fifth edition (BPM5; IMF, 1993), broadening scope to include the international investment position.

### Project management and contributors
- Project managed under a task force headed by Neil Patterson (former Assistant Director of the Statistics Department).
- Task force members included:
  - Edgar Ayales
  - Keith Dublin
  - Roberto Rosales
  - Robin Kibuka
  - Wipada Soonthornsima
  - Emmanuel Kumah
- Main draft chapters prepared by Statistics Department consultants:
  - Paul Cotterell
  - Kevin O’Connor
- Supplementary materials and contributions received from other Statistics Department staff, including:
  - Kim Zieschang
  - Cor Gorter
  - Mick Silver
  - Jose Cartas
- Additional contributions and inputs from other IMF departments strengthened the pamphlet’s policy and practical content.
- Secretarial, editorial, and publication coordination:
  - Carmen Diaz-Zelaya and Patricia Poggi provided secretarial assistance.
  - Joan Gibson gave editorial assistance.
  - James McEuen of the External Relations Department coordinated copyediting and publication.
- Acknowledgement from Robert W. Edwards, Director, Statistics Department, International Monetary Fund, thanking all contributors.

*Source: Foreword, _pam56 (IMF pamphlet).*

### 1993. Subsequently, the IMF developed the methodology for monetary and

### _pam56 - 1993. Subsequently, the IMF developed the methodology for monetary and

### Background and standards
- The IMF developed methodology for monetary and financial statistics—published as the Monetary and Financial Statistics Manual (MFSM; IMF, 2000c)—and revised the methodology for government finance statistics—published as the Government Finance Statistics Manual 2001 (GFSM 2001; IMF, 2001).
- Published jointly: Commission of the European Communities—Eurostat, IMF, Organization for Economic Cooperation and Development (OECD), United Nations (UN), and World Bank (1993).
- The 1993 SNA and the BPM5 are being updated in harmony to account for new developments in economic activities and analysis since 1993.
- Macroeconomic statistical standards are harmonized with the 1993 SNA and oriented to policy variables not covered by national accounts (balance of payments surplus or deficit, fiscal position, money and credit measures).

### Common features of macroeconomic statistics
- Purpose: to serve decision makers and to be, as far as practicable, mutually consistent.
- Common conceptual elements discussed: institutional units and sectors; residence; stocks (assets/liabilities), economic flows, and their integration; accounting rules; market price valuation and conversion procedures.
- The pamphlet simplifies many concepts for broad exposition; for detailed standards, readers should refer to the relevant statistical manuals or guides.

### Institutional units and sectors
- Institutional unit definition: an economic entity capable, in its own right, of owning assets, incurring liabilities, and engaging in economic activities and transactions; it can be held directly responsible and accountable for those actions.
- Two main types of entities qualify as institutional units:
  - Households (multiperson households are not decomposed into individual institutional units).
  - Legal and social entities recognized independently of their owners—corporations, government units, and nonprofit institutions.
- Quasi-corporations: unincorporated entities belonging to households or government units that produce market goods and services and for which it is meaningful to compile a complete set of accounts are treated as quasi-corporations.
- Five mutually exclusive institutional sectors:
  - Nonfinancial corporations sector,
  - Financial corporations sector,
  - General government sector,
  - Nonprofit institutions serving households (NPISH) sector,
  - Household sector.
- Sectoral composition notes:
  - The two corporate sectors include corporations, quasi-corporations, and NPIs that are market producers.
  - The general government sector comprises general government units not treated as quasi-corporations and nonmarket NPIs controlled and mainly financed by government units.
  - The NPISH sector comprises nonmarket NPIs not controlled by government.
  - The household sector comprises households and their unincorporated enterprises not treated as quasi-corporations.

### Residence
- Macroeconomic statistics relate to an economy defined as all its resident institutional units.
- Residency is based on the unit’s center of economic interest, not nationality or currency of denomination.
- Definitions and rules:
  - Residents: institutional units with a closer tie to the economic territory of the country than to any other country.
  - Nonresidents: units not resident of the given economy; residents of the rest of the world.
  - Economic territory includes geographic territory administered by a government, airspace, territorial waters, continental shelf with exclusive rights, and territorial enclaves in the rest of the world (embassies, consulates, military bases).
  - Economic interest: existence of a location within the economic territory from which the unit engages in economic activities significantly, either indefinitely or over a finite but long period; normally a one-year rule is applied.
- Residency applications:
  - General government units at all levels are residents of the home country even when carrying out activities abroad (embassies, consulates, military bases treated as residents of the home country; foreign government units located in the country are nonresidents).
  - Corporations are residents of a country when engaged in a significant amount of production there or when owning land or buildings there, even if owned by nonresidents; branches/subsidiaries of foreign corporations located in the country are residents of that country.
  - Offshore enterprises are residents of the economy in which they are located, regardless of special exemption zones.
  - Households: a household has residency when it maintains a dwelling used as principal residence; persons living permanently in a country are residents even when temporarily abroad; individuals working abroad continuously for one year or more normally cease to be members of a resident household; students remain residents of their country of origin if they remain members of households there.

### Stocks, flows, and their integration
- Stocks:
  - Defined as economic magnitudes measured at a point in time—positions in assets and liabilities.
  - Assets must be owned by an institutional unit and expected to provide economic benefit through production, income generation (interest, dividends, rent), or store of value.
  - Stocks are recorded in the balance sheet at the beginning and end of the accounting period and are to be valued at current market prices on the day the balance sheet is drawn up.
  - Assets are nonfinancial (land, machinery and equipment, inventories) or financial (claims of one unit on another); liabilities are financial obligations and the counterpart to financial assets.
  - Examples of financial assets/liabilities: currency (asset for holder, liability for central bank); deposits (asset for depositor, liability for bank); loans (asset for lender, liability for borrower); securities and shares (shares are financial claims of owners and liabilities of the corporation).
  - Monetary gold and SDRs are considered assets by convention and used by monetary authorities to settle international payments; monetary gold consists only of gold held by the central bank or government as part of official reserves; SDRs are international reserve assets created by the IMF and allocated to members.
  - Some financial contracts (guarantees, letters of credit, loan commitments) are not considered financial assets but may be collected for information on future risks.
  - Net worth: difference between total stock of assets (financial and nonfinancial) and stock of liabilities; in macroeconomic accounts, shares and other equity obligations are included in liabilities, so net worth differs from commercial-accounting net equity.
- Flows:
  - Flows are economic magnitudes measured with reference to a period of time.
  - Two types of flows: transactions (exchanges or transfers) and other economic flows (holding gains and losses and changes in the volume of the asset).
  - Flows fully reflect the change in the value of a stock of an asset or liability during the accounting period.
  - Transactions are interactions among institutional units by mutual agreement; exchanges involve one party providing a good, service, labor, or asset and receiving a counter...

### Balance sheets and integration with flow accounts
- Balance sheets:
  - Statements drawn up at a particular point showing values of all assets owned and liabilities of an institutional unit in T-account format (assets left, liabilities right).
  - Net worth is the difference between total assets and total liabilities and is recorded on the right-hand side of the balance sheet.
  - Closing balance sheet of one period is identical to the opening balance sheet of the next period.
  - Changes in holdings of assets and liabilities during a period can be fully explained by transactions plus other economic flows (revaluations and other volume changes): closing = opening + transactions + other economic flows.
  - Valuation: stock values to be valued at market prices; where direct observations are unavailable, market prices for close substitutes may be used; fixed assets often estimated by perpetual inventory method or net present value of future returns; valuation of financial items should include any accrued interest.
- Uses and distinctions:
  - Integrated balance sheets and flow accounts enable verification of reasonableness of statistics and analysis of components of changes in balance sheets.
  - Household balance sheets are important for analyzing consumption, savings, distribution of wealth, and liquidity.
  - Balance sheet data indicate economic resources of a nation and help assess external debtor/creditor positions.
  - Differences from business accounting balance sheets:
    - Enterprises often value items at historic cost rather than current market prices.
    - Fixed capital values in enterprise accounts are influenced by tax depreciation rules.
    - Shares in enterprise accounts may be valued at nominal or issue prices rather than current market prices.
    - Enterprise balance sheets may include provisions for contingent risks not included as liabilities in macroeconomic accounts.
  - Adjustments are needed when using enterprise balance sheet data for macroeconomic accounts to ensure consistent valuations.

*Source: _pam56 - 1993. Subsequently, the IMF developed the methodology for monetary and*

### part in return. For example, a unit may exchange goods and services for a

### _pam56 - part in return. For example, a unit may exchange goods and services for a

### Financial assets and transaction types
- All statistical systems recognize eight categories of financial assets (with or without corresponding liabilities).
- Monetary gold and SDRs
  - Monetary gold: a financial asset not having a corresponding liability.
  - SDR holdings: treated as financial assets because they represent unconditional rights to obtain foreign exchange or other reserve assets from other IMF members. IMF member countries to which SDRs are allocated are not regarded as having an actual (unconditional) liability to repay their SDR allocations; many countries nevertheless show a liability entry equal to their original SDR allocations.
- Currency and deposits
  - Currency: notes and coins of fixed nominal value, generally usable directly for transactions; issued by central banks and governments.
  - Deposits: two broad types—transferable deposits and other deposits (savings, time, fixed). Transferable deposits are exchangeable at par on demand; other deposits often easily converted into transferable deposits.
- Securities other than shares: negotiable instruments evidencing obligations to pay interest and repay principal; short-term securities can be close substitutes for deposits.
- Loans: nonnegotiable financial claims created when a creditor provides funds directly to a debtor; generally pay interest; loans that become negotiable should be reclassified as securities.
- Shares and other equities: evidence of ownership giving claims on residual value; may pay dividends and be held for holding gains.
- Insurance technical reserves: liabilities of insurance companies and pension funds to participants; include net equity of households in life insurance reserves and pension funds, unearned premiums, and reserves for outstanding claims.
- Financial derivatives: instruments linked to a specific financial instrument, indicator, or commodity; two broad types are forward-type contracts and option contracts; value derives from an underlying asset or index.
- Other accounts receivable/payable: include trade credit and advances and a wide range of miscellaneous creditor/debtor relationships.

### Types of flows and integration of stocks and flows
- Transactions
  - Example: consumption of fixed capital is treated as a transaction even though only one unit is involved; the unit is treated as acting in two capacities—as the user and the owner of the fixed asset.
  - Transactions can involve exchange of a financial asset for a nonfinancial asset, or an exchange of a financial asset (cash) for another financial asset (loan).
- Transfers
  - Transfers involve one party providing a good, service, labor, or asset without receiving anything in return (examples: government donation of food/medical supplies; payment of taxes).
- Other economic flows
  - Holding gains and losses: arise when market prices of assets change during the period, including exchange-rate-induced valuation changes for foreign-currency assets.
  - Changes in volume of assets: include discovery of new natural resources, depletion of subsoil assets, destruction of assets through natural disaster, and debt write-off.
- Stock-flow identity
  - Stock (end) = Stock (beginning) + Transactions + Other Economic Flows.
  - Numerical example: opening bank account stock $100; deposits $30 and withdrawals $10 (net transactions +$20) → end stock $120 (if no other changes).

### Accounting rules, recording bases, and valuation
- Double-entry accounting: every flow recorded twice—as a debit and as a credit.
  - Debit: increase in an asset, decrease in a liability, or decrease in net worth (expense).
  - Credit: increase in a liability, decrease in an asset, or increase in net worth (revenue).
- Examples of credits (listed items)
  - Sales of goods and services (including exports)
  - Property income receivable
  - Compensation of employees receivable by households
  - Transfers receivable (including tax revenue for government)
  - Increases in liabilities
  - Decreases in nonfinancial assets (including inventories)
  - Decreases in financial assets
- Examples of debits (listed items)
  - Purchases of goods and services (including imports)
  - Property income payable
  - Compensation of employees payable by employers
  - Transfers payable
  - Decreases in liabilities
  - Increases in nonfinancial assets (including inventories)
  - Increases in financial assets
- Accrual vs cash recording
  - Accrual basis: record flows when economic value is exchanged, transformed, created, transferred, or extinguished (ensures consistency across units and time).
  - Cash basis: records events only when cash is received or disbursed; omits noncash transactions.
  - If source statistics are cash-based, analysts should adjust to an approximate accrual basis to preserve internal consistency (notably for government finance statistics compiled on a cash basis).
- Market-price valuation and currency conversion
  - Transactions and stocks should be measured at market prices where possible.
  - Where market prices are unavailable, compilers may use alternative measures or proxies.
  - Currency conversion: use exchange rates prevailing on the transaction date (for transactions) or the reporting date (for stocks); a rule of thumb recommends the midpoint between buying and selling rates.

### Data quality, uses, and practical applications
- Data Quality Assessment Framework (DQAF)
  - Introduced 2001 and updated 2003; organizes prerequisites and five dimensions of data quality: assurance of integrity, methodological soundness, accuracy and reliability, serviceability, and accessibility.
  - The IMF developed DQAF frameworks for seven macroeconomic data sets: national accounts, consumer price index, producer price index, external debt, government finance, monetary, and balance of payments.
  - Uses: guides IMF staff, assists countries in evaluating compilation shortcomings and self-assessments, helps data users evaluate data for policy analysis and forecasts.
- Uses of integrated macroeconomic accounts in IMF surveillance
  - Financial programming (FP): evaluates linkages between main macroeconomic accounts, assesses impact of exogenous shocks, formulates policy responses, prepares alternative prospective scenarios for the medium term.
  - Balance sheet approach (BSA): exploits sectoral and national balance sheets to examine vulnerabilities (financial position of key sectors; mismatches in maturity, currency, and term structure; potential propagation of sectoral weaknesses).
  - Vulnerability indicators point to potential risks that could trigger liquidity and solvency problems.

### System of National Accounts (1993 SNA) framework and sequence of accounts
- The 1993 SNA links transactions and other economic flows with balance sheets; provides framework to measure GDP and related aggregates.
- Main sets of accounts
  - Current accounts: production account (measures GDP) and income accounts (derive national income, national disposable income, and saving).
  - Accumulation accounts: capital account (transactions in nonfinancial assets and capital transfers), financial account (transactions in financial assets and liabilities), accounts for other economic flows (revaluations and other changes in the volume of assets).
  - Balance sheets: show stock of assets and liabilities at beginning and end of period; balancing item is net worth.
- Capital account balancing item: net lending/borrowing (NL/B).
  - If saving and capital transfers exceed net acquisition of nonfinancial assets → net lending.
  - If net acquisition of nonfinancial assets exceeds saving and capital transfers → net borrowing.
- Financial account: transactions classified by financial instrument; net acquisition of financial assets on the left, net incurrence of liabilities on the right; reflects NL/B.

### Defining and measuring GDP (key definitions and approaches)
- Definition: GDP is the sum of value added produced by all institutional units resident in the domestic economy plus taxes less subsidies on products. Value added = output less intermediate consumption.
- Taxes on products and other taxes on production affect measurement; basic price vs market price distinctions noted.
- Three approaches to measure GDP
  - Production approach: GDP = gross value added + taxes less subsidies on products; gross because no deduction for consumption of fixed capital. Example values from sample tables: Output, basic prices 3,604; Intermediate consumption 1,883; Gross value added 1,721; Taxes less subsidies on products 133; GDP 1,854.
  - Income approach: sum incomes generated by production—compensation of employees, taxes less subsidies on production, operating surplus/mixed income. Sample values: Compensation of employees 762; Gross operating surplus/mixed income 901.
  - Expenditure approach: GDP = C + I + G + (X – M). Components in sample tables:
    - Final consumption expenditure: Government 368; Households and NPISH 1,031.
    - Gross capital formation: Gross fixed capital formation 376; Changes in inventories 28; Acquisitions less disposals of valuables 10.
    - Exports of goods and services 540; Imports of goods and services 499.
  - Algebraic identity: GDP = C + I + G + (X – M).
- Tables (sample values reproduced exactly)
  - Table 2 (Goods and Services Account): Output, basic prices 3,604; Intermediate consumption 1,883; Taxes less subsidies on products 133; Final consumption expenditure Government 368; Imports 499; Households and NPISH 1,031; Gross fixed capital formation 376; Changes in inventories 28; Acquisitions less disposals of valuables 10; Exports 540; Total supply and total use 4,236.
  - Table 3 (Gross Domestic Product): Output, basic prices 3,604; Less intermediate consumption –1,883; Gross value added 1,721; Taxes less subsidies on products 133; Gross capital formation components as above; Exports 540; Less imports –499; GDP 1,854.
  - Table 4 (Current Accounts excerpt): Intermediate consumption 1,883; Output, basic prices 3,604; Domestic product, gross (GDP) 1,854; Less consumption of fixed capital –222; Domestic product, net 1,632; Generation of income items include Compensation of employees 762, Taxes less subsidies on production 133 and 58 (other), Gross operating surplus/mixed income 901; Allocation of primary income and secondary distribution with items and totals such as National income, gross 1,883; National disposable income, gross 1,854; Use of income showing Final consumption 1,399; Saving, gross 455; Less consumption of fixed capital –222; Saving, net 233.
  - Table 5 (Capital and Financial Accounts excerpt): Gross fixed capital formation 376; Less consumption of fixed capital –222; Change in inventories 28; Net lending (+)/borrowing (–) 38; Saving, net 233; Capital transfers receivable 62; Capital transfers payable –65; Financial account: Net acquisition of financial assets 641; Net incurrence of liabilities 603; Instrument-level entries: Monetary gold and SDRs –1; Currency and deposits 119 (assets) / 132 (liabilities); Securities other than shares 138 (assets) / 123 (liabilities); Loans 244 (assets) / 217 (liabilities); Shares and other equity 43 (assets) / 44 (liabilities); Insurance technical reserves 36 (assets and liabilities); Financial derivatives 0; Other accounts receivable 61; Other accounts payable 52; Net lending (+)/net borrowing (–) 38.
  - Table 6 (Balance Sheet and Accumulation Accounts excerpt): Opening balance sheet Nonfinancial assets 9,922; Financial assets 6,792; Liabilities 6,298; Net worth 10,416. Changes in balance sheet (transactions): Acquisitions less disposals of nonfinancial assets 192; Net acquisition of financial assets 641; Net incurrence of liabilities 603; Changes in net worth due to saving and capital transfers 230. Other changes in volume of assets account: Nonfinancial changes 10; Financial 5; Changes in net worth due to other changes in volume of assets 17. Revaluation account: Nominal holding gains (+)/losses (–) Nonfinancial assets 280; Financial assets 84; Liabilities 76; Changes in net worth due to nominal holding gains/losses 288. Closing balance sheet Nonfinancial assets 10,404; Financial assets 7,522; Liabilities 6,976; Net worth 10,951.

### Accumulation accounts, other economic flows, and balance sheets
- Capital account: records acquisitions/disposals of nonfinancial assets and capital transfers. Right-hand side: saving and net capital transfers. Balancing item: net lending (+) / net borrowing (–).
- Financial account: shows how NL/B is financed via transactions in financial assets and liabilities; classified by instrument.
- Other economic flows: other changes in volume of assets (discoveries, destruction, uncompensated seizures) and revaluation account (holding gains and losses).
- Balance sheets: present opening and closing stocks; total change explained by transactions plus other economic flows.

### Volume measures, price indices, and real income
- Volume and constant price measures allow decomposition of changes into price and volume components; convert nominal aggregates into real (volume) series.
- Deflation and extrapolation methods
  - Deflate current-period value with appropriate price index (PPI, CPI, XMPI) or extrapolate base period value with volume indicators.
  - Double-deflation approach: measure output and intermediate consumption at constant prices and subtract to get gross value added at constant prices.
  - Where data are insufficient, alternatives include extrapolating base-year value added by an output volume index or single deflation of current-period value added by a price index for output.
- Chain-linking
  - 1993 SNA preference: annual chaining; base-year updates should be made at least about every five years.
  - Chained indices are conceptually superior but do not aggregate consistently to higher levels.
- Price indices (boxes summarized with exact terminology)
  - Producer Price Index (PPI): measures rate of change in prices of goods and services bought and sold by producers; output PPI vs input PPI; used for inflation monitoring, indexation, compilation of other inflation measures, national accounts deflation.
  - Consumer Price Index (CPI): measures overall rate of change in prices of goods and services consumed by households; used for inflation targeting, contract indexation, national accounts deflation.
  - Export and Import Price Indices (XMPIs): measure rate of change over time in prices of traded goods and services; unit-value indices are surrogates but prone to bias; survey-based XMPIs preferred.
- Real gross domestic income (real GDI) vs GDP at constant prices
  - GDP at constant prices is a volume measure of output.
  - Real GDI adjusts for changes in a country’s terms of trade (trading gain or loss); when terms of trade improve, real purchasing power of domestic production increases even at the same volume of output.
  - Movements in GDP at constant prices and in real GDI can diverge significantly when terms of trade change.
- Implicit price deflator: nominal GDP divided by GDP at constant prices (multiply by 100) yields the GDP implicit price deflator.

*Source: _pam56 - part in return. For example, a unit may exchange goods and services for a*

### 1.   Volume or constant price GDP—the GDP in the current year at prices

### 1.   Volume or constant price GDP—the GDP in the current year at prices of the base year plus the trading gain or loss resulting from changes in the terms of trade

### Definition and equivalent expressions
- "Volume or constant price GDP—the GDP in the current year at prices of the base year plus the trading gain or loss resulting from changes in the terms of trade"
- Equals real gross domestic income plus real primary incomes from abroad minus real primary incomes payable abroad
- Equals real gross national income plus real current transfers receivable from abroad minus real current transfers payable abroad

### Calculating trading gains (losses) resulting from changes in the terms of trade (Box.7)
- The trading gains (losses) are calculated as shown in the source:

        X – M        X       M
  T = –––––– – 
  (
  ––– – –––
  )
  ,
             P          P
  X        
  P
  M 

- Interpretation of the two terms in the formula:
  - The first term is "a measure of the goods and services balance (exports of goods and services (X) less imports of goods and services (M)) using a single deflator, P."
  - The second term is "the goods and services balance by taking the difference between a volume (say constant price) measure of exports and a volume measure of imports—that is, after X and M have been deflated by respective price indices for exports and imports, P_X and P_M."

### Practical implications and cautions
- "Note in the second term how, for example, as export prices increase slower than import prices, the larger is the sum deducted from the first term, and the smaller the terms of trade effect."
- "In many economies, deflated imports may exceed deflated exports, and the second term is negative. In such cases, it is highly desirable that the economy calculate the trading loss, because the possibility exists that the loss may offset any positive growth in GDP."
- "Note also that the magnitude of the terms of trade effect is contingent on the deflator in the first term."

### Issues in deflator choice
- "Experts do not agree on the best deflator to use for this component."
- Suggested options and rationales:
  - Use the import price index or the export price index, "depending on whether the balance is negative or positive."
  - Some argue for "a simple average of the import and export price indices."
  - "There is a good case, consistent with the definition of real national income, for using the implicit deflator for gross domestic expenditure."
- The interpretation of the trading gain: "in terms of the gain in purchasing power with regard to a respective bundle of such goods and services."

*Source: _pam56 - 1.   Volume or constant price GDP—the GDP in the current year at prices*

### 4. Equals real gross national disposable income.

### 4. Equals real gross national disposable income.

### Deflators and measurement of real income components
- The deflator used to measure real primary incomes and transfers to and from abroad is not clear because no deflator can be directly applied to these items.
- It is important that the deflator be broadly based; countries often use the implicit price deflator for gross domestic expenditure.  
- Footnote/reference: 18

### Quarterly national accounts (QNA)
- QNA data are an important related feature of macroeconomic statistics and are a natural progression once countries have established annual accounts.
- Potential scope for QNA is the whole of the 1993 SNA sequence of accounts.
- Prerequisites for QNA:
  - Timely and accurate quarterly source data covering a high proportion of totals.
  - Consistency of QNA with annual equivalents to facilitate benchmarking.
- Benchmarking process:
  - Incorporates information from annual data into quarterly estimates.
  - Uses revisions to allow timely release of data and subsequent incorporation of new data.

### Important boundaries that define scope and treatment
- The system uses boundaries that affect scope and measurement:
  - Production boundary: scope of productive activity.
  - Asset boundary: distinguishes transactions in assets from income and expenditure.
  - Boundary between current and capital transfers: impacts the measure of saving.

### Production boundary
- Production is defined as activity in which a unit uses inputs to produce goods and services that can be provided to other units, individually or collectively.
- The 1993 SNA production boundary encompasses:
  - The production of all goods by a unit, including for own use;
  - The production of services by a unit that are supplied to other units;
  - The own-account production of housing services by owner-occupiers;
  - The production of domestic and personal services through the employment of paid domestic staff.
- General principle:
  - Includes production of goods for own use but excludes own-produced services.
- Measurement implications:
  - Including nonmonetary flows requires concurrent estimation of income and consumption measures.
  - Household own-account production (e.g., subsistence agriculture) must be estimated and included in GDP where material.
- Sectoral notes:
  - Financial and nonfinancial corporate sectors produce most goods and services; households may produce many goods/services, especially in developing countries.
  - Financial intermediaries and insurance corporations may charge indirectly for services—necessitating estimation and allocation of FISIM (financial intermediation services indirectly measured) and adjustment of interest flows and insurance premiums for service components.
  - General government and NPISH produce goods and services that satisfy individual or collective needs and are included even if provided free.

### Asset boundary
- Includes financial and fixed assets and nonproduced assets over which effective ownership rights are exercised.
- Coverage limited to entities subject to ownership rights and from which owners may derive economic benefits.
- Examples and treatment:
  - Expenditure on mineral exploration is included as acquisition of an asset (information likely to yield future benefits).
  - Major renovations, reconstructions, and enlargements are capital formation; regular repair and maintenance are current production costs.
- Implication:
  - The asset boundary determines whether a transaction is recorded in current accounts (income/expenditure) or accumulation accounts (assets/liabilities), directly affecting GDP, national income, and savings measures.

### Boundary between current and capital transfers
- Transfers are transactions where the recipient receives nothing directly in return; all transfers increase recipient net worth.
- 1993 SNA distinction:
  - Current transfers contribute to disposable income and saving.
  - Capital transfers link the transfer to an asset (example: inheritance tax is a capital transfer; social security benefit is a current transfer).
- Example:
  - Debt forgiveness is recorded in the capital account as a capital transfer and should not be shown as an increase in saving.

### Labor force indicators
- Improved labor market data (employment, hours worked, earnings) are crucial for assessing economic performance and labor market policy effectiveness.
- Data sources for labor statistics: business surveys, household surveys, administrative sources.
- Key concepts (aligned with the 1993 SNA and ILO standards):
  - Economically active population / labor force: employed + unemployed; working-age population defined with a minimum age (may differ by country).
  - Employed persons: above minimum age who performed some work for pay, profit, or family gain during the reference period or had a job but were temporarily not at work.
  - Operational interpretation of “some work”: may be interpreted as work for at least one hour.
  - Unemployed persons satisfy three simultaneous criteria:
    - Without work;
    - Currently available for work;
    - Seeking work (taken specific steps in a specified recent period).
  - Persons satisfying neither employment nor unemployment definitions are economically inactive.
- Principal classifications in labor surveys:
  - Status in employment (employee, employer, own-account worker, unpaid family worker, other nonemployees).
  - Branch of economic activity (industry).
  - Occupation.

### Productivity and multifactor productivity (MFP)
- Productivity tools:
  - Productivity comparisons: ratio of output over inputs.
  - Productivity indices: track trends in output/input ratios.
- Output concepts:
  - Output volume (gross production) or value added volume (net production after intermediate consumption).
  - Value added volume is directly related to GDP.
- Labor productivity measures (Box 9 formulas preserved as conceptual definitions):
  - Gross labor productivity = Output volume index / Labor input volume index
  - Net labor productivity = Value added volume / Labor input volume index
- Multifactor productivity (MFP) definitions:
  - Gross MFP = Output volume index / Primary (including labor) and intermediate input volume index
  - Net MFP = Value added volume index / Primary (including labor) input volume index
- Returns-to-scale consideration:
  - Measures commonly assume constant, unitary returns to scale; returns-to-scale affect interpretation of productivity indices.
- Implementation:
  - Index numbers aggregate relative changes across outputs and inputs; Törnqvist formula commonly used for MFP indices.
- Reference manual: OECD Measuring Productivity (2001) for further guidance.

### Environmental and economic accounting
- Growing demand for data linking economy and environment (depletion of subsoil assets, fisheries, environmental damage).
- SEEA (UN and others, 2003; UN, 2004) provides a common framework for economic and environmental information, permitting consistent assessment of environment–economy interactions.

### Informal sector and illegal activities
- The 1993 SNA does not fully cover the informal economy and illegal activities; consideration for greater detail is under review.
- Informal and illegal activities can account for a substantial portion of economic activity, especially in developing and transition countries.
- Draft papers, handbooks, and guidelines (for example, OECD and others, 2002) are available for methodological guidance.

### Supply and use tables (SUTs)
- SUTs disaggregate the goods and services account to commodity and industry level; they are rectangular matrices (supply table: products × producing industries; use table: products × intermediate consumption and final uses).
- Purposes:
  - Statistical: check consistency among different statistical sources and provide framework for compiling production data and identifying weaknesses.
  - Analytical: integrate into macroeconomic models, convert into input-output tables to study links between final demand and industry output.
- Commodity-flow (four basic steps):
  - Estimate supply at basic prices for commodities;
  - Adjust estimates to purchaser prices;
  - Estimate uses of commodities;
  - Compare results and reconcile supply and uses.
- Greater detail in matrices improves clarity; usefulness persists even at higher aggregation.

### Balance of payments and international investment position (IIP)
- BPM5 (IMF, 1993) is the international standard for conceptual framework of balance of payments and IIP statistics, harmonized with the 1993 SNA.
- BPM5 extension includes transactions, other economic flows, and stocks of external financial assets and liabilities (the IIP).
- Complementary datasets and guides mentioned include CPIS Guide and others for reserves and external debt statistics.
- The balance of payments comprises three accounts:
  - Current account: transactions in goods and services, income, and current transfers (see Table 8 for components).
  - Capital account: transactions in capital transfers and nonproduced nonfinancial assets.
  - Financial account: transactions in external financial assets and liabilities.
- Relationship with IIP:
  - IIP integrates opening and closing stocks of external financial assets and liabilities with transactions, revaluations, and other economic flows (see Table 7 framework).
- Goods and services component:
  - Goods principally cover exports and imports as shown in external trade statistics, adjusted for timing, valuation, and coverage in accordance with change of ownership requirements.

*Source: 4. Equals real gross national disposable income.*

### 1. Goods

### 1. Goods

### Goods and services classification
- Goods accounts value both exports and imports of goods free on board (f.o.b.) from the country of export, providing for symmetrical valuation.
- Services items record costs of shipping the goods between the exporting country and importing country, performed by residents for nonresidents, and vice versa.
- Other services cover activities including transportation of passengers, travel, communication, construction, and so forth.

### Box.10 — Statistics on International Trade in Services (ITS)
- ITS provide internationally comparable statistics to meet needs of private and public sectors, including globalization studies and trade negotiations.
- ITS take a broader and more detailed view of international trade in services than the conventional balance of payments perspective outlined in BPM5 by:
  - (1) classifying services delivered through conventional trade between residents and nonresidents in more detail than in BPM5;
  - (2) including treatment of local delivery of services through a foreign commercial presence; and
  - (3) providing some link between the two systems.
- ITS statistics cover four modes of trade in services:
  - (1) cross-border supply;
  - (2) consumption abroad;
  - (3) commercial presence; and
  - (4) presence of natural persons.
- For guidance on compiling ITS statistics, users may refer to the Manual on Statistics of International Trade in Services (UN and others, 2002).

### Income (current account component)
- The income component records transactions in primary incomes, comprising:
  - Compensation of employees (labor income).
  - Investment income, separately identifying:
    - Direct investment income.
    - Portfolio investment income.
    - Other investment income.
- The distinction between direct investment, portfolio investment, and other investment is elaborated in the context of the financial account.

### Current transfers (current account component)
- Identifies separately transfers involving the resident general government sector and those involving other resident sectors.
- Workers’ remittances are a major component of transfers involving other resident sectors.
- The current account balance mirrors domestic saving and investment behavior in the national accounts.

### Capital account
- Records transactions in capital transfers and nonproduced, nonfinancial assets.
- When recorders balance the current account and capital account transactions, that balance equals net lending/borrowing (NL/B) with the rest of the world.
- High-level components of the capital account, along with the financial account, are presented in Table 9.

### Financial account — scope and classification
- The financial account records all transactions in financial assets and liabilities between residents and nonresidents and records the form in which net lending/borrowing with the rest of the world takes place.
- Financial account classification criteria:
  1. By function (purpose of the investment): direct investment, portfolio investment, financial derivatives, other investment, and reserve assets.
  2. By whether the instrument is an asset or liability.
  3. By the nature of the instrument—equity, debt, trade credit, loans, currency and deposits, and so forth.
  4. By the domestic sector acquiring the assets or incurring the liabilities (for portfolio and other investment): monetary authorities, general government, banks, and other sectors.

### Table 9. Capital and Financial Accounts: standard components
- A. Capital account
  - 1. Capital transfers
    - 1.1 General government
    - 1.2 Other sectors
  - 2. Acquisition/disposal of nonproduced, nonfinancial assets
- B. Financial account
  - 1. Direct investment
    - 1.1 Abroad
    - 1.2 In reporting economy
  - 2. Portfolio investment
    - 2.1 Assets
      - 2.1.1 Equity securities
      - 2.1.2 Debt securities
    - 2.2 Liabilities
      - 2.2.1 Equity securities
      - 2.2.2 Debt securities
  - 3. Financial derivatives
    - 3.1 Assets
    - 3.2 Liabilities
  - 4. Other investment
    - 4.1 Assets
      - 4.1.1 Trade credits
      - 4.1.2 Loans
      - 4.1.3 Currency and deposits
      - 4.1.4 Other assets
    - 4.2 Liabilities
      - 4.2.1 Trade credits
      - 4.2.2 Loans
      - 4.2.3 Currency and deposits
      - 4.2.4 Other assets
  - 5. Reserve assets
    - 5.1 Monetary gold
    - 5.2 Special drawing rights (SDRs)
    - 5.3 Reserve position in the IMF
    - 5.4 Foreign exchange
    - 5.5 Other claims

### Definitions and characterizations
- Direct investment is characterized by the investor’s having an effective voice in the management of an enterprise, identified using a 10 percent equity ownership rule.
- Portfolio investment refers to investment in debt and equity securities (both usually traded) other than those included in direct investment and reserve assets.
- Financial derivative instruments are linked to a specific financial instrument and include options, futures contracts, and swaps.
- Other investment comprises instruments not covered by the other categories, including trade credits, loans, currency and deposits, and other assets/liabilities.
- Reserve assets consist of external assets readily available to and controlled by the monetary authorities for addressing payments imbalances and comprise monetary gold, SDRs, reserve position in the IMF, foreign exchange assets (consisting of currency and deposits, securities, and financial derivatives), and other claims.

*Source: _pam56 - 1. Goods (IMF pamphlet content).*

### 5.   Further  by  long-  or  short-term  investment  (in  the  case  of  other  in-

### 5.   Further by long- or short-term investment (in the case of other investment and the debt securities component of portfolio investment) according to the original maturity of the instrument.

### Financial account components and reserve assets
- High-level components of the financial account, along with the capital account, are presented in Table 9. Readers are referred to pages 43–48 in the BPM5 for the full standard-component listing of the balance of payments.
- A supplement to the BPM5 on financial derivatives was issued in 2000.
- Nontransactional changes affecting holdings of reserve assets by monetary authorities (shown as other economic flows) include:
  - The IMF’s allocation of SDRs to its member countries (increases holdings with no counterpart in economic transactions).
  - Monetization or demonetization of gold by monetary authorities.
  - Changes in the value of reserve assets arising from exchange rate movements.

### Surplus or deficit (balance of payments concepts)
- Broad definitions:
  - Surplus: positive balance for a set of transactions (sum of credit entries exceeds sum of debit entries).
  - Deficit: negative balance for a set of transactions (sum of debit entries exceeds sum of credit entries).
- Historical note: IMF staff previously attempted a precise definition of overall surplus/deficit but moved to a more flexible approach recognizing multiple analytic balances:
  - Goods and services balance
  - Current balance
  - Financial account balance

### Balance of payments presentations
- Two presentation types:
  - Standard presentation: conventional two-column credit and debit format; fully harmonized with the national accounts (1993 SNA). Net lending (+)/net borrowing (–) in the 1993 SNA is equivalent to the sum of current and capital accounts in the balance of payments.
  - Analytic presentation: single-column format with credits as positive and debits as negative; regrouping of standard components to focus on analytic issues and introduction of various balances and an overall balance distinguishing autonomous transactions from accommodating transactions (reserves and related items).

- Table 10 (BALANCE OF PAYMENTS STANDARD PRESENTATION) — example (Credit / Debit)
  - Current.account 619 / 578
  - Goods and services 540 / 499
    - Goods 462 / 392
    - Services 78 / 107
  - Income 69 / 40
  - Current transfers 10 / 39
  - Capital.and.financial.account
    - Capital account 1 / 4
    - Financial account 50 / 88
      - Direct investment abroad 0 / 3
      - Direct investment in reporting economy 2 / 0
      - Portfolio investment assets 0 / 20
      - Portfolio investment liabilities 5 / 0
      - Financial derivatives assets 0 / 0
      - Financial derivatives liabilities 0 / 0
      - Other investment assets 0 / 64
      - Other investment liabilities 43 / 0
      - Reserve assets 0 / 1

- Table 11 (BALANCE OF PAYMENTS ANALYTIC PRESENTATION) — selected balances and entries (single-column, credits positive; debits negative)
  - A ..Current.account.balance 1 / 41
    - Goods: exports f.o.b. 462
    - Goods: imports f.o.b. –392
    - Balance on goods 70
    - Services: credit 78
    - Services: debit –107
    - Balance on goods and services 41
    - Income: credit 69
    - Income: debit –40
    - Balance on goods, services, and income 70
    - Current transfers: credit 10
    - Current transfers: debit –39
  - B ..Capital.account.balance 1 / –3
    - Capital account: credit 1
    - Capital account: debit –4
    - Total: groups A and B 38
  - C ..Financial.account.balance 1 / –37
    - Direct investment abroad –3
    - Direct investment in reporting economy 2
    - Portfolio investment assets –20
    - Portfolio investment liabilities 5
    - Financial derivatives assets 0
    - Financial derivatives liabilities 0
    - Other investment assets –64
    - Other investment liabilities 43
    - Total: groups A through C 1
  - D ..Errors.and.omissions 0
    - Total: groups A through D 1
  - E ..Reserves.and.related.items.balance –1
    - Reserve assets –1
    - Use of IMF credit and loans 0
    - Exceptional financing 0
  - Note: Excludes components that have been classified in group E.

- Financing and accommodating transactions:
  - Reserve assets and selected liabilities (use of IMF credit and loans; exceptional financing) are presented as financing the overall surplus or deficit.
  - Exceptional financing examples include bond issuance, grants received, debt forgiveness, and temporary accumulation of payments in arrears.

### International Investment Position (IIP)
- The IIP is the balance sheet of financial assets and liabilities for an economy with respect to the rest of the world; it reports stocks at the beginning and end of the period and changes via transactions, revaluations (price changes and exchange rate changes separately identified), and other economic flows.
- Net IIP = external financial assets minus external liabilities; combined with nonfinancial assets, it constitutes the net worth of the economy.
- Classification mirrors the financial account: direct investment, portfolio investment, financial derivatives, other investment, reserve assets; items include financial claims on and liabilities to nonresidents, equity assets and liabilities, financial derivative instruments, monetary gold, and SDRs.
- Use cases:
  - Analyze appropriateness of external asset portfolio against debt profile.
  - Assess developments in portfolio over time using a series of IIPs.
  - Analyze rates of return on external investments.
  - Net IIP differs from gross external debt by including external assets and nondebt liabilities (equity, financial derivatives).

- Table 12 (INTERNATIONAL INVESTMENT POSITION) — worked example (Position at Beginning of Year / Transactions / Price and Exchange Rate Changes / Other Adjustments / Position at End of Year)
  - Assets 5735 / 070630
    - Direct investment abroad 1132 / 30118
    - Portfolio investment 1255 / 40134
    - Financial derivatives 00000
    - Other investment 3354 / 200377
    - Reserve assets 01001
  - Liabilities 2978 / 830388
    - Direct investment in reporting economy 33006
    - Portfolio investment 7720 / 2099
    - Financial derivatives 00000
    - Other investment 2176 / 500283

- Revaluation effect example: When domestic currency depreciates against denomination currency, value of foreign-currency-denominated asset/liability increases in domestic currency (exchange rate changes positive); converse if domestic currency appreciates.

### External debt statistics
- The External Debt Statistics: Guide for Compilers and Users (IMF, 2003) provides comprehensive guidance for compiling and analyzing external debt data.
- Previous 1988 guide measured disbursed and outstanding debt valued in nominal terms, focusing on borrowing from banks and government sources.
- The 2003 Guide aligns with the 1993 SNA: gross external debt includes all liabilities (other than equity and financial derivatives) owed to nonresidents; consistent with balance of payments and IIP.
- Guide recommendations (strongly recommended):
  - Compile data on the debt-service schedule (timing and magnitude of future payments).
  - Compile data on currency composition of external debt (indicator of exchange rate exposure).
  - Measure net external debt = gross external debt less external assets in form of debt instruments (relevant where private sector active in financial markets).

### Data template on international reserves and foreign currency liquidity (Box 11)
- Template integrates international reserves and foreign currency liquidity within a single framework; covers authorities’ foreign currency resources on a given date and inflows/outflows over a future one-year period.
- Reports:
  - Amount and composition of official reserves and other foreign currency assets by monetary authorities and central government.
  - Foreign currency obligations of monetary authorities and central government coming due in the short term, including those related to financial derivative positions and guarantees for quasi-official and private borrowing.
- IMF guidance:
  - International Reserves and Foreign Currency Liquidity: Guidelines for a Data Template (Kester, 2001), replacing a provisional 1999 issue.

### Direct investment statistics (Box 12)
- Direct investment: resident entity obtaining a lasting interest in an enterprise resident in another economy; implies long-term relationship and significant degree of influence.
- Two key statistic sets used by analysts:
  - Direct investment statistics (cross-border positions and flows between entities in direct investment relationships).
  - Statistics on operations of foreign affiliates (sales, employment, assets) — "foreign affiliates trade statistics".
- Direct investment statistics form components of the balance of payments and IIP; used for forecasting, surveillance, and vulnerability analysis.
- Countries often extend direct investment statistics with geographical partner breakdowns and industrial sector breakdowns.
- Harmonized guidelines: BPM5 and OECD Benchmark Definition of Foreign Direct Investment, third edition (OECD, 1996).

### Coordinated Portfolio Investment Survey (CPIS) (Box 13)
- CPIS: international survey of holdings of portfolio investment assets; provides data on holdings of equity and debt securities (short- and long-term) from perspective of security holders.
- Data elements include type of issue, country of residence of issue, country of holder, sector of holder, and currency of issue.
- Bilateral data provision allows information on counterparty security liabilities of debtor countries and cross-border exposure magnitudes.
- CPIS complements IIP by detailing portfolio investment activity.
- IMF publications to assist jurisdictions: Coordinated Portfolio Investment Survey Guide (IMF, 1996b) and second edition (IMF, 2002a).

### Monetary and financial statistics (chapter IV overview)
- Monetary and financial statistics: comprehensive stock and flow data on financial and nonfinancial assets and liabilities of the financial corporations sector.
- Purpose: match units with net lending surpluses to those with borrowing requirements; support monetary policy and macroprudential analysis; provide links to government finance and balance of payments statistics.
- MFSM (Monetary and Financial Statistics Manual; IMF, 2000c) harmonized with 1993 SNA for residency, institutional sectors, recognition/timing, and valuation.
- Accounting identity:
  - The opening balance sheet + transactions in financial assets and liabilities + other economic flows = the closing balance sheet.
- Other economic flows include holding gains/losses from market price and exchange rate changes and volume changes such as debt write-offs.
- MFSM framework levels:
  - Sectoral balance sheets (central bank, other depository corporations, other financial corporations).
  - Consolidated surveys (e.g., Depository Corporations Survey (DCS), Financial Corporations Survey (FCS)).

### Coverage of monetary and financial statistics; institutional categories
- Three types of financial corporations: central bank, other depository corporations, other financial corporations.
  - Other financial corporations include insurance corporations and pension funds, other financial intermediaries, and financial auxiliaries.
- Central bank functions: issue currency, manage international reserves, transact with the IMF, provide credit to other depository corporations.
- Other depository corporations: resident units engaging primarily in financial intermediation and issuing liabilities included in national broad money.
- Financial auxiliaries provide services to financial intermediaries and markets but do not incur liabilities for intermediation (examples: security brokers, securities exchanges, foreign exchange companies).

### Financial assets and liabilities (classification principles)
- Financial assets are a subset of economic assets; most originate from contractual claims (creditor/debtor relationships).
- Exceptions by convention: monetary gold and SDRs are financial assets without corresponding liabilities.
- MFSM classifies financial assets based on liquidity and legal characteristics; liquidity includes negotiability, transferability, marketability, and convertibility.
- Asset categories include: currency and deposits, securities other than shares, loans, shares and other equity, insurance technical reserves, financial derivatives, other accounts receivable/payable.
- Contingencies (guarantees, lines of credit) that do not create unconditional claims are excluded from monetary and financial statistics but should be reported as memorandum items.

### Monetary aggregates and depository corporations
- No single universal definition of money; MFSM does not recommend a single measure but discusses issues for deriving country-specific money measures.
- Instruments countries may include in money measures: currency, deposits, securities other than shares (national currency and transferable deposits always included).
- Money holders typically: all resident sectors except depository corporations and central government (state and local governments, nonfinancial corporations, financial corporations other than depository corporations, households, NPISH).
- Money issuers: financial corporations whose liabilities are included in national broad money (central bank, commercial banks, savings banks, building societies, or units issuing short-term securities considered close substitutes for deposits).
- Common practice: range of measures M1 through M2, M3, etc., with higher aggregates including broader assets (foreign-currency-denominated deposits, longer maturities).

### Depository Corporations Survey (DCS)
- DCS presents depository corporations’ broad money liabilities and links them to foreign assets/liabilities, net claims on central government, and claims on other resident sectors.
- DCS general format:
  - Assets
    - Net foreign assets
    - Domestic claims
      - Net claims on central government
      - Credit to other resident sectors
  - Liabilities
    - Broad money
      - Currency outside depository corporations
      - Transferable deposits
      - Other deposits
      - Securities other than shares
    - Other liabilities (by instrument)
    - Other items (net)
- DCS identity facilitating monetary analysis:
  - M = NFA + NCG + CORS – OIN
    - M = country-specific measure of broad money
    - NFA = net foreign assets (balance of payments effect)
    - NCG = net claims on central government
    - CORS = credit to other resident sectors
    - OIN = net position of all other items
  - Change form (period change ∆):
    - ∆M = ∆NFA + ∆NCG + ∆CORS – ∆OIN

- Table 13 (Depository Corporations Survey — Annual changes) — example entries:
  - Net.foreign.assets 23
    - Monetary gold and SDRs ...
    - Foreign currency ... Deposits 82
  - Broad.money 105
    - Currency 23
    - Deposits 82
    - Securities other than shares 0
  - Net.credit.to.central.government 16
    - Credit to central government ...
    - Government deposits ...
  - Credit.to.other.resident.sectors 129
  - Other.items,.net 63

- Central bank survey: for countries focusing on monetary base/reserve money, present central bank survey in same format with monetary base replacing broad money; definitions differ but commonly include currency in circulation and deposits of other depository corporations in the central bank.

### Financial Corporations Survey (FCS) and flow of funds
- FCS consolidates DCS and other financial corporations survey; presents claims on and liabilities to domestic sectors and nonresidents for the full financial sector. Liability section separately shows insurance technical reserves.
- Flow of funds / financial accounts measure financial relationships within the economy and with the rest of the world; MFSM provides guidance drawing from the 1993 SNA.
- Financial account for an economy should be identical to the national accounts’ net lending/borrowing (NL/B) by the economy.
- The 1993 SNA financial account by sector illustrates contributions to overall NL/B (example economy is a net lender to the rest of the world by 38 units; nonfinancial corporations and general government are net borrowers; households are net lenders).

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/pam/pam56/_pam56.pdf*

### 14. F

### 14. Financial accounts (1993 SNA) by sector

### Sectoral financial flows (selected figures)
- Net acquisitions of financial assets by sector (exact figures as presented):
  - Nonfinancial Corporations: 71
  - Financial Corporations: 237
  - General Government: 120
  - Households: 181
  - NPISH: 32
  - Total Economy: 641
- Breakdown of net acquisitions of financial assets by instrument (selected entries, by sector columns shown in source):
  - F.1 Monetary gold and SDRs: –1 (Total economy)
  - F.2 Currency and deposits: 17 (Nonfinancial Corporations); 15 (Financial Corporations); 7 (General Government); 68 (Households); 12 (NPISH); 119 (Total Economy)
  - F.3 Securities other than shares: 18; 53; 26; 29; 12; 138
  - F.4 Loans: 27; 167; 45; 5; —; 244
  - F.5 Shares and other equity: 2; 3; 6; 3; —; 44
  - F.6 Insurance technical reserves: —; —; 36; —; —; 36
  - F.7 Financial derivatives: 0; 0; 0; 0; 0; 0
  - F.8 Other accounts receivable: 7; 6; 40; 8; —; 61
- Net incurrence of liabilities by sector:
  - Nonfinancial Corporations: 140
  - Financial Corporations: 232
  - General Government: 170
  - Households: 33
  - NPISH: 28
  - Total Economy: 603
- Breakdown of net incurrence of liabilities by instrument (selected entries):
  - F.2 Currency and deposits: 130; 2; —; —; —; 132 (Total)
  - F.3 Securities other than shares: 6; 53; 64; —; —; 123
  - F.4 Loans: 71; 94; 28; 24; —; 217
  - F.5 Shares and other equity: 26; 13; —; 4; —; 43
  - F.6 Insurance technical reserves: —; —; 36; —; —; 36
  - F.7 Financial derivatives: 0; 0; 0; 0; 0; 0
  - F.8 Other accounts payable: 37; 10; 5; —; —; 52
- B.9 Net lending (+)/net borrowing (–) by sector:
  - Nonfinancial Corporations: –69
  - Financial Corporations: 5
  - General Government: –50
  - Households: 148
  - NPISH: 4
  - Total Economy: 38

### Interpretation and limitations of the sectoral table
- Key analytical observations (text from source):
  - The financial corporations sector has a large volume of transactions in financial assets and liabilities but typically is neither an overall net borrower nor a net lender.
  - Nonfinancial corporations acquire a spread of financial assets and incur liabilities mainly in the form of loans (71) and shares and other equity (26).
  - The financial corporations sector acquires a large part of its assets in the form of loans (167) and incurs equivalent liabilities largely in the form of currency and deposits (130) and securities other than shares (53).
  - Large transaction values for financial corporations reflect their role in financial intermediation.
- Limitation emphasized:
  - The table does not identify counterparties; it does not show who is financing whom (for example, whether government borrowing via securities other than shares (64) and loans (94) is domestic or external). Determining counterparties requires additional detail.

### Detailed flow of funds accounting (policy/statistical guidance)
- Purpose and scope:
  - Detailed flow of funds accounting cross-classifies financial assets acquired by each sector by instrument and by counterpart debtor sector, and similarly cross-classifies liabilities by instrument and counterpart creditor sector.
  - Typical presentation disaggregates the financial corporations sector into subsectors: central bank, other depository corporations, other financial corporations, financial auxiliaries, and insurance corporations and pension funds.
  - A detailed flow of funds includes a rest-of-the-world sector treated as an institutional sector to show cross-border counterparties.
- Analytical advantages:
  - Interlocking row and column constraints within the matrix serve as important consistency checks, increasing the data’s usefulness for analysts.
- Complementary statistics:
  - Countries may complement detailed flow of funds (flows) with stocks of financial assets and liabilities cross-classified by sector and instrument; the full set of stock and flow data (including transactions and other flows) are referred to as financial statistics (MFSM Chapter 8).

### Government finance statistics: coverage and basis of recording
- Coverage of general government:
  - General government sector covers all institutional units at central, state, and local government levels, including administrative units (budgetary and extrabudgetary), social security funds, and nonmarket nonprofit institutions controlled and mainly financed by government.
  - Classification rule: units controlled by government are public sector; public sector units are classified as general government or public corporations based on how their output is financed (nonmarket producers → general government; market producers → public corporations).
- Basis of recording:
  - Historically many governments record GFS on a cash basis (GFSM 1986). Cash recording focuses on liquidity but can inadequately capture timing and economic impact of fiscal actions.
  - GFSM 2001 extends the framework by emphasizing accrual recording—recording an economic event when economic value is created, transformed, exchanged, transferred, or extinguished.

### GFSM 2001 versus 1993 SNA — main specifics and differences
- Areas of close harmonization:
  - GFSM 2001 and the 1993 SNA are harmonized to a very large extent: overall structure, definition of units, classification of sectors and functions, and accounting conventions are very similar.
- Main specifics of GFS relative to 1993 SNA:
  - The GFS focus on areas of prime importance to fiscal analysis; they do not include a production account.
  - GFS have fewer core balances than the 1993 SNA and identify supplementary analytical balances.
  - GFS provide greater breakdown of several transaction categories and specify sources and uses of cash in tables.
  - GFS emphasize the public sector and consolidated statements more than the 1993 SNA.
- Differences that are simplifications or consequences of simplifications (selected):
  - Inputs for own-account capital formation are not distinguished by type in GFS.
  - Value of social benefits in GFS excludes goods and services produced by government units themselves.
  - Some in-kind transactions produced by government are treated as if made in cash followed by a sale (examples listed in source).
  - GFS do not adjust interest flows for FISIM.
  - GFS do not break down gross non-life-insurance premiums into insurance services and net premiums.
  - For employer social insurance schemes that provide retirement benefits, GFS do not record social contributions or pensions as government revenue/expense; for unfunded schemes, receivables/payables are recorded under insurance technical reserves.
  - GFS do not impute reinvested earnings on direct foreign investment.
- Differences that are theoretical improvements:
  - GFS treat defined-benefit unfunded retirement schemes more adequately: GFS record the present value of pension obligations on balance sheets and reflect increases in promised future benefits; GFS record the increase in pension liabilities that results from the passage of time rather than recording property income on reserves as in the 1993 SNA.
- Other classification differences:
  - Some flows recorded as taxes or subsidies in the 1993 SNA are classified differently in GFS (e.g., classified as miscellaneous other expense or as grants) and eliminated in consolidation for general government.

### Implementation note (GFSM 2001)
- Moving from GFSM 1986 to GFSM 2001:
  - Implementation involves three distinct sets of actions that can be initiated simultaneously but completed over different time horizons depending on complexity (source begins description of these implementation actions).

*Source: IMF — excerpt from section 14.F and surrounding text in the provided chapter PDF*

### 1. Changing the presentation of the existing data (near term),

### _pam56 - 1. Changing the presentation of the existing data (near term),

### Implementation stages and sequencing
- Three sequential actions:
  - 1. Changing the presentation of the existing data (near term),
  - 2. Improving data reporting (medium term), and
  - 3. Fully implementing accrual reporting and the associated underlying systems (long term).
- Relative effort and constraints:
  - Adopting the GFSM 2001 presentational format: easiest, involves reclassifying existing fiscal data, requires few resources, can be accomplished relatively quickly.
  - Reporting according to the GFSM 2001 framework: more challenging; constrained by statistical capacity; close collaboration between national authorities and IMF staff and training may be required; could take considerable time.
  - Full implementation of GFSM 2001: requires introducing an accounting system based on accrual principles and a modern public expenditure management framework; ensures classification systems capable of supporting statistical reporting compliant with GFSM 2001; is a major task requiring careful planning and management to avoid disrupting fiscal statistics flow.
- Recommendation:
  - Countries should develop a migration strategy for implementing GFSM 2001 tailored to institutional capacity to manage constraints effectively at every stage.

### Accrual basis and analytical implications
- Accrual accounting records economic events when value is created, transformed, exchanged, transferred, or extinguished—not just when cash flow takes place; allows recording of:
  - noncash transactions (such as barter or in-kind transfers),
  - internal transactions,
  - other economic flows,
  - the accrual of interest on discounted securities,
  - any payment arrears.
- Tax revenue on an accrual basis:
  - GFSM 2001 requires recording as revenue only those taxes that countries can reasonably expect to collect.
  - Over time a close relationship should develop between accrual recording of tax revenue and cash received.

### Analytical framework: balance sheet approach (BSA) and core balances
- GFSM 2001 supports the balance sheet approach (BSA), bringing together stocks and flows in a transparent and consistent framework.
- The framework enables assessment of fiscal sustainability by evaluating how net worth evolves through a series of balance sheets.
- GFSM 2001 framework components (summary tables similar to business financial reports):
  - operating statement,
  - balance sheet,
  - cash statement.
- Four analytic statements in the framework:
  - the statement of government operations,
  - the statement of other economic flows,
  - the balance sheet,
  - the statement of sources and uses of cash (not shown here).
- Four main balances (core fiscal indicators) within the tables:
  - the net operating balance,
  - net lending/borrowing,
  - net worth,
  - the cash surplus/deficit (not shown here).
- Other analytic measures identified:
  - overall primary balance (adds back interest expense to the overall fiscal balance),
  - gross debt position (measures the stock of all debt liabilities as defined in GFSM 2001).

### GFSM 2001 analytic statements (accrual vs cash basis)
- Three of the four analytic statements are based on accrual data for transactions, other economic flows, and balance sheets; the fourth is cash-based:
  1. The statement of government operations (Table 16) summarizes all transactions by general government units and derives net operating balance and net lending/borrowing.
  2. The statement of other economic flows presents changes in net worth arising from economic flows other than transactions (revaluations and changes in volume).
  3. The balance sheet represents stocks of assets, liabilities, and net worth at the beginning and end of the accounting period.
  4. The statement of sources and uses of cash shows purely cash flows associated with revenue and expense transactions and transactions in nonfinancial assets, yielding the cash surplus/deficit; adding cash flow transactions in financial assets (other than cash) and liabilities to the cash surplus/deficit gives net change in the stock of cash.

### Statement of government operations — structure (Table 16)
- Revenue
  - 1.1 Taxes
  - 1.2 Social contributions
  - 1.3 Grants
  - 1.4 Other revenue
- Expense
  - 2.1 Compensation of employees
  - 2.2 Use of goods and services
  - 2.3 Consumption of fixed capital
  - 2.4 Interest
  - 2.5 Subsidies
  - 2.6 Grants
  - 2.7 Social benefits
  - 2.8 Other expense
- Net operating balance (NOB) (1 minus 2)
- Net acquisition of nonfinancial assets
  - 3.1.1 Fixed assets
  - 3.1.2 Inventories
  - 3.1.3 Valuables
  - 3.1.4 Nonproduced assets
- Net lending/borrowing (NOB minus 3.1)
- Transactions in financial assets and liabilities (financing)
  - 3.2 Net acquisition of financial assets
    - 3.2.1 Domestic
    - 3.2.2 Foreign
  - 3.3 Net incurrence of liabilities
    - 3.3.1 Domestic
    - 3.3.2 Foreign

### Worked example summaries and key figures (Tables 17 and 18)
- Table 17. STATEMENT OF GENERAL GOVERNMENT OPERATIONS (numbers presented as in source)
  - Revenue 1,046
    - Taxes 450
    - Social contributions 1 268
    - Grants 2 1
    - Other revenue 3 327
  - Expense 1,084
    - Compensation of employees 4 140
    - Use of goods and services 4 252
    - Consumption of fixed capital 4 30
    - Interest 35
    - Subsidies 44
    - Grants 2 58
    - Social benefits 1 451
    - Other expense 74
  - Net operating balance –38
  - Net acquisition of nonfinancial assets 12
    - Fixed assets (capital formation) 4 5
    - Inventories 0
    - Valuables 3
    - Nonproduced nonfinancial assets 4
  - Net lending/borrowing –50
  - Transactions in financial assets and liabilities (financing) 50
    - Net acquisition of financial assets 120
    - Net incurrence of liabilities 1 170
  - Notes in source:
    - 1 Assuming no nonautonomous government employee pension fund is included in general government.
    - 2 Presented after consolidation and including capital grants.
    - 3 Includes output adjusted for collective consumption.
    - 4 Assuming no own-account capital formation.

- Table 18. INTEGRATED BALANCE SHEET FOR GENERAL GOVERNMENT (selected lines and exact figures)
  - NET. WORTH..
    - Opening Balance Sheet 1,300
    - Transactions –38
    - Holding Gains and Losses 37
    - Other Volume Changes 2
    - Closing Balance Sheet 1,301
  - Nonfinancial. assets.
    - Opening 1,591
    - Transactions 12
    - Holding Gains and Losses 43
    - Other Volume Changes 0
    - Closing 1,646
  - Fixed. assets.
    - Opening 913
    - Transactions 5
    - Holding Gains and Losses 18
    - Other Volume Changes –3
    - Closing 933
  - Inventories.
    - Opening 47
    - Transactions 0
    - Holding Gains and Losses 1
    - Other Volume Changes 0
    - Closing 48
  - Valuables.
    - Opening 41
    - Transactions 3
    - Holding Gains and Losses 1
    - Other Volume Changes 0
    - Closing 45
  - Nonproduced. assets.
    - Opening 590
    - Transactions 4
    - Holding Gains and Losses 23
    - Other Volume Changes 3
    - Closing 620
  - Financial. assets.
    - Opening 396
    - Transactions 120
    - Holding Gains and Losses 1
    - Other Volume Changes 1
    - Closing 518
  - Domestic. and. foreign (financial assets)
    - Opening 316
    - Transactions 120
    - Holding Gains and Losses 0
    - Other Volume Changes 1
    - Closing 437
  - Currency and deposits
    - Opening 150
    - Transactions 7
    - Holding Gains and Losses 0
    - Other Volume Changes 0
    - Closing 157
  - Securities other than shares (financial assets)
    - Opening 0
    - Transactions 26
    - Holding Gains and Losses 0
    - Other Volume Changes 3
    - Closing 29
  - Loans (financial assets)
    - Opening 115
    - Transactions 45
    - Holding Gains and Losses 0
    - Other Volume Changes 0
    - Closing 160
  - Shares and other equity (financial assets)
    - Opening 12
    - Transactions 36
    - Holding Gains and Losses 0
    - Other Volume Changes –2
    - Closing 46
  - Insurance technical reserves (financial assets)
    - Opening 20
    - Transactions 0
    - Holding Gains and Losses 0
    - Other Volume Changes 0
    - Closing 20
  - Other accounts receivable (financial assets)
    - Opening 19
    - Transactions 6
    - Holding Gains and Losses 0
    - Other Volume Changes 0
    - Closing 25
  - Monetary. gold. and. SDRs.
    - Opening 80
    - Transactions 0
    - Holding Gains and Losses 1
    - Other Volume Changes 0
    - Closing 81
  - Liabilities
    - Opening 687
    - Transactions 170
    - Holding Gains and Losses 7
    - Other Volume Changes –1
    - Closing 863
  - Domestic. and. foreign (liabilities)
    - Opening 687
    - Transactions 170
    - Holding Gains and Losses 7
    - Other Volume Changes –1
    - Closing 863
  - Currency and deposits (liabilities)
    - Opening 102
    - Transactions 2
    - Holding Gains and Losses 0
    - Other Volume Changes 0
    - Closing 104
  - Securities other than shares (liabilities)
    - Opening 212
    - Transactions 64
    - Holding Gains and Losses 7
    - Other Volume Changes 0
    - Closing 283
  - Loans (liabilities)
    - Opening 328
    - Transactions 94
    - Holding Gains and Losses 0
    - Other Volume Changes –1
    - Closing 421
  - Shares and other equity (liabilities)
    - Opening 4
    - Transactions 0
    - Holding Gains and Losses 0
    - Other Volume Changes 0
    - Closing 4
  - Insurance technical reserves (liabilities)
    - Opening 19
    - Transactions 0
    - Holding Gains and Losses 0
    - Other Volume Changes 0
    - Closing 19
  - Other accounts payable (liabilities)
    - Opening 22
    - Transactions 10
    - Holding Gains and Losses 0
    - Other Volume Changes 0
    - Closing 32

### Public sector debt concepts and reporting guidance
- GFSM 2001 public sector debt concepts are broadly consistent with External Debt Statistics: Guide for Compilers and Users (IMF, 2003) and the 1993 SNA.
- Definition and valuation:
  - Debt is a subset of liabilities; public sector debt “consists of all liabilities that require payments of interest and/or principal by the debtor to the creditor at a date or dates in the future.”
  - All liabilities of public sector units are debt instruments except for shares and other equity, and financial derivatives.
  - GFSM 2001 recommends valuing debt instruments at current market values, except loans, which are normally valued at nominal prices.
  - Contingent claims on the public sector are not recognized as liabilities in balance sheets but may be reported as memorandum items.
- Gross public debt: total debt instruments issued by public sector units.
- Net public debt: public sector’s net position on debt instruments (assets minus liabilities).
- In compiling public sector balance sheets, national compilers should consolidate counterpart claims and liabilities among public sector units (intrapublic sector holdings) and exclude them from gross and/or net public sector debt.
- For vulnerability and sustainability analyses, accurate and timely data on composition of public debt are required: financial instruments, currency composition, residency, maturity structure.
- GFSM 2001 prescribes breakdown by residency and instrument; compilers can supplement with currency composition and maturity.
- A draft public sector debt template and reporting guidelines are available on the IMF’s website (as noted in the source).

### Major GFSM 2001 classifications
- Economic classification: type of revenue, expense, nonfinancial asset, and financial instrument (e.g., taxes, social contributions, grants, other revenue; compensation of employees; use of goods and services; consumption of fixed capital; interest; subsidies; social benefits; other expense; nonfinancial assets by type; financial instruments).
- Functional classification: applies COFOG (Classification of the Functions of Government) to both expenses and net acquisition of nonfinancial assets; COFOG classifies functions at three levels and identifies 10 divisions at the highest level (COFOG details continue beyond the excerpt).

*Italic: Source: _pam56 - 1. Changing the presentation of the existing data (near term),*

### 1. General public services

### 1. General public services

### Classification of functions and activities
- Ten main functional divisions are identified:
  - 1. General public services
  - 2. Defense
  - 3. Public order and safety
  - 4. Economic affairs
  - 5. Environmental protection
  - 6. Housing and community amenities
  - 7. Health
  - 8. Recreation, culture, and religion
  - 9. Education
  - 10. Social protection
- Within each division, several groups are identified.
- Within each group, one or more classes of activities are identified that achieve the broad objectives of the group.

### Counterparty classification (financial assets, liabilities, and transactions)
- The GFSM 2001 presents:
  - Stocks of financial assets and liabilities and transactions in financial instruments by counterparty sector.
  - Classification of stock positions and transactions in financial assets and liabilities by types of financial instruments (economic classification).
- Resident counterpart sectors:
  - central bank
  - other depository corporations
  - financial corporations not elsewhere classified
  - nonfinancial corporations
  - households
  - nonprofit institutions serving households (NPISH)
- Nonresident counterpart sectors:
  - general government
  - international organizations
  - financial corporations
  - other nonresidents

### Linkages among macroeconomic statistical systems
- The four main macroeconomic statistical systems were developed with harmonization where possible to promote understanding and facilitate reconciliation.
- Harmonization supports integrating sectoral flows and stocks into macroeconomic analysis under the balance sheet approach (BSA) and enhances data compilation efficiency.

Major harmonizations include:
- Residence
  - All systems distinguish the domestic economy from the rest of the world on the same basis—residence of institutional units—assigning to the rest of the world those institutional units whose main center of economic interest is outside the geographic territory of the country.
- Domestic economy and institutional sectors
  - All systems define the domestic economy as all resident institutional units, adopting a common breakdown of the economy into sectors and subsectors.
- Stocks and flows
  - All systems use the same distinction between stocks (measured at a point in time) and flows (measured with regard to a period of time).
  - All systems use the same definitions for transactions and other economic flows.
- Accounting rules
  - All systems use the accrual basis for identifying and timing transactions.
  - All systems use market prices as the valuation principle.
- Boundary conditions
  - For all systems, the production and asset boundaries are the same.
- Integrated accounts
  - In all systems, an integrated set of accounts explains all changes between an opening and a closing balance sheet by transactions, holding gains/losses, and other changes in the volume of assets, fostering reconciliation of stocks and flows within balance sheets.
  - The systems reflect harmonization in similar accounting frameworks, although substantial differences exist in classification to meet specific needs.

### Examples of system differences and reconciliation
- 1993 SNA:
  - Focuses on measuring production and income flows in the current accounts—closely matched in the balance of payments.
  - The 1993 SNA rest-of-the-world account has identical coverage to the balance of payments but is presented from the point of view of the rest of the world, whereas the balance of payments presents the same data from the point of view of the reporting economy.
  - The 1993 SNA and balance of payments are the most completely harmonized of the systems.
- Government Finance Statistics (GFS) system:
  - Uses quite different categories to meet the needs of fiscal analysis.
  - Does not include a production account and does not show the value of government final consumption expenditure.
- Monetary and financial statistics:
  - Do not directly measure current account transactions.
  - In the financial accounts, classification differences exist across systems but can be directly reconciled at the level of financial assets.
- The 1993 SNA current accounts and the balance of payments current account include the same components—goods and services, income, and current transfers—permitting derivation of links between the systems.

### Specific institutional note
- The Government Finance Statistics Manual 2001 (GFSM 2001; IMF, 2001) has one principal difference from the other systems: it recognizes that the government has an actual liability (and government employees have an asset) for government employee unfunded pensions.

*Source: _pam56 - 1. General public services*

### 20.	 c

### 20. c

### Comparison of macroeconomic statistical systems: structure and core linkages
- Four principal statistical frameworks: System of National Accounts (1993 SNA), Balance of Payments (BPM), Government Finance Statistics (GFSM 2001), Monetary and Financial Statistics (MFSM).
- Core accounting identity for total supply and use of goods and services:
  - P + M = IC + C + I + G + X.
- GDP expenditure presentation:
  - GDP = C + I + G + (X – M).
- Gross national disposable income and current account:
  - GDY = C + I + G + (X – M) + NY + NCT.
  - CAB = X – M + NY + NCT.
  - GDY = C + I + G + CAB.
- Saving and current account relationships:
  - S = GDY – C – G.
  - S = I + CAB.
  - S – I = CAB.
- Net lending/borrowing (NL/B) definitions linking national accounts and balance of payments:
  - NL/B = S – I + NKT + NPNFA.
  - NL/B = CAB + NKT + NPNFA.
- Government link between GFS and national accounts:
  - NL/Bg = NOB + NANFA.
  - NOB = REV – EXP.
  - NL/Bg = NAFAL + NADAL.

### Worked numerical example (Table 21) — consolidated total economy aggregates and links to the balance of payments
- National Accounts (1993 SNA) — Goods and services (consolidated):
  - Gross.domestic.product.(GDP) 1,854
  - Government final consumption expenditure (G) 368
  - Nongovernment final consumption expenditure (C) 1,031
  - Gross capital formation (I) 414
  - Exports of goods and services (X) 540
  - Imports of goods and services (M) 499
- Balance of Payments — Current account:
  - Goods and services: Credit 540; Debit –499
- Current and capital accounts (consolidated):
  - Net primary income received from abroad (NY): Credit 29; Debit 40
  - Net current transfers received from abroad (NCT): –29 (as shown)
  - Balance on current account (CAB) = 10 (as summarized in the table)
  - National.disposable.income,.gross.(GDY) 1,855
  - Final consumption expenditure (C + G) 1,399
  - Saving,.gross 455
- Capital account:
  - Net capital transfers received from abroad (NKT) –3 (Credit 1; Debit –4; Total –3)
  - Net acquisition of nonproduced, nonfinancial assets (NPNFA) 0
  - Gross capital formation (I) 414
  - Net. lending. (+)/Net. borrowing. (–).(NL/B) 38
- Financial account:
  - Net acquisition of financial assets less net incurrence of liabilities = Net lending (+) Net borrowing (–) 38
  - Assets less liabilities = –50 and 88 in the worked example leading to Net lending 38
- Note: In consolidated accounts, income and transfer flows among residents are not shown.

### Instrument and sectoral linkages across frameworks
- 1993 SNA and balance of payments are highly comparable in financial asset/liability classification; BPM uses primary functional categories (direct investment, portfolio investment, other investment, financial derivatives, reserve assets) but aligns with SNA at the second level.
- Monetary and financial statistics focus on financial assets/liabilities corresponding to the 1993 SNA financial account; depository corporations surveys emphasize broad money (M), net foreign assets (NFA), and net domestic assets (NDA):
  - M = NFA + DC – OIN.
  - M = NFA + NCG + CORS – OIN.
  - Period changes: ∆M = ∆NFA + ∆NCG + ∆CORS – ∆OIN.
- Link between monetary/financial statistics and GFS:
  - NADAL = ∆NCG + ∆NCORS (net credit to government from domestic sectors).
- Balance of payments and monetary/financial statistics share identical residence criteria, facilitating identification of NFA by institutional subsectors (monetary authorities, general government, banks, other sectors).

### Balance sheet approach (BSA) and analytical use
- High degree of harmonization of the four frameworks supports the balance sheet approach to macroeconomic analysis.
- Analysts can construct an intersectoral asset and liability matrix by combining balance sheets of:
  - Central bank, depository corporations, other financial corporations (MFSM),
  - Central and general government (GFSM 2001),
  - International investment position (BPM).
- Table 22 (Intersectoral Asset and Liability Position Matrix) organizes holders of liabilities (creditors) versus issuers of liabilities (debtors) across sectors: Central Bank; General Government; Financial Corporations; Nonfinancial Corporations and Other Resident Sectors; Nonresidents.
- Important disaggregation dimensions for vulnerability assessment:
  - Type of instrument,
  - Maturity (short-term, long-term),
  - Currency (domestic, foreign),
  - Resident/nonresident holder breakdown.
- Complementary data on nonfinancial assets (for example, residential and commercial property holdings) are required to assess net worth and the ability of private subsectors to meet financial obligations.

### Classification differences and reconciliation issues
- Differences to note:
  - FISIM treatment: 1993 SNA allocates a portion of interest to imports and exports of services; balance of payments treats all interest as income (no impact on CAB).
  - GFSM 2001 includes liabilities for government employees’ pensions, causing differences from SNA liabilities.
  - GFS net operating balance (NOB) differs from 1993 SNA net saving of general government mainly by net capital transfers received by government.
  - Some BPM financial account entries include asset items and some include liability items that cross-classify with SNA definitions.
- Practical implication: Detailed classifications in each system permit close reconciliation where institutional and instrument breakdowns are available.

*Italic: Source — Excerpt from the chapter on linkages among macroeconomic statistical systems in the provided IMF PDF.*

### bibliography

### _pam56 - bibliography

### i.   when is  fiscal adjustment needed?

- Mathisen,  Johan,  and Anthony  J.  Pellechio,  2006,  “Using  the  Balance  Sheet Approach  in  Surveillance:  Framework,  Data  Sources,  and  Data  Availability,” IMF Working Paper 06/100 (Washington: International Monetary Fund).
- Organization  for  Economic  Cooperation  and  Development,  1996, OECD Benchmark Definition of Foreign Direct Investment, 3rd ed. (Paris).
- Organization  for  Economic  Cooperation  and  Development,  2001, Measuring  Productivity:  OECD  Manual:  Measurement  of  Aggregate  and Industry-Level Productivity Growth (Paris).
- Organization  for  Economic  Cooperation  and  Development,  2004, Environmental Data Compendium 2004 (Paris).
- Organization  for  Economic  Cooperation  and  Development,  International  Monetary  Fund,  International  Labor  Organization,  and  the Interstate Statistical Committee of the Commonwealth of Independent States, 2002, Measuring the Non-Observed Economy: A Handbook (Paris). Available via the Internet: http://www.oecd.org/dataoecd/9/20/1963116.pdf.
- Patterson, Neil, Marie Montanjees, John Motala, and Colleen Cardillo, 2004, Foreign  Direct  Investment:  Trends,  Data  Availability,  Concepts,  and  Recording Practices (Washington: International Monetary Fund).
- United  Nations,  1994, Fundamental  Principles  of  Official  Statistics  (New York). Available via the Internet: http://unstats.un.org/unsd/goodprac/bpabout.asp.
- United  Nations,  2000, Household  Accounting  Experience  in  Concepts  and  Compilation: Vol. 1, Household Sector Accounts (New York).
- United  Nations,  European  Commission,  International  Monetary  Fund,  Organization for Economic Cooperation and Development,  United  Nations  Conference  on Trade  and  Development,  and  World  Trade  Organization,  2002, Manual  on Statistics  of  International Trade  in  Services  (Geneva,  Brussels/Luxembourg, New York, Paris, Washington).
- United Nations, European Commission, International Monetary Fund, Organization for Economic Cooperation and Development, and World Bank, 2003, Handbook  of  National Accounting:  Integrated  Environmental  and  Economic  Accounting 2003 (New York). Available via the Internet: http://unstats.un.org/unsd/envAccounting/seea2003.pdf.
- United Nations Food and Agriculture Organization, 2004, Integrated Environmental and Economic Accounting for Fisheries, Handbook of National Accounting, Studies in Methods, Series F, No. 97 (New York). Available via the Internet: http://unstats.un.org/unsd/envAccounting/Fish_final_whitecover.pdf.

*The System of Macroeconomic Accounts Statistics: An Overview, Pamphlet Series No. 56, Statistics Department, INTERNATIONAL MONETARY FUND, 2007*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/pam/pam56/_pam56.pdf_