{
  "title": "Disappearing Deficits",
  "publication": "IMF Blog, March 28, 2012",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2012/03/28/disappearing-deficits",
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  "summary": "Author: Tim Irwin",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Author: Tim Irwin\n- Date: March 28, 2012\n- Context: At the IMF, governments are sometimes found to employ accounting devices that make the reported deficit smaller without actually reducing spending or raising taxes."
    },
    {
      "heading": "How the devices work",
      "content": "- Governments may take over companies’ pension schemes; the government’s obligation to make future pension payments has a real cost but \"doesn’t count as a liability in the accounting\" in some cases.\n- When the government receives a pension scheme’s assets from a company, it can treat the receipt of those assets as revenue that reduces its deficit.\n- Public-private partnerships (PPPs): a private company builds and maintains an asset (for example, a road or a hospital). In return, the government agrees to pay the company for its costs over \"20 or 30 years.\"\n- Effect: The government’s deficit is lower initially, but this often comes \"at the expense of bigger future deficits.\""
    },
    {
      "heading": "Consequences and diagnosis",
      "content": "- The pain of spending cuts and tax increases is postponed and potentially magnified rather than avoided.\n- Accounting devices make the deficit a less accurate fiscal indicator, complicating efforts by citizens, journalists, think tanks, investors, rating agencies, and governments to understand public finances.\n- Different indicators can reveal problems suppressed in one measure; an example given is the United States where a mainly cash-based measure and the \"net operating surplus\" diverge because pension obligations show up in the net operating surplus but not in the budget surplus."
    },
    {
      "heading": "Improving transparency — recommended actions",
      "content": "- Prepare audited financial statements (income statement, cash-flow statement, and balance sheet) according to international accounting standards.\n- Give statisticians the resources and independence to be both expert and impartial, and the authority to revise standards in light of emerging problems.\n- Monitor a variety of different indicators of the state of public finances so that problems hidden in one indicator appear in others.\n- Accept that addressing accounting devices \"cannot be solved with the stroke of a pen\"; obtaining an accurate picture requires hard work, careful checks, and willingness to look at several different measures of the deficit.\n\nSource: Disappearing Deficits — Tim Irwin, March 28, 2012.\n\n---\n\n Content in this bundle\n\n- Staff Discussion Note\n  - Staff Discussion Note (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Staff Discussion Note (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- https://www.imf.org/wp-content/uploads/2012/03/gov-deficit.jpg\n\nSource: https://www.imf.org/en/blogs/articles/2012/03/28/disappearing-deficits"
    }
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    "Authors: Tim Irwin",
    "Published: March 28, 2012",
    "Author: Tim Irwin",
    "Date: March 28, 2012",
    "Context: At the IMF, governments are sometimes found to employ accounting devices that make the reported deficit smaller without actually reducing spending or raising taxes.",
    "Governments may take over companies’ pension schemes; the government’s obligation to make future pension payments has a real cost but \"doesn’t count as a liability in the accounting\" in some cases.",
    "When the government receives a pension scheme’s assets from a company, it can treat the receipt of those assets as revenue that reduces its deficit.",
    "Public-private partnerships (PPPs): a private company builds and maintains an asset (for example, a road or a hospital). In return, the government agrees to pay the company for its costs over \"20 or 30 years.\"",
    "Effect: The government’s deficit is lower initially, but this often comes \"at the expense of bigger future deficits.\"",
    "The pain of spending cuts and tax increases is postponed and potentially magnified rather than avoided.",
    "Accounting devices make the deficit a less accurate fiscal indicator, complicating efforts by citizens, journalists, think tanks, investors, rating agencies, and governments to understand public finances.",
    "Different indicators can reveal problems suppressed in one measure; an example given is the United States where a mainly cash-based measure and the \"net operating surplus\" diverge because pension obligations show up in the net operating surplus but not in the budget surplus.",
    "Prepare audited financial statements (income statement, cash-flow statement, and balance sheet) according to international accounting standards.",
    "Give statisticians the resources and independence to be both expert and impartial, and the authority to revise standards in light of emerging problems.",
    "Monitor a variety of different indicators of the state of public finances so that problems hidden in one indicator appear in others.",
    "Accept that addressing accounting devices \"cannot be solved with the stroke of a pen\"; obtaining an accurate picture requires hard work, careful checks, and willingness to look at several different measures of the deficit.",
    "**Staff Discussion Note**",
    "[https://www.imf.org/wp-content/uploads/2012/03/gov-deficit.jpg](https://www.imf.org/wp-content/uploads/2012/03/gov-deficit.jpg)"
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