Chapter

Appendix 6. Linkages with Other Macroeconomic Datasets

Author(s):
Eduardo Valdivia-Velarde, and Tamara Razin
Published Date:
December 2014
Share
  • ShareShare
Show Summary Details

Linkages of the International Accounts with the National Accounts

Introduction

A6.1 Information from the international accounts is essential to a full implementation of the System of National Accounts 2008 (2008 SNA). The addition of the balance on primary income converts GDP, a measure of the income arising in an economy from production by units resident in that economy, to gross national income (GNI), a measure of the income arising from production anywhere in the world attributable to the residents of the particular economy. This is further converted to gross disposable income by the balance on secondary income. The difference between domestic saving and capital formation (investment) equal to the current account balance is reflected in the capital account balance and net lending or borrowing in the international accounts. Further, the financial account information and the international investment position (IIP) make it possible to see to what extent an economy has claims on nonresidents or liabilities to nonresidents.

A6.2 This integration of the two systems is made possible because the underlying accounting systems are identical, although different terminology and forms of presentation are sometimes used. Appendix 7 of the BPM6 provides a summary account of the complete concordance between the 2008 SNA and the BPM6 in respect to residence, valuation, time of recording, conversion procedures, and coverage of flows and positions.

A6.3 In addition to measuring activity within the domestic economy, the SNA records the exchanges between the domestic economy and the rest of the world as if the nonresident units engaged in transactions with units resident in the domestic economy formed a distinct institutional sector of the economy. The exchanges (flows) of all resident units with nonresident units (and claims of one set of units on the other) are recorded in the rest of the world sector of the 2008 SNA from the perspective of the rest of the world. Thus, for example, imports are a resource to the domestic economy and exports are used by the rest of the world, reversing the BPM6 convention that imports are a debit and exports a credit.

A6.4Chapter 2 of the BPM6 includes a separate annex (Annex 2.2) illustrating with a numeric example (1) an overview of the integrated economic accounts as presented in the 2008 SNA, and (2) the links between the financial instruments and the functional categories used in the BPM6, including the conversion of data from instrument to functional category. Furthermore, standard components (BPM6, Appendix 9) include the 2008 SNA codes, where appropriate, which facilitates comparison between the international accounts and the 2008 SNA.

A6.5 This appendix complements the text in the BPM6 with a presentation in parallel of the recording of various flows and positions in the 2008 SNA vis-à-vis the BPM6 along the lines of the accounting structure of the two systems. The intention here is to illustrate the correspondence of indicators and the consistency between the two datasets. It also serves the need for validation of the two datasets by their respective compilers, in particular when different source data are used for some of the indicators. It is worth noting the practice common in many economies whereby the balance of payments and IIP data are compiled first and subsequently incorporated as the relevant components of the 2008 SNA rest of the world accounts.

Classification

A6.6 The classification systems of the 2008 SNA and BPM6 mainly employ consistent coverage and terminology. There is, however, a major presentational difference regarding the grouping of the financial assets and liabilities by functional categories—the primary level of classification in the BPM6 with impacts on the financial account, the IIP, and the categories of investment income—as compared with the categories used by the 2008 SNA in the same accounts. These differences are illustrated in the presentation of the sequence of accounts at the end of this appendix.

A6.7 Other differences between the BPM6 and the 2008 SNA concern the breakdown of the institutional sectors and their groupings. While consistent in coverage, the aggregation of institutional sectors differs according to the importance given to sectors and subsectors in the two datasets. Table A6.1 illustrates the correspondence between the classification of institutional sectors in the two systems.

Table A6.1Conversion of the Sector Breakdown: System of National Accounts (SNA)—Balance of Payments
Domestic sectors as they appear in the 2008 SNA and BPM6
2008 SNABPM6
Nonfinancial corporationsCentral bank
Financial corporationsDeposit-taking corporations except the central bank
Central bankGeneral government
Deposit-taking corporations except the central bankOther sectors
Other financial corporations
Money market fundsMoney market funds
Non-MMF investment fundsNon-MMF investment funds
Other financial intermediaries except insurance corporations and pension fundsOther financial intermediaries except insurance corporations and pension funds
Financial auxiliariesFinancial auxiliaries
Captive financial institutions and money lendersCaptive financial institutions and money lenders
Insurance corporationsInsurance corporations
Pension fundsPension funds
General governmentNonfinancial corporations, households, and NPISHs
Nonfinancial corporations
HouseholdsHouseholds
Nonprofit institutions serving householdsNonprofit institutions serving households

Comparison/Correspondence between the International Accounts and the SNA

A6.8 As in the 2008 SNA, the international accounts (BPM6) cover current and accumulation accounts (flows), as well as positions in the balance sheet (IIP). In the international accounts, transactions (flows) are gathered together under the balance of payments. In the balance of payments the current accounts comprise the goods and services account, the primary income account, and the secondary income account while the accumulation accounts include the capital account and the financial account. In addition, flows that are not transactions but affect the position of assets and liabilities are incorporated in a further account, the other changes in financial assets and liabilities. The IIP covers that part of the national balance sheet that represents the cross border element—that is, the position of financial claims (assets) and liabilities where one party is nonresident, and gold bullion held as reserves.

A6.9 The presentation ahead highlights the similarities and differences in the accounting presentation of the 2008 SNA and BPM6. This presentation is account by account and emphasizes the balancing items, as applicable. In the BPM6, the entries in the current accounts are described as credits and debits. In the 2008 SNA, they are described as resources and uses, but, as noted in paragraph A6.3, a credit for the national economy in the BPM6 is treated as a use by the rest of the world in the 2008 SNA and a BPM6 debit as a resource in the 2008 SNA. In the BPM6, there is a balancing item for each account showing the excess of credits over debits (or a net balance of the financial account). In addition, the BPM6 shows the cumulative value of balancing items up to and including the account under consideration. This is done for comparison with the 2008 SNA, where only the cumulative balance is shown because the 2008 SNA records the balancing item on the use side of the previous account as the first entry on the resource side of the subsequent account.

A6.10 To aid the exposition, Table A6.2 at the end of this appendix shows the main entries for the domestic economy as well as those for the rest of the world from the 2008 SNA perspective, as well as the main entries for the international accounts. The numeric values are those given in the annex to Chapter 2 of the BPM6.

Table A6.2A Comparative Overview of SNA—International Accounts
Current accountsSNABalance of Payments
Domestic economyRest of the world1Goods and services account2
UsesResourcesUsesResourcesUsesResourcesCreditsDebits
Imports of goods and services499499499Goods and services3
Goods392392392Goods
Services107107107Services
Exports of goods and services540540540Goods and services
Goods462462462Goods
Services787878Services
External balance on goods and services−4141Balance on goods and services, net exports
Production accountThis account does not exist in balance of payments
Output36043604
Intermediate consumption18831883
Taxes less subsidies on products133133
Value added/Net domestic product1632
Generation of income accountThis account does not exist in balance of payments
Value added/Net domestic product1632
Compensation of employees1150
Taxes on production and imports235
Subsidies−44
Surplus and mixed income291
Allocation of primary income accountPrimary income account
Operating surplus and mixed income291
Compensation of employees11506262Compensation of employees
Taxes on production and imports23500Taxes on production and imports
Subsidies−4400Subsidies
Property income39139744384438Investment incomeDirect investmentPortfolio investmentFinancial derivatives and employee stock optionsOther investmentReserve assets
Interest21720913211321Interest****
Distributed income of corporations626217171717Distributed income of corporations***
Reinvested earnings on FDI014140140Reinvested earnings on FDI**
Other investment income47470000Other investment income***
Rent656500100Rent
10Balance of primary income
Balance of primary income, net164251Balance on goods, services and primary income
Secondary distribution of income accountSecondary income account
Balance of primary income, net1642
Current taxes on income, wealth etc.2122131010Current taxes on income, wealth etc.
Net social contributions3333330000Net social contributions
Social benefits other than social benefits in kind3843840000Social benefits other than social benefits in kind
Other current transfers28324416551655Other current transfers
Net nonlife insurance premiums5647211211Net nonlife insurance premiums
Net nonlife insurance claims4857123123Net nonlife insurance claims
Current transfers within general government9696
Current international cooperation311131131Current international cooperation
Miscellaneous current transfers5243110110Miscellaneous current transfers
Current transfers between resident and nonresident households711717Current transfers between resident and non-resident households
1755Total current transfers
−38Balance on secondary income
Disposable income1604
Use of income accountThis account does not exist in balance of payments
Disposable income1604(but note the adjustment item and also current account balance shown below other items in the secondary income account)
Household consumption expenditure10151015
General government consumption expenditure352352
NPISH consumption expenditure3232
Adjustment for the change in pension entitlements
Adjustment for the change in pension entitlements11110000
Saving205
Current external balance−1313Current account balance
Note: SNA = system of national accounts; IIP = international investment position. An entry of * indicates an entry is possible but in the example given the value is either unknown or zero. Where two values are given separated by /, the first figure relates to assets, the second to liabilities.
Accumulation accountsSNABalance of Payments
Domestic economyRest of the worldGoods and services account
Changes in assetsChanges in liabilities and net worthChanges in assetsChanges in liabilities and net worthChanges in assetsChanges in liabilities and net worthCreditsDebits
Capital account
Saving20513Current account balance
Gross capital formation414414
Consumption of fixed capital−222
Acquisitions less disposals of non-produced non-financial assets
Acquisitions less disposals of nonproduced non-financial assets00
Capital transfers receivable62414Capital transfers
Capital transfers payable−65−1
−3Capital account balance
Net lending (+)lnet borrowing (-)10−1010Net lending (+) l net borrowing (-)
Net acquisition of financial assetsNet incurrence of liabilities
Financial account
Net lending (+)/net borrowing (-)1010Net lending (+) / net borrowing (-)Direct investmentPortfolio investmentFinancial derivativesOther investmentReserve assets
Monetary gold and SDRs4−111Monetary gold and SDRs1/1*
Currency and deposits8910211−2−211Currency and deposits*−5/113/
Debt securities8674921219Debt securities2/414/55/
Loans7847435354Loans*35/4*
Equity and investment fund shares10710512141412Equity and investment fund shares10/34/9**
Insurance, pension and standarized guarantee schemes
Insurance, pension and standarized guarantee schemes48480000**
Finanancial derivatives and employee stock options
Finanancial derivatives and employee stock options141103303/0*
Other accounts payable/receivable153910−14−1410Other accounts payable/receivable−4/4−10/6
57Net acquisition of financial assets8183208
47Net incurrence of liabilities1114022
Note: SNA = system of national accounts; IIP = international investment position. An entry of * indicates an entry is possible but in the example given the value is either unknown or zero. Where two values are given separated by /, the first figure relates to assets, the second to liabilities.
Accumulation accountsSNAOther changes in financial assets and liabilities account
Domestic economyRest of the worldGoods and services account
Changes in assetsChanges in liabilities and net worthChanges in assetsChanges in liabilities and net worthChanges in assetsChanges in liabilities and net worthNet changes in financial assetsNet changes in liabilities
Other changes in the volume of assets
Non-financial assets10
Financial assets and liabilities33Financial assets and liabilitiesDirect investmentPortfolio investmentFinancial derivativesOther investmentReserve assets
Monetary gold and SDRs4Monetary gold and SDRs4*
Currency and depositsCurrency and deposits***
Debt securitiesDebt securities***
LoansLoans***
Equity and investment fund shares22Equity and investment fund shares****
Insurance, pension and standarized guarantee schemes
Insurance, pension and standarized guarantee schemes11**
Financial derivatives and employee stock options
Finanancial derivatives and employee stock options**
Other accounts payable/receivableOther accounts payable/receivable**
* value possible but unknown or negligible
Revaluation account
Non-financial assets280
Financial assets and liabilities8476715157Financial assets and liabilitiesDirect investmentPortfolio investmentFinancial derivativesOther investmentReserve assets
Monetary gold and SDRs4121212Monetary gold and SDRs412/
Currency and deposits0Currency and deposits***
Debt securities40424224Debt securities1/11/3*
Loans0Loans***
Equity and investment fund shares32343113Equity and investment fund shares0/11/2**
Insurance, pension and standarized guarantee schemes
Insurance, pension and standarized guarantee schemes0**
Financial Derivattives and employee stock options
Finanancial derivatives and employee stock options0
Other accounts payable/receivable0Other accounts payable/receivable**
Note: SNA = system of national accounts; IIP = international investment position. An entry of * indicates an entry is possible but in the example given the value is either unknown or zero. Where two values are given separated by /, the first figure relates to assets, the second to liabilities.
Balance sheetsSNAIIP
Domestic economyRest of the worldGoods and services account
Opening balance sheetAssetsLiabilitiesAssetsLiabilitiesAssetsLiabilities
Non-financial assets4621
Financial assets and liabilities8231776280512741274805Financial assets and liabilitiesDirect investmentPortfolio investmentFinancial derivativesOther investmentReserve assets
Monetary gold and SDRs477000770770Monetary gold and SDRs4770/
Currency and deposits14821471105116116105Currency and deposits0/080/10536/
Debt securities126313111257777125Debt securities10/1540/11027/
Loans1384143770171770Loans*17/70*
Equity and investment fund shares26142756345203203345Equity and investment fund shares53/155150/190**
Insurance, pension and standarized guarantee schemes47047126252526Insurance, pension and standarized guarantee schemes*25/26
Finanancial derivatives and employee
Finanancial derivatives and employee stock options21140770stock options7/0*
Other accounts payable/receivable2273021345959134Other accounts payable/receivable15/4044/94
Total changes in assets/liabilities

Non-financial assets
482
Financial assets and liabilities52350554727254Financial assets and liabilitiesDirect investmentPortfolio investmentFinancial derivativesOther investmentReserve assets
Monetary gold and SDRs4110112121Monetary gold and SDRs4/112/
Currency and deposits8910211−2−211Currency and deposits*−5/113/
Debt securities12611613232313Debt securities3/515/85/
Loans7847435354Loans*35/4*
Equity and investment fund shares14114115151515Equity and investment fund shares10/45/11**
Insurance, pension and standarized guarantee schemes
Insurance, pension and standarized guarantee schemes49490000**
Finanancial derivatives and employee stock options
Finanancial derivatives and employee stock options141103303/0*
Other accounts payable/receivable153910−14−1410Other accounts payable/receivable−4/4−10/6
Closing balance sheet
Non-financial assets5103
Financial assets and liabilities8754826785913461346859Financial assets and liabilitiesDirect investmentPortfolio investmentFinancial derivativesOther investmentReserve assets
Monetary gold and SDRs4781017827821Monetary gold and SDRs4/1782/
Currency and deposits15711573116114114116Currency and deposits*75/11639/
Debt securities13891427139100100138Debt securities13/2055/11832/
Loans1462148474525274Loans*52/74*
Equity and investment fund shares27552897360218218360Equity and investment fund shares63/159155/201**
Insurance, pension and standarized guarantee schemes
Insurance, pension and standarized guarantee schemes519520262525*25/26
Finanancial derivatives and employee stock options
Finanancial derivatives and employee stock options352501010010/0*
Other accounts payable/receivable2423411444545144Other accounts payable/receivable11/4434/100
Note: SNA = system of national accounts; IIP = international investment position. An entry of * indicates an entry is possible but in the example given the value is either unknown or zero. Where two values are given separated by /, the first figure relates to assets, the second to liabilities.

Current Accounts

A6.11 As well as accounts showing transactions between different units in the economy, or between a resident and a nonresident unit, the 2008 SNA also contains an account called the goods and services account. It shows how all goods and services made available in the economy through domestic production or imports are used domestically or are exported. It contains all items that do not have counterpart items elsewhere in the sequence of accounts in the SNA and is the source of deriving GDP.

A6.12 There is no equivalent in the international accounts for the SNA’s production account that shows how goods and services are made available to the domestic economy via production. Thus, the recording of imports and exports in the balance of payments is taken as parallel to part of the goods and services account.

A6.13 The balance of payments emphasizes the distinction between goods and services. Goods are presented at an aggregated level while services are covered in detail. The classification of services in the 2008 SNA is strictly consistent with the Central Product Classification (CPC); in the BPM6, it differs from the CPC for a few products—that is, travel, construction, and government goods and services n.i.e., which are transactor-based (relating to the provider/acquirer rather than the product itself). These distinctions reflect policy interests as well as source data issues (see Chapter 10, BPM6). In summary tables of the SNA, imports and exports are usually shown in total or broken down into goods and services separately only.

A6.14 The external balance on goods and services for the rest of the world, which is part of the goods and services account, is mirrored by the balance on goods and services in the international accounts.

A6.15 There are no matching accounts in the international accounts to the SNA’s production account, showing the value of goods and services produced by resident units, or generation of income account, which shows how value added arising from production accrues to government and to the other resident units participating directly in the production process.

A6.16 The primary income account entries in the balance of payments are largely concerned with compensation of employees and property income, exactly as in the allocation of primary income account in the 2008 SNA. Also recorded in the primary income account are the payments of taxes on production payable by a resident to another government, as well as any subsidy receivable by a resident from another government.

A6.17 Property income in the 2008 SNA is equal to investment income in the balance of payments plus rent. Rent rarely arises in cross border situations because all land is deemed to be owned by residents, if necessary by creating a notional resident unit. An example where rent may be recorded in the international accounts may be short-term fishing rights in territorial waters provided to foreign fishing fleets. Also, production sharing agreements in exploration of natural resources may include rent transactions (see Chapter 10, Box 10.1). Investment income in relation to cross border transactions reflects the return to the financial capital invested abroad and vice versa. Interest flows are measured on exactly the same basis in both the BPM6 and the 2008 SNA. With effect from the BPM6, interest is adjusted for the implicit service charge (known as financial intermediation services indirectly measured (FISIM)) levied by deposit-taking corporations and treated by them as part of interest. FISIM is treated as an import/export of financial services.

A6.18 In order to make the reconciliation between investment income in the international accounts and in the 2008 SNA, subcomponents below the level of the functional categories of investment income need to be used. For example, the figures for interest payments to and from the rest of the world as shown in the 2008 SNA are the sum of interest payments under each functional category heading, as indicated by the supplementary table to the right of these headings.

A6.19 The balance on primary income, the balancing item of the primary income account in the balance of payments, shows how GDP is converted to the GNI by payments of primary income to and from abroad. The cumulative balancing item for this sequence of the international accounts is the balance on goods, services, and primary income.

A6.20 The entries in the secondary income account of the balance of payments are mainly current transfers. These entries correspond exactly to those in the secondary distribution of income account in the SNA. Several of these are particularly important in the balance of payments, in particular current international cooperation and personal transfers (remittances) sent by households in one economy to households in another economy (see BPM6, Chapter12 and Appendix 5). Insurance flows related to reinsurance can be of significant importance internationally. The balance of payments records these flows in the same way as the SNA, both as regards the separation of a financial service charge and the treatment of direct insurance and reinsurance flows separately and not on a consolidated basis (more details in Chapter 10, BPM6). The balance of payments also includes in the secondary income account an item known as the adjustment for the change in pension entitlements. This appears in the use of income account in the SNA, but this account does not exist in the balance of payments.

A6.21 The balancing item recorded at this point for the international accounts is the balance on secondary income. The cumulative balance is the current account balance. The SNA records disposable income as the cumulative balancing item on the secondary distribution account. There is then another SNA account, the use of income account, for which there is no corresponding account in the international accounts. The cumulative balancing item on the use of income account is saving for the domestic economy and the current external balance for the rest of the world. This item corresponds exactly to the current account balance from the international accounts.

The Capital Account

A6.22 The elements of the capital account subject to international transactions contain fewer items than those covered in the SNA. There are no transactions recording capital formation of produced assets because the international accounts are not concerned with the final use of products imported/ exported. There are entries to cover acquisitions and disposals of nonproduced nonfinancial assets and capital transfers, although these are infrequent and for many economies may not appear. The account also records capital transfers receivable by and payable by the domestic economy, leading to a capital account balance.

The Financial Account

A6.23 Of major importance for the international accounts is the financial account, which, together with the IIP, plays an important role in understanding the international financing, as well as the international liquidity and vulnerability of a given domestic economy. In particular it indicates how a current account deficit was funded and how a surplus was used.

A6.24 As mentioned earlier, the major difference in presentation in the 2008 SNA and BPM6 concerns the grouping of the financial assets and liabilities by functional categories as the primary level of classification in the BPM6 and the use of the instruments and sectors by the 2008 SNA for the same categories. However, data by functional category are further subdivided by instrument and institutional sector, which makes it possible to link them to the corresponding 2008 SNA and monetary and financial statistics items.

A6.25 It must always be the case that the sum of transactions in financial assets must be equal to the sum of the transactions in liabilities in the matching instruments. Thus the sum of the transactions within the domestic economy and between residents and nonresidents in one financial instrument must be equal for both asset holders and liability holders. For example, Table A6.2 shows that in the financial account the change in assets of currency and deposits held by residents was 89 and by residents in the rest of the world was 11. The matching liability was 102 for residents and -2 for nonresidents, making total assets and liabilities equal to 100.

A6.26 As in the 2008 SNA, the balance of payments has exactly the same balancing item—net lending or net borrowing, which represents the balancing item for the sum of the current and capital accounts, as well as for their counterpart—the financial account. In both systems, net lending or borrowing covers transactions in all instruments used for providing or acquiring funding, without consolidating matching asset and liability transactions. Conceptually, it has the same value as the national accounts item for the total economy, and the same as the national accounts item for the rest of the world but with the sign reversed.

Balance Sheet—IIP

A6.27 The balance sheet in the 2008 SNA measures the positions of assets, both nonfinancial and financial, and liabilities for each institutional sector so as to derive at the end the net worth by the total economy. It also shows how the transactions and other flows occurring during the course of a year explain the changes in positions between the opening and closing balance sheet. The part of the balance sheet covered in the international accounts is called the IIP and matches the rest of the world sector in the 2008 SNA for financial assets and liabilities. Nonfinancial assets do not appear in the international accounts as they do not have a counterpart liability or other international aspect. (If an item previously classified as a capital item is sold abroad, it appears as part of trade in goods.) In the case of financial claims, the cross border element arises when one party is resident and the other party is nonresident. In addition, while gold bullion is an asset that has no counterpart liability, it is included in the IIP when held as a reserve asset, because of its role as a means of international payments.

A6.28 There is also a balancing item for the balance sheet called net worth, reflecting the difference between the total value of assets and liabilities. Changes in net worth due to different transactions and other flows may also be derived.

A6.29 Figure 2.1 in the BPM6. which shows an overview of the SNA as a macroeconomic framework including international accounts, illustrates the sequence of accounts in the 2008 SNA including the balance sheet framework. This is the framework illustrated in the following table showing the relationship between the national and international accounts.

A6.30Table A6.2 gives you a comparative overview of the SNA—Balance of Payments accounts. For the financial account and financial assets and liabilities in the accumulation account part, as well as for the financial assets and liabilities in the balance sheet part, an additional breakdown is presented of the financial instruments by functional category.

Linkages of the International Accounts with Monetary and Financial Statistics

Introduction

A6.31 The most recent methodology for compiling monetary and financial statistics is contained in the draft Monetary and Financial Statistics Manual and Compilation Guide (MFSM-CG) of 2013. The MFSM-CG is broadly consistent with the 2008 SNA and BPM6, and take account of financial developments since the Monetary and Financial Statistics Manual (MFSM) 2000 was published. The MFS focus on the compilation and reporting of balance-sheet data (end-of-period positions) for the central bank and other depository corporations. However, the new draft MFSM-CG provides more detailed coverage of the other financial corporations sector. A major step in the implementation of the methodology in the MFSM has been the introduction of standardized report forms (SRFs) for economies’ transmittal of monetary data for publication in IFS and for operational purposes of the IMF. The SRFs are designed for reporting of position data only. An overview of the monetary statistics framework supporting the SRFs is presented in Annex 1 of this appendix.

Common Principles and Differences in Classifications

A6.32 Monetary statistics share many principles and concepts with the BPM6 and the SNA.1 The MFSM-CG and the BPM6 are consistent on such issues as the definition and delineation of resident and nonresident entities, time of recording of transactions and other flows, financial asset and liability valuation, and data aggregation and consolidation. However, there are some differences in sectoring of the institutional units and in the classification of the various categories of financial assets and liabilities.

A6.33 As regards the delineation of institutional units and sectors, a special case is the definition of other depository corporations (ODC). In the monetary statistics methodology, all financial corporations that issue liabilities included in broad money are designated as depository corporations. These include the central bank subsector, the other deposit-taking corporations (ODC) subsector, and, in many economies, money market fund shares. The latter two form the ODC subsector in MFSM-CG. In the BPM6, money market funds are not consolidated with deposit-taking corporations but with other financial corporations. In summary in the BPM6 the financial corporations sector is divided into central bank, deposit-taking corporations, except the central bank, and other financial corporations, while the MFSM-CG defines the following subsectors: central bank, ODCs, and other financial corporations (OFC). Therefore if the balance of payments compiler uses monetary statistics the compiler should request separate data on money market funds balance of payments transactions and IIP in order to classify financial transactions and positions correctly within the OFC subsector. The balance of payments compiler should also confirm the institutional coverage of the deposit-taking corporations subsector, as some deposit-takers may be excluded; for instance, offshore banks that do not accept deposits from residents are still considered deposit-taking institutions in the BPM6 but classified as other financial corporations in the monetary statistics.

A6.34 The major categories for financial assets and liabilities in the monetary statistics follow the classification in the 2008 SNA and BPM6 financial instruments classification. Regarding the classification of financial assets, the differences with the BPM6 are as follows:

  • Classification by maturity—In the BPM6, most of debt instruments are divided into separate categories for short-term instruments (original maturity of one year or less) and long-term instruments. The standard components in the MFSM-CG do not include loans and debt securities classified by maturity, although the SRFs include a maturity breakdown for central bank liabilities with nonresidents.

  • Classification by currency of denomination—The BPM6 recommends a breakdown of all debt assets and all debt liabilities by major currency. MFSM-CG requires a breakdown of all instruments, financial assets and liabilities, except equity liabilities, into (1) national currency and (2) foreign currency.

Limitations in Using Monetary Statistics in Compiling an IIP, and How to Overcome Them

A6.35 For the compilation of the IIP using the monetary statistics as source data, the following types of limitations can be identified: valuation, coverage, sector classification, functional categories, and maturity breakdown. These limitations also affect the compilation of other external sector statistics—such as the financial account of the balance of payments and the external debt statistics—that use monetary statistics.

Valuation

A6.36 The valuation principles and other accounting rules in the MFSM-CG are in general agreement with those in the BPM6. However, a major exception for the monetary statistics is the valuation of equity on the liability side of the sectoral balance sheets of financial corporations. For the monetary statistics, liabilities in the form of equity are measured at book value. In the BPM6, equity securities (for both assets and liabilities) should be valued at the market or fair value of the shares.

A6.37 Valuing equity at book value, particularly on the SRFs, has important implications. The equity liability account in the sectoral balance sheet, instead of being subclassified by counterpart sector, as in the rest of the accounts, is classified by types of equity resources (i.e., funds contributed by owners; retained earnings; general and special reserves; and valuation adjustments). Therefore, the value of the equity issued by the domestic financial system and held by nonresidents is not identified.

A6.38 To cover for the compilation needs of the financial statistics, including the financial account of the SNA, the SRFs contain a memorandum item requesting the market or fair value of shares and other equity by counterpart sector, thus allowing for the recognition of equity owned by nonresidents. However, the great majority of economies do not report this memorandum item, implying that this information is not currently compiled by the monetary statisticians. To solve this situation, the IIP compiler (who often does possess data on equity liabilities to nonresidents) should be encouraged to coordinate with their monetary statistics counterparts to promote the compilation of the referred SRF memorandum items, thus avoiding duplication of efforts or excessive reporting burden on financial institutions. Furthermore, foreign liabilities in the monetary statistics are often underestimated because of the lack of liabilities to nonresidents in the form of equity.

Coverage

A6.39 One significant difference between the BPM6 and MFSM-CG regards the treatment of money market funds, which in the BPM6 are part of the other financial corporations sector and in the MFSM-CG are part of the other depository corporations sector. This and other possible deviations from the BPM6 definition of other deposit-takers is discussed in paragraph A6.33.

A6.40 For OFCs in many economies the major reporting challenges arise from the large number and diversity of OFCs, as well as from multiple channels of existing data reporting. The OFCs might well outnumber ODCs owing to the prevalence of insurance corporations, pension funds, and other financial intermediaries and auxiliaries such as financial asset dealers and brokers. In some economies, OFC data reporting is incomplete or is not performed on a timely basis (or both); reporting by some categories of OFCs may not even exist.

A6.41 Ideally, all OFCs should report the monetary data on a timely basis directly to the data compiler. However, such reporting presently exists in relatively few economies. Instead, OFCs report to government agencies responsible for supervision of particular segments of the financial services industry—for example, national agencies for supervision of securities trading or the operation of organized exchanges, and national or state supervisors of insurance corporations or pension funds. Data reporting sometimes is channeled through trade associations or other nongovernment entities that represent the interests of specific groups of OFCs.

A6.42 Establishment of data reporting from OFCs directly to the monetary statistics compiler should result in improved data quality and timelier reporting, with the possibility of sharing these data with the IIP compiler, if efforts to define and gather the data are coordinated. However, national policy may dictate that data reporting to the monetary statistics compiler be channeled through supervisory agencies to which OFCs already report. In any case, if the central bank gathers data on OFCs for monetary or financial sector analysis, and provided BPM6 recording principles are followed, these data should be used for balance of payments purposes too, thus avoiding duplication of efforts.

A6.43 The ODCs subsector may include corporations operating under the control of receivers or regulators or that are no longer dealing with the public. Technically, bankrupt institutions that continue to operate may retain the legal status of operating banks, or a special status may be imposed. In the BPM6, bankrupt deposit-taking corporations that continue to operate remain classified in the deposit-taking corporations institutional sector.

Functional categories

A6.44 Monetary statistics do not use functional categories to classify financial assets and liabilities. This can pose compilation challenges where monetary statistics are used to estimate balance of payments/IIP data on direct investment equity transactions and positions for deposit-takers. For OFCs, as a subsector, there are compilation challenges for direct investment data when monetary data are used in balance of payments / IIP.

A6.45 The emphasis on group consolidated supervision of the financial sector made the relationship between parent, subsidiary, and associate financial corporations broadly available as subaccounts within the accounting chart of accounts used by financial corporations. Nonetheless, the balance of payments compiler faces the difficulty of reconciling the definition of control and significant influence between financial accounting and macroeconomic statistics. In other words, these definitions in the BPM6 do not entirely correspond to the definitions found, for example, in the international financial reporting standards (IFRS). Nevertheless, the closeness of the definitions may encourage some economies to use banking supervisor data or data based on IFRS (without adjustment) for compiling the international accounts.

Maturity breakdown

A6.46 The SRFs contain maturity breakdown only for central bank liabilities with nonresidents, but not for financial assets or for assets and liabilities in other financial subsectors. While traditional monetary analysis does not focus on maturity of financial assets, supervisory data often used to compile the monetary statistics present the short and long-term breakdowns required by the BPM6 for selected financial instruments. These breakdowns are often available to the monetary statistics compiler.

A6.47 New requirements for financial sector data focused on financial stability analysis, particularly on liquidity, are putting emphasis on the availability of maturity breakdowns useful for the compilation of the IIP.2

Reconciliation Exercise between Monetary Statistics and IIP

A6.48 This section presents tables reconciling monetary statistics and IIP components. It shows the use and limitations of the monetary statistics in details—that is, component by component.

A6.49 As mentioned in Chapter 9, the Sectoral Balance Sheet for ODC,3 can be used for the deposit-taking corporations, except the central bank sector of the IIP. The Sectoral Balance Sheet for the Central Bank can be used to compile data for the central bank sector in the IIP. If economies complete the Sectoral Balance Sheet for OFC,4 it can be used to compile IIP data for other sectors—other financial corporations.

A6.50 The Sectoral Balance Sheet for ODC, which can be used by the compiler to identify and select the external assets and liabilities of deposit-taking corporations, except the central bank, is reported to the IMF through the SRFs for reporting monetary and financial data. Table A6.3 presents the reconciliation of positions of depository corporations, except the central bank vis-à-vis nonresidents, with the corresponding IIP components.5

A6.51Table A6.3 shows that, although the sectoral balance sheet data can largely correspond with IIP components, the differences in the classification do not allow a full reconciliation of the two frameworks.

Table A6.3Reconciliation of Other Depository Corporations’ Balance Sheet Items with International Investment Position (IIP) Components
Monetary statistics: Sectoral Balance Sheet Other Depository CorporationsIIP: Deposit-taking corporations, except central bank
Assets: Claims on nonresidents1
Foreign currency4.2.2 Other investment, currency and deposits
Deposits (transferable and other, in national and foreign currency)
  • 4.2.2.1 Short-term

  • 4.2.2.2 Long-term

Debt securities2.2.2 Portfolio investment, debt securities

  • 2.2.2.1 Short-term

  • 2.2.2.2 Long-term

Loans4.3.2 Other investment, loans

  • 4.3.2.1 Short-term

  • 4.3.2.2 Long-term

Equity and investment fund shares1.1 Direct investment assets, equity and investment funds shares

  • 1.1.1 Direct investor in direct investment enterprise

  • 1.1.2 Direct investment enterprise in direct investor (reverse investment)

  • 1.1.3 Between fellow enterprises



2.1.2 Portfolio investment, equity and investment fund shares

4.1 Other investment, other equity
Insurance, pension, and standardized guarantee schemes4.4.2 Other investment, insurance, pension, and standardized guarantee schemes
Financial derivatives and employee stock options3.2 Financial derivatives and employee stock options (other than reserves)
Other accounts receivable

  • Trade credit and advances

  • Other





  • 4.5.3 Other investment, trade credit and advances

    • 4.5.3.1 Short-term

    • 4.5.3.2 Long-term

  • 4.6.2 Other investment, other accounts receivable—other

    • 4.6.2.1 Short-term

    • 4.6.2.2 Long-term

Liabilities to nonresidents
Deposits (excluded from broad money, transferable and other, in national and foreign currency)4.2.2 Other investment, currency, and deposits

  • 4.2.2.1 Short-term

  • 4.2.2.2 Long-term

Debt securities (excluded from broad money, in national and foreign currency)







Loans
2.2.2 Portfolio investment, debt securities

  • 2.2.2.1 Short-term

  • 2.2.2.2 Long-term



4.3.2 Other investment, loans

  • 4.3.2.1 Short-term

  • 4.3.2.2 Long-term

Insurance, pension, and standardized guarantee schemes4.4.2 Other investment, insurance, pension, and standardized guarantee schemes
Financial derivatives and employee stock options3.2 Financial derivatives and employee stock options (other than reserves)
Other accounts payable

  • Trade credit and advances

  • Other

4.5.3 Other investment, trade credit and advances

  • 4.5.3.1 Short-term

  • 4.5.3.2 Long-term



4.6.2 Other investment, other accounts payable—other

  • 4.6.2.1 Short-term

  • 4.6.2.2 Long-term

Equity and investment fund shares: Market value, by holding sector (memorandum item)1.1 Direct investment liabilities, equity and investment funds shares

  • 1.1.1 Direct investor in direct investment enterprise

  • 1.1.2 Direct investment enterprise in direct investor (reverse investment)

  • 1.1.3 Between fellow enterprises



2.1.2 Portfolio investment, equity and investment fund shares

4.1 Other investment, other equity
Note: Numbers shown in the table follow the numbering sequence in the standard components of the IIP in the BPM6.

A6.52Table A6.4 presents the reconciliation of positions of the central bank vis-à-vis nonresidents with the relevant corresponding IIP components.

Table A6.4Reconciliation of Sectoral Balance Sheet Items for the Central Bank with International Investment Position (IIP) Components
Monetary statistics: Sectoral Balance Sheet Central BankIIP: Central bank
Assets: Claims on nonresidents
Monetary goldReserve assets

5.1 Monetary gold

  • 5.1.1 Gold bullion

  • 5.1.2 Unallocated gold accounts

Holdings of SDRsReserve assets

5.2 Special drawing rights (SDRs)—Holdings
Foreign currency included in official reserve assetsReserve assets

5.4.1 Currency and deposits

  • 5.4.1.1 Claims on monetary authorities

  • 5.4.1.2 Claims on other entities

Foreign currency otherOther investment

4.2.1 Currency and deposits

  • 4.2.1.0.1 Short-term

  • 4.2.1.0.2 Long-term

Deposits in national currency (transferable and other)Other investment

4.2.1 Currency and deposits

  • 4.2.1.0.1 Short-term

  • 4.2.1.0.2 Long-term

Deposits in foreign currency (transferable and other)

  • Included in official reserve assets

  • Other

Reserve assets

5.4.1 Currency and deposits

  • 5.4.1.1 Claims on monetary authorities

  • 5.4.1.2 Claims on other entities



Other investment

4.2.1 Currency and deposits

  • 4.2.1.0.1 Short-term

  • 4.2.1.0.2 Long-term

Debt securities

  • Included in official reserve assets

  • Other

Reserve assets

5.4.2.1 Debt securities

  • 5.4.2.1.1 Short-term

  • 5.4.2.1.2 Long-term



Portfolio investment

2.2.1 Debt securities

  • 2.2.1.1 Short-term

  • 2.2.2.1 Long-term

Loans

  • Loans to IMF

  • Repurchase agreements

    • Included in official reserve assets

    • Other

  • Other loans

    • Included in official reserve assets

    • Other

Reserve assets

  • 5.3 Reserve position in the IMF

  • 5.4.4 Other claims



Other investment

  • 4.3.1 Loans

  • 4.3.1.1 Credit and loans with the IMF (other than reserves)

  • 4.3.1.2 Other short-term

  • 4.3.1.3 Other long-term

Equity and investment fund shares

  • Included in official reserve assets

  • Other

Reserve assets

  • 5.4.2.2 Equity and investment fund shares Portfolio investment

  • 2.1.1 Equity and investment fund shares



Other Investment

  • 4.1 Other equity

Insurance, pension, and standardized guarantee schemesOther investment

  • 4.4.1 Insurance, pension, and standardized guarantee schemes

Financial derivatives and employee stock options

  • Included in official reserve assets

  • Other

3.1 Financial derivatives (other than reserves) and employee stock options Reserve assets

5.4.3 Financial derivatives (net)
Other accounts receivable

  • Trade credit and advances

  • Other

Other investment

  • 4.5.1 Trade credit and advances

    • 4.5.1.1 Short-term

    • 4.5.1.2 Long-term

  • 4.6.1 Other accounts receivable—other

    • 4.6.1.1 Short-term

    • 4.6.1.2 Long-term

Liabilities to nonresidents1
Currency in circulation (nonresidents’ holdings, not separately identified in balance sheet)



Deposits excluded from broad money (transferable and other, in national and foreign currency)2

  • Short-term

  • Long-term





Debt securities excluded from broad money

  • Short-term

  • Long-term

Other investment

4.2.1 Currency and deposits

  • 4.2.1.0.1 Short-term

  • 4.2.1.0.2 Long-term







Portfolio investment

2.2.1 Debt securities

  • 2.2.1.1 Short-term

  • 2.2.1.2 Long-term

Loans







  • Loans from IMF

  • Repurchase agreements

    • Short-term

    • Long-term

  • Other Loans

    • Short-term

    • Long-term

Other investment

4.3.1 Loans

  • 4.3.1.1 Credit and loans with the IMF

  • 4.3.1.2 Other short-term

  • 4.3.1.3 Other long-term

Financial derivatives and employee stock options

  • Short-term

  • Long-term

3.1 Financial derivatives (other than reserves) and employee stock options
Other accounts payable

  • Trade credit and advances

  • Other

Other investment

4.5.1 Trade credit and advances

  • 4.5.1.1 Short-term

  • 4.5.1.2 Long-term



4.6.1 Other accounts payable—other

  • 4.6.1.1 Short-term

  • 4.6.1.2 Long-term

SDR Allocations4.7 SDRs (Allocations)
Note: Numbers shown in the table follow the numbering sequence in the standard components of the IIP in the BPM6.

A6.53Tables A6.3 and A6.4 demonstrate that there may be a number of limitations when using monetary statistics to derive the IIP. In many instances, monetary statistics do not provide enough detail to compile the full breakdown of standard components in the IIP. But both systems have enough in common to consider pursuing a coordinated effort to use the same source data with the necessary details to compile both types of statistics. When properly designed and implemented, this approach would avoid duplication of effort and improve consistency between these related datasets.

Linkages of the International Accounts with the Government Finance Statistics

Introduction

A6.54 The Government Finance Statistics Manual 2014 (GFSM 2014) describes an integrated macroeconomic statistical framework (the government finance statistics (GFS)) designed specifically to support fiscal analysis. The manual provides the economic and statistical principles to be used in compiling the statistics and guidelines for the presentation of fiscal statistics within an integrated analytic framework that includes appropriate balancing items.6

A6.55 As a result of the conceptual interlinkages between these two datasets, the compiler of the international accounts and GFS may be able to usefully consult with one another to ensure consistency in definitions, coverage, concepts, and accounting rules. The compiler may also be able to share source data,7 and to reconcile these estimates where they overlap.

A6.56 This appendix summarizes important similarities and differences between GFS and the balance of payments and IIP statistics. It also indicates how the data compiled for general government in the balance of payments and IIP could be reconciled with GFS. It does not list, however, all similarities and differences between the two datasets and should not be considered a comprehensive guide.

Coverage and Accounting Rules

A6.57 Since the GFSM 2014 is harmonized with the 2008 SNA, it is also harmonized with other macroeconomic systems, including the BPM6. In GFS total economy is divided into five mutually exclusive sectors (general government, financial corporations,8 nonfinancial corporations, households, and nonprofit institutions serving households). The units in each sector have similar objectives, and these objectives are, in turn, different from those of units in other sectors. The international accounts use the same sectors and subsectors as the 2008 SNA and the GFS framework but with a different presentation to allow continuity with previous international classifications (such as the Balance of Payments Manual, fifth edition). The international accounts have a shorter list of sectors and include only four main sectors: general government, central bank, deposit-taking corporations, except the central bank, and other sectors9 (see Table 4.2 in the BPM6 for the detailed classification of the institutional sectors) for economies in which it is not practical to implement the full classification. The general government sector10 follows the definitions of the SNA in GFS and the international accounts. The compiler of both datasets should ensure that the actual coverage of the general government used in their statistics is identical.

A6.58 Both frameworks can be described as the systematic recording and presentation of positions and flows, with flows comprising transactions and other economic flows. The accrual basis of recording is used, and the valuation principle is the current market value for recording positions and flows. Both use the doubleentry accounting system (i.e., each transaction is recorded as consisting of a debit and credit entry of equal value), and the sum of credit entries and the sum of the debit entries are the same.

A6.59 Both GFS and the international accounts record, respectively, revenue and expense and current and capital transactions on a gross basis; and both record transactions and other changes in financial assets and liabilities on net bases for each category of assets or liabilities. For dissemination purposes, GFS presents revenue (credits) and expense (debits) separately (i.e., in two different detailed tables), while in the international accounts, credits and debits are presented under the same respective categories. Positions of financial assets and liabilities are recorded on a gross basis in both datasets.

A6.60 Consolidation is a method of presenting statistics for a set of units as if they constituted a single unit. Because the international accounts reflect transactions involving residents and nonresidents and external financial assets and liabilities, including other flows associated with them, consolidation is not relevant for international accounts of an individual economy. In GFS, consolidation is relevant and used for the preparation of statistics for the general government and its subsectors (central, regional, and local governments). General government units by definition are resident units; therefore GFS consolidation principles would not affect the consistency in data between the two datasets.

Comparison of the Structures of GFS and the Balance of Payments and the IIP

A6.61 The structure of the GFS framework is similar to the structure used in the balance of payments and IIP frameworks, and comprises: (1) the statement of operations, which records the results of all transactions during an accounting period; (2) the statement of other economic flows, which summarizes changes in assets, liabilities, and net worth that have not been generated by transactions; and (3) the balance sheet, which shows positions of financial and nonfinancial assets owned, positions of liabilities owed, and net worth, which is equal to the total value of all assets less the total value of all liabilities. As illustrated in Figure A6.1, the comprehensive treatment of transactions and other economic flows in GFS enables the opening and closing balance sheets to be fully integrated. That is, the position of a given type of asset or liability at the beginning of an accounting period plus the changes in that position indicated by transactions and other economic flows equal the stock position at the end of the period.

Figure A6.1Government Finance Statistics Framework

A6.62 The GFS framework generates a set of statistical statements, which if combined, demonstrate that all changes in the positions result from flows. This is similar to the accounting identity in the IIP that requires all changes in investment positions to result from transactions and other flows. In addition, the GFS framework includes a statement of sources and uses of cash to provide key information on liquidity. A similar statement is not prepared in the international accounts.

The Statement of Operations

A6.63 The statement of operations is a summary of transactions of the general government sector in a given accounting period. This statement presents three main categories of transactions (see Table A6.5): (1) transactions affecting net worth that include details of transactions on revenue and expense; (2) transactions in nonfinancial assets (net acquisition of nonfinancial assets);11 and (3) transactions in financial assets and liabilities (net acquisition of financial assets, and the net incurrence of liabilities). The statement of operations has similarities with the balance of payments, because both statements summarize transactions during a period. In the balance of payments, transactions are presented in a sequence of three accounts, the current, capital, and financial account.

Table A6.5Statement of Operations
Transactions Affecting Net Worth
1Revenue
11Taxes
12Social contributions [GFS]
13Grants
14Other revenue
2Expense
21Compensation of employees [GFS]
22Use of goods and services
23Consumption of fixed capital
24Interest
25Subsidies
26Grants
27Social benefits [GFS]
28Other expense
NOB/GOBNet/gross operating balance (1–2)1
Transactions in nonfinancial assets:
31Net/gross investment in nonfinancial assets2
311Fixed assets
312Inventories
313Valuables
314Nonproduced assets
2MExpenditure (2+31)
NLBNet Lending (+)/borrowing (-)[GFS] (1-2-31=1-2M=32-33)
Transactions in financial assets
32Net acquisition of financial assets
321Domestic3
322External3
Transactions in liabilities
33Net incurrence of liabilities
331Domestic3
332External3

A6.64 The transactions presented in the first two categories of the GFS framework—namely, revenue and expense—are similar to the transactions in the current account of the balance of payments with one exception: capital transfers included in respectively revenue (credit) and expense (debit) of GFS, because these transactions affect net worth, are presented in the capital account of the balance of payments. Gross acquisitions (debit)/disposals (credit) of nonproduced assets included in the net investment of nonfinancial assets of GFS are presented in the capital account of the balance of payments. The GFS transactions in financial assets and liabilities of the statement of operations are fully consistent with those shown in the financial account of the balance of payments.

A6.65 The statement of operations in GFS has a linkage to the accounts in the balance of payments to the extent that general government sector units are involved in transactions with nonresidents. For grants, interest, and transactions in financial assets and liabilities, GFS separately identifies transactions with nonresidents. However, for other transactions with nonresidents GFS will usually not separately identify these transactions, which limit opportunities for reconciliation between the international accounts and GFS. However, in some cases, supplementary information in the general government sector accounting system may identify such transactions—particularly where these are of an unusual nature, large volume, or large value.

A6.66 In GFS, revenue is defined as an increase in net worth resulting from a transaction, and expense as a decrease in net worth resulting from a transaction. The net investment in nonfinancial assets equals gross fixed capital formation less consumption of fixed capital, plus changes in inventories, transactions in valuables, and nonproduced assets. The net acquisition of financial assets and the net incurrence of liabilities represent financial transactions that change a government’s holdings of financial assets and/or liabilities.

A6.67 Two important analytical balances are derived in GFS in the statement of operations. Revenue less expense equals the net operating balance(change in the net worth due to transactions). The subsequent deduction of the net investment in nonfinancial assets results in net lending (+)/net borrowing (-)(change in the net financial worth), which is also equal to the net result of transactions in financial assets and liabilities—that is, equal to the net acquisition of financial assets minus the net incurrence of liabilities. The net operating balance is a summary measure of the ongoing sustainability of government operations, and the net lending (+)/net borrowing (-) is a summary measure indicating the extent to which the government is either putting financial resources at the disposal of other sectors in the economy or to abroad, or utilizing the financial resources generated by other sectors or from abroad. In addition, the gross operating balance is a balance that differs from the net operating balance in that it does not include consumption of fixed capital as an expense.12

A6.68 There are more balancing items in the balance of payments than in GFS, partly because there are more transaction accounts than categories in the statement of operations. In GFS, as indicated in the previous paragraph, the balancing items are: the net operating balance and the net lending/net borrowing, while in the balance of payments the balancing items are: current account balance; balance on goods and services; balance on goods; balance on services; balance on primary income ; balance on secondary income; capital account balance; net lending/borrowing (i.e., balance from current and capital accounts); and net lending/net borrowing (i.e., balance from financial account). In both datasets, the net lending/net borrowing is equal to the financial account balance.

Revenue

A6.69 Governments receive four major types of revenue from their fiscal operations: compulsory levies in the form of taxes and certain types of social contributions, property income derived from the ownership of assets,13 sales of goods and services,14 and transfers receivable from other units. Of these, compulsory levies and transfers are the main sources of revenue for most general government units. Revenue is composed of heterogeneous elements classified according to different characteristics depending on the type of revenue. The four types of revenue are classified in four categories: (1) taxes ; (2) social contributions; (3) grants; and (4) other revenue.

Taxes

A6.70Taxes are compulsory, unrequited amounts receivable by government units from institutional units.15 The coverage, timing, and valuation of tax revenue in the balance of payments and GFS are identical, but the classifications differ. The balance of payments has provisions for compilation of (1) taxes on production and imports; (2) current taxes on income, wealth, and so forth; and (3) capital taxes, while the approach adopted in GFS is to classify taxes mainly by the basis on which the tax is levied. Taxes are grouped in six major categories in GFS: (1) taxes on income, profits, and capital gains; (2) taxes on payroll and workforce; (3) taxes on property; (4) taxes on goods and services; (5) taxes on international trade and transactions; and (6) other taxes (see Table A.6.6 for additional details).16

Table A6.6Taxes in Government Finance Statistics (GFS) and Balance of Payments
GFS: TaxesBalance of payments: Taxes
1RevenueI.BPrimary income
11TaxesI.B.3.1Taxes on production and on imports
111Taxes on income, profits and capital gains
1111Payable by individualsI.CSecondary income
1112Payable by corporations and other enterprisesI.C.IGeneral government
1113Other taxes on income, profits, and capital gainsI.C.1.1Current taxes on income, wealth, etc.
112Taxes on payroll and workforceIC.2Financial corporations, nonfinancial corporations, households, and nonprofi
113Taxes on propertyLC.2.2Other current transfers
1131Recurrent taxes on immovable propertyI.C.2.0.1Current taxes on income, wealth, etc.
1132Recurrent taxes on net wealth
1133Estate, inheritance, and gift taxes2Capital account
1135Capital levies2.2Capital transfers
1136Other recurrent taxes on property2.2.1General government
114Taxes on goods and services2.-2.1.2Other capital transfers
1141General taxes on goods and services2.2.1.2.1of which: Capital taxes
11411Value-added taxes2.2.2Financial corporations, nonfinancial corporations, households, and NPISHs
11412Sales taxes2.2.2.2Other capital transfers
11413Turnover and other general taxes on goods and services2.2.2.2.1of which: Capital taxes
11414Taxes on financial and capital transactions
1142Excise
1143Profits of fiscal monopolies
1144Taxes on specific services
1145Taxes on use of goods and on permission to use goods or
11451Motor vehicle taxes
11452Other taxes on use of goods and on permission to use goods
1146Other taxes on goods and services
115Taxes on international trade and transactions
1151Customs and other import duties
1152Taxes on exports
1153Profits of export or import monopolies
1154Exchange profits
1155Exchange taxes
1156Other taxes on international trade and transactions
116Other taxes
1161Payable solely by business
1162Payable by other than business or unidentifiable
Note: To maintain consistency with codes used in GFSM 2001, the 11414 code does not follow directly the code of the previous category of taxes- taxes on capital and financial transactions (GFS 1134 in GFSM 2001) are now classified in taxes on goods and services (GFS 114) to enhance consistency with 2008 SNA.

A6.71 While certain taxes may be levied on nonresidents (such as some taxes on international trade and on international transactions), the portion attributable to nonresidents may be difficult to identify in GFS and may vary from one tax category to the next and from one year to another.

A6.72 Taxes on products and production reported in the balance of payments primary income account comprise the same tax categories as in the SNA. Some examples of these taxes17 are value added taxes (GFS 11411);18 sales taxes (GFS 11412); excise (GFS 1142); taxes on specific services (GFS 1144); customs and other import duties (GFS 1151); taxes on exports (GFS 1152); and profits of export or import monopolies (GFS 1153). Exceptionally, some taxes and duties may be payable on goods that physically enter the economy but where there is no change of ownership, so they are not treated as imports. Nevertheless, any such taxes and duties are still included in the heading of taxes and duties on imports in the GFS.

A6.73 Current taxes on income, wealth, and so forth reported in the balance of payments secondary income account are the sum of several detailed tax categories as reported in the GFS, and comprise taxes on income, profits and capital gains (GFS 111) and several other tax categories mainly payable by final consumers (such as taxes on use of goods and on permission to use goods or perform activities (GFS 1145), and other taxes on international trade and transactions (GFS 1156).

A6.74 Capital taxes included in the balance of payments capital account consist of taxes levied at irregular and infrequent intervals on the values of the assets or net worth owned by institutional units or on the value of assets transferred between institutional units as a result of legacies, gifts inter vivos, or other transfers. Capital taxes19 are the sum of estate, inheritance, and gift taxes (GFS 1133), and capital levies (GFS 1135).

Social contributions

A6.75 In GFS, social contributions are actual or imputed revenues receivable by social insurance schemes to make provision for social insurance benefits payable. Social contributions may be from either employers on behalf of their employees or from employees, self-employed, or nonemployed persons on their own behalf. These contributions secure entitlement to social benefits (GFS 27) that are payable to the contributors, the dependents, or their survivors. The contributions may be compulsory or voluntary. Social contributions are classified as social security contributions (GFS 121) or other social contributions (GFS 122) depending on the type of scheme receiving them. Additional breakdowns are included to classify this information by employees, employers, and self-employed or nonemployed persons. In GFS, social contributions are not divided between residents and nonresidents.

A6.76 The coverage of social contributions in GFS is more restricted than in the 2008 SNA and BPM6. In GFS, only contributions that constitute revenue are included in social contributions (GFS 12)—that is, only transactions that increase the net worth are included. In GFS, social contributions exclude contributions to autonomous and nonautonomous pension funds and to unfunded employment related pension schemes that provide pension and other retirement benefits. Social contributions to autonomous and nonautonomous pension funds and to unfunded employer social insurance schemes that provide retirement benefits are recorded as incurrence of liabilities by the government.20 The 2008 SNA and BPM621 record all social contributions and incurrence of liabilities, with the accounting being neutralized by recording an adjustment for the change in pension entitlements. Social contributions receivable from nonresidents by general government sector units are included in the secondary income account in the balance of payments, and, when identified, they should be consistent with the corresponding GFS categories.

Grants

A6.77 Grants are transfers receivable by government units from other resident or nonresident government units or international organizations, and that do not meet the definition of a tax, subsidy or a social contribution. Three sources of grants are recognized in GFS: grants from foreign governments (GFS 131), grants from international organizations (GFS 132), and grants from other general government units (GFS 133). Each of these categories distinguishes current and capital grants.

Table A6.7Other Revenue Categories in Government Finance Statistics (GFS) and Balance of Payments
GFS: Other revenue categoriesBalance of payments: Other revenue categories
12Social contributions [GFS]ICurrent account
121Social security contributionsI.AGood and services
1211Employee contributionsI.BPrimary income
1212Employer contributionsI.B.2Investment income
1213Self-employed or nonemployed contributionsI.B.2.1Direct investment
1214Unallocable contributionsI.B.2.1.1Income on equity and investment fund shares
122Other social contributionsI.B.2.1.1.1Dividends and withdrawals from income of quasi-corporations
1221Employee contributionsI B 2 1 1 2Reinvested earnings
1222Employer contributionsInvestment income attributable to policyholders in insurance, pension schemes, and standardized guarantee schemes and to investment funds
1223Imputed contributionsI.B.2.1.2Interest
13GrantsI.B.2.2Portfolio investment
131From foreign governmentsI.B.2.2.1Investment income on equity and investment fund shares
1311CurrentI.B.2.2.1.1Dividends
1312CapitalI.B.2.2.1.2Investment income attributable to investment fund shareholders
132From international organizationsI.B.2.2.1.2.1Dividends on equity excluding investment fund shares
1321CurrentI.B.2.2.1.2.2Reinvested earnings
1322CapitalI.B.2.2.2Interest
133From other general government unitsI.B.2.3Other investment
1331CurrentI.B.2.3.1Withdrawals from income of quasi-corporations
1332CapitalI.B.2.3.2Interest
14Other revenueI.B.2.3.3Investment income attributable to policyholders in insurance, pension schemes, and standardized guarantee schemes
141Property income [GFS]I.B.2.4Reserve assets
1411Interest [GFS]I.B.2.4.1Income on equity and investment fund shares
1412DividendsI.B.2.4.2Interest
1413Withdrawals from income of quasi-corporationsIB.3Other primary income
1414Property income from investment income disbursementsI.B.3.3Rent
1415Rent
1416Reinvested earnings on foreign direct investmentI.CSecondary income
142Sales of goods and servicesI.C.IGeneral government
1421Sales by market establishmentsI.C.I.ISocial contributions
1422Administrative feesI.C.I.4Current international cooperation
1423Incidental sales by nonmarket establishmentsI.C.I.5Miscellaneous current transfers of general government
1424Imputed sales of goods and servicesNet nonlife insurance premiums
143Fines, penalties, and forfeits2Capital account
144Transfers not elsewhere classified2.2Capital transfers
1441Current transfers not elsewhere classified2.2.1General government
14411Subsidies2.2.1.1Debt forgiveness
14412Other current transfers
1442Capital transfers not elsewhere classified
145Premiums, fees, and claims related to nonlife insurance and standardized guarantee schemes
1451Premiums, fees, and current claims
1452Capital claims

A6.78 Current grants receivable from foreign general governments and international organizations (GFS 1311 and 1321, respectively) are often the most important linkage between the GFS and the balance of payments secondary income account. Capital grants receivable from foreign general governments and international organizations (GFS 1312 and 1322, respectively) are linked to the capital transfer category of the general government in the balance of payments capital account. Current (GFS 1331) and capital grants (GFS 1332) receivable from other general government units are transactions between residents—that is, units within the general government of any particular economy, and they do not impact the balance of payments.

A6.79 The following is the treatment of some capital transfers in the GFS and balance of payments accounts:

  • Debt forgiveness22 received from nonresidents will be reflected in the GFS as revenue in capital grants received either from foreign governments (GFS 1312), or international organizations (GFS 1322), or as capital transfers not elsewhere classified (GFS 1442), when received from other nonresident entities. A corresponding reduction in the appropriate external debt instrument will be recorded. In the balance of payments, debt forgiveness is recorded as a capital transfer (see BPM6, paragraph 13.23) in the capital account from the creditor economy to the debtor economy, offset by a reduction in the liability of the debtor (reduction in the asset of the creditor) under the appropriate debt instrument in the financial account.

  • Investment transfer consists of capital transfers in cash23 or in kind made by foreign governments or international organizations to other institutional units to finance all or part of the cost of their acquiring fixed assets. These transfers will be recorded in the same categories of revenue and expense as for debt forgiveness as described earlier in GFS. However, in this case, a corresponding increase in cash will be recorded if the investment grant was received in cash, while the appropriate nonfinancial asset will increase in the case of a grant in kind. In the balance of payments, investment grants are recorded as other capital transfer (see BPM6, paragraph 13.25) in the capital account from the donor economy to the recipient economy, and the counterentry is in the relevant financial instrument, if the transfer was received in cash, or in import of goods and services, if received in kind.

  • Calls on one-off guarantees and other debt assumption are capital transfers that occur when a one-off guarantee is activated and the guarantor acquires no claim on the debtor or a claim worth less than the value of the guarantee, or in other cases of debt assumption. When general government sector units and nonresidents are involved in these transactions, they should be consistently treated in the capital account and GFS. For treatment in balance of payments see the BPM6, paragraph 13.27.

A6.80 Other capital transfers consist of major nonrecurring payments in compensation for extensive damage or serious injuries not covered by insurance policies. When general government sector units are the recipients of this type of transfer from nonresidents, they will be recorded as part of capital grants receivable either from foreign governments (GFS 1312), or international organizations (GFS 1322), or as capital transfers n.e.c. (GFS 1442), when receivable from other nonresident entities. In balance of payments, such payments are recorded as other capital transfers in capital account (see BPM6, paragraph 13.29). When statistics are compiled for the general government sector, grants from other domestic government units would be eliminated in consolidation 24 so that only grants from foreign governments and international organizations would have nonzero values in the general government accounts.

Other revenue

A6.81 In GFS, other revenue includes property income, sales of goods and services, fines, penalties, and forfeits, transfers not elsewhere classified, and premiums, fees, and claims related to nonlife insurance and standardized guarantee schemes.

A6.82 The contribution of the general government sector to investment income in the primary income account is mainly derived from the portion receivable from nonresidents of the GFS categories interest (GFS 1411), dividends (GFS 1412), withdrawals from income of quasi-corporations (GFS 1413), property income from investment income disbursements (GFS 1414),25 rent (GFS 1415), and reinvested earnings on foreign direct investment (GFS 1416). In the balance of payments, the primary income account groups these items by functional category (direct investment, portfolio investment, other investment, and reserve assets). GFS does not present a functional classification26 similar to that in the international accounts.

A6.83 The contribution of the general government sector to the goods and services accounts of the balance of payments comprises the sales of goods and services to nonresidents. These sales are classified in the corresponding categories of the goods and services accounts. In the services account, a separate disclosure of government goods and services n.i.e. is included and covers the following:

  • Goods and services supplied by enclaves, such as embassies, military bases, and international organizations

  • Goods and services acquired from the host economy by diplomats, consular staff, and military personnel located abroad, and their dependents but excluding revenue/expense of workers who are residents of the local economy

  • Services supplied by governments and not included in other categories of services

A6.84 As foreign government and international organization enclaves are not residents of the territory in which they are physically located, their transactions with residents of the territory of location are international transactions. Government revenue from licenses and permits sold to nonresidents is also included in this category if it is not instead treated as taxes, as well as some activities related to technical assistance provided by one economy to another (see BPM6, Box 10.6).

A6.85 The GFS framework does not specifically require the identification of transactions with nonresidents in goods and services, or produced nonfinancial assets owned by the government. However, where these transactions can be identified and classifications are built into the underlying public sector accounting system, the information could be supplied to the balance of payments compiler for estimating credits from the sales of goods and services category of GFS (GFS 142), as well as the net investment in nonfinancial assets, other than nonproduced assets (GFS 31).

A6.86 The secondary income and the capital accounts of the balance of payments have linkages to several GFS other revenue categories, including fines, penalties, and forfeits (GFS 143), current transfers not elsewhere classified (GFS 1441) and premiums, fees, and claims related to nonlife insurance and standardized guarantee schemes (GFS 145) in the secondary income account, and capital grants (GFS 131 and 132) and capital transfers n.e.c. (GFS 1442) in the capital account.

Expenses

A6.87 Sometimes governments supply goods and services to the community. In doing so, a government may produce the goods and services itself and distribute them, purchase them from a third party, or transfer cash to households so they can purchase the goods and services directly. The types of expenses that relate to the costs of production undertaken by government itself incurred for these activities are: compensation of employees, use of goods and services, and consumption of fixed capital. Expenses also include subsidies, grants, social benefits, and other expense related to transfers in cash or in kind, and purchases of goods and services from third parties for delivery to other units. In addition, expenses include interest that is payable by units that incur certain kinds of liabilities—namely, deposits, debt securities, loans, and other accounts payable (see Table A6.8 for additional details).

Table A6.8Expense in Government Finance Statistics (GFS) and Balance of Payments
2ExpenseICurrent account
21Compensation of employees [GFS]I.AGood and services
211Wages and salaries [GFS]I.BPrimary income
2111Wages and salaries in cash [GFS]I.B.1Compensation of employees
2112Wages and salaries in kind [GFS]I.B.2.1Direct Investment
212Employers’ social contributions [GFS]I.B.2.1.1Income on equity and investment fund shares
2121Actual social contributions [GFS]I.B.2.1.1.1Dividends and withdrawals from income of quasi-corporations
2122Imputed social contributions [GFS]I.B.2.1.1.2Reinvested earnings
22Use of goods and servicesInvestment income attributable to policyholders in insurance, pension schemes, and standardized guarantee schemes and to investment funds
23Consumption of fixed capital [GFS]I.B.2.1.2Interest
24Interest [GFS]I.B.2.2Portfolio Investment
241To nonresidentsI.B.2.2.1Investment Income on equity and investment fund shares
242To residents other than general governmentI.B.2.2.1.1Dividends
243To general government unitsI.B.2.2.1.2Investment income attributable to investment fund shareholders
25SubsidiesI.B.2.2.1.2.1Dividends
251To public corporationsI.B.2.2.1.2.2Reinvested earnings
2511Public nonfinancial corporationsI.B.2.2.2Interest
2512Public financial corporationsI.B.2.3Other investment
252To private enterprisesI.B.2.3.1Withdrawals from income of quasi-corporations
2521Private nonfinancial enterprisesI.B.2.3.2Interest
2522Private financial enterprisesI.B.2.3.3Investment income attributable to policyholders in insurance, pension schemes, and standardized guarantee schemes
253To other sectorsI.B.2.4Reserve assets
26GrantsI.B.2.4.1Income on equity and investment fund shares
261To foreign governmentsI.B.2.4.2Interest
2611CurrentI.B.3Other primary income
2612CapitalI.B.3.3Rent
262To international organizations
2621CurrentI.CSecondary income
2622CapitalI.C.IGeneral government
263To other general government unitsI.C.I.ISocial contributions
2631CurrentI.C.I.3Social benefits
2632CapitalI.C.I.4Current international cooperation
I.C.I.5Miscellaneous current transfers of general government
27Social benefits [GFS]Net nonlife insurance premiums
271Social security benefits2Capital account
2711Social security benefits in cash2.2Capital transfers
2712Social security benefits in kind2.2.1General government
272Social assistance benefits2.2.1.1Debt forgiveness
2721Social assistance benefits in cash
2722Social assistance benefits in kind [GFS]
273Employment-related social benefits
2731Employment-related social benefits in cash
2732Employment-related social benefits in kind
28Other expense
281Property expense other than interest
2811Dividends
28111To nonresidents
28112To residents
2812Withdrawals from income of quasi-corporations
2813Property expense attributed to insurance policyholders, pension
2814Rent
2815Reinvested earnings on foreign direct investment
282Transfers not elsewhere classified
2821Current not elsewhere classified
2822Capital not elsewhere classified
283Premiums, fees, and claims related to nonlife insurance and standardized guarantee schemes
2831Premiums, fees, and current claims
2832Capital claims

A6.88 The linkages that exist between the international accounts and GFS are presented ahead.

Compensation of employees

A6.89 Compensation of employees is the total remuneration, in cash or in kind, payable to an individual in an employer-employee relationship in return for work done by the latter during the accounting period. Compensation of employees (GFS 21) excludes amounts connected with own-account capital formation. In GFS, compensation of employees payable to employees engaged in own-account capital formation, which is the production of nonfinancial assets for own use, is directly recorded as a component of the cost of the acquisition of nonfinancial assets. It includes both wages and salaries (GFS 211) and employers’ social contributions (GFS 212). Wages and salaries are payments in cash or in kind to employees in return for services rendered, before deduction of withholding taxes and employees’ contributions to social insurance schemes. In the balance of payments, the definition of compensation of employees is the same.

A6.90 Because government employment usually has some residency criteria as preconditions, international payments of employee compensation by government are often not very large. However, in the case of territorial enclaves, all compensation of employees (GFS 21) payable by government to residents of the host economy should be included in the primary income account. The GFS classifications do not specifically require the identification of compensation of employees to nonresidents. However, when such payments are identified in the underlying source system, the information should be reported consistently in the GFS and primary income account debits in the balance of payments.

Uses of goods and services

A6.91 This category consists of goods and services used for the production of market and nonmarket goods and services. Excluded are the consumption of fixed capital (GFS 23), the use of goods and services in own-account capital formation that are recorded as the acquisition of nonfinancial assets, and goods purchased by government and distributed without transformation that are recorded as some type of transfer in kind.27

A6.92 The use of goods and services of the general government sector from nonresidents is reflected in the corresponding categories of the goods and services accounts in the balance of payments where goods and services accounts contain a separate category for government goods and services n.i.e. (see paragraph A6.83). The GFS system does not specifically require the identification of transactions in goods and services of the government with nonresidents. However, where these transactions can be identified and classifications are built into the underlying public sector accounting system, the information could be supplied to the balance of payments compiler for estimating debits from the uses of goods and services (GFS 22) category of the GFS.

Consumption of fixed capital

A6.93 Consumption of fixed capital is the decline during an accounting period in the current value of fixed assets owned and used by a general government unit as a result of physical deterioration, normal obsolescence, or normal accidental damage. It is valued in the average prices of the period. This is an internal transaction where government act in two capacities, and would therefore not have any impact on the balance of payments.

Interest

A6.94 Interest is the expense that the general government unit (the debtor) incurs for the use of certain kinds of financial assets, for putting these financial and other resources at the disposal of another institutional unit. In the GFS framework, the interest category is not compiled using an international account functional classification. The interest expense (GFS 24) category in the GFS framework is broken down in three subcategories: to nonresidents (GFS 241), to residents other than general government (GFS 242), and to general government units (GFS 243). As opposed to other categories in GFS, the nonresident portion of interest (GFS 241) is separately identified and it should be linked with the corresponding categories in the balance of payments accounts. The compiler should also be aware that, as opposed to general government interest receipts and payments recorded in the balance of payments, interest in the GFS framework is not adjusted for FISIM.

Subsidies

A6.95 Subsidies are current unrequited payments that government units make to companies on the basis of the level of their production activities or the quantities or values of the goods or services they produce, sell, export, or import. Subsidies may be designed to influence the level of production and the prices at which outputs are sold, or the profits or losses of the companies involved.

A6.96 In calculating other primary income in the balance of payments, linkages with the GFS data arise from the transactions with nonresidents related to subsidies (GFS 25). Where the identification of such payments to nonresidents is provided in the underlying public sector accounting system, the information should be consistent with the primary income account.

Grants

A6.97 Grants are transfers payable by a government unit to other resident or nonresident government unit, or international organizations, that do not meet the definition of a tax, subsidy, or social contribution. These three recipients of grants are recognized in GFS. For reconciliation with the international accounts, the following grants are relevant: current grants payable to foreign governments (GFS 2611) and to international organizations (GFS 2621) are linked to the secondary income account in the balance of payments, and capital grants payable t o foreign governments (GFS 2612) and to international organizations (GFS 2622) are linked to the capital account in the balance of payments.

A6.98 When the government sector unit is the grantor of debt relief to a nonresident, an expense will be reflected in grants, to foreign governments, capital (GFS 2612); or, grants, international organizations, capital (GFS 2622); or capital transfers not elsewhere classified (GFS 2822), when provided to other entities different from foreign government and international organizations. A corresponding reduction in the appropriate foreign financial asset will be recorded. The GFS framework does not identify a separate category for debt forgiveness. Exceptionally large nonlife insurance claims—where these claims are payable by government sector units—may be recorded as capital claims (GFS category 2832) in the premium, fees, and claims related to nonlife insurance and standardized guarantee schemes (GFS 283) category.

A6.99 Governments are often involved in grant transfers, which should be reported in a consistent way in GFS and the secondary income or capital account of the balance of payments. Governments undertake transfers to convey a benefit to another party, or benefit from transfers receivable. These capital transfers consist of compulsory transfers to governments, transfers under court orders, and voluntary transfers. There may also be imputed capital transfers as a result of governments’ use of entities resident in other economies, for fiscal purposes (see GFSM 2014, paragraph 2.124, and BPM6, paragraphs 8.24–8.26).

Social benefits

A6.100 Social benefits are current transfers receivable by households intended to provide for the needs that arise from certain events or circumstances—for example, sickness, unemployment, retirement, housing, education, or family circumstances.28 In GFS, not all social benefits are treated as expense. The payment of pension and other retirement benefits through employer social insurance schemes is treated as reductions in liabilities (see also paragraph A6.76). Social benefits (GFS 27) payable to nonresidents should feed into those corresponding categories in the secondary income account. In the international accounts, social benefits are divided in two subcategories—that is, those related to the general government and those to the financial corporations, nonfinancial corporations, households, and NPISHs. In the GFS framework, social benefits are compiled with a different disaggregation, social security benefits (GFS 271), social assistance benefits (GFS 272), and employment-related social benefits (GFS 273).

Other expense

A6.101 The GFS framework, in addition to compensation of employees, use of goods and services, consumption of fixed capital, interest, subsidies, grants, and social benefits, identifies other expense. Other expense comprises property expense other than interest, transfers not elsewhere classified, and premium, fees, and claims related to nonlife insurance and standardized guarantees.

A6.102 The contribution of the general government to the primary income account of the balance of payments is often largely derived from the nonresident portion of all the subcategories of property expense other than interest (GFS 281): dividends (GFS 2811), withdrawals from income of quasi-corporations (GFS 2812), property expense for investment income disbursements (GFS 2813), rent (GFS 2814), and reinvested earnings on foreign direct investment (GFS 2815). In GFS, detailed classification of dividends presents breakdowns to nonresidents (GFS 28111) and to residents (GFS 28112).

A6.103 In calculating secondary income and capital account categories of the balance of payments, linkages with the GFS other expense categories arise from the transactions with nonresidents related to current transfers not elsewhere classified (GFS 2821) and premiums, fees, and claims related to nonlife insurance and standardized guarantees (GFS 283) in the secondary income account, and capital transfers not elsewhere classified (GFS 2822) in the capital account.

Transactions in Nonfinancial Assets

A6.104 In GFS, transactions in nonfinancial assets include all categories of produced and nonproduced assets. It should be noted that, contrary to GFS, the capital account in the balance of payments does not include produced nonfinancial assets; it instead records only transactions in nonproduced nonfinancial assets. Transactions in produced nonfinancial assets are included in the respective balance of payments categories—for example, goods as recorded in the goods and services account. The goods and services account does not distinguish whether those goods or services are of a capital or current nature.

A6.105 Nonproduced nonfinancial assets consist of natural resources; contracts, leases, and licenses; and marketing assets and goodwill in the balance of payments, which are identified in the GFS framework. There is full consistency in the macroeconomic statistical framework with regards to the categories of nonproduced, nonfinancial assets that exist. Where general government sector units acquire or dispose of these assets in transactions with nonresidents, supplementary information would be helpful from the GFS transactions to feed into the international accounts.

Transactions in Financial Assets and Liabilities

A6.106 The functional categories in the international accounts take into consideration some aspects of the relationship between the parties and the motivation for investment (see BPM6, Chapter 6). In addition, data in the financial account are also presented according to the financial instrument employed, and the sector of the resident counterpart to the transaction.

A6.107 Although the classification of financial assets and liabilities as presented in the GFS does not follow the same functional categories of the international accounts, it is fully consistent with the financial instrument and sector classification as used in the international accounts. The guidelines of the GFS framework suggest that transactions in financial assets and liabilities with residents and nonresidents be separately disclosed. GFS follows the same criteria for determining residence as the international accounts. Conceptually it therefore allows international financial transactions that are included in GFS to be compared to the data for general government as presented in the financial account of the international accounts.29

The Statement of Other Economic Flows

A6.108 In the GFS framework, the other economic flows in the financial assets and liabilities account shows changes in positions that arise for reasons other than transactions between residents and nonresidents. These changes are also called other flows, and, as with the international accounts, they include holding gains and losses, reclassifications, and other changes in volume of financial assets and liabilities.30 The classification of financial instruments for assets and liabilities is conceptually fully consistent in GFS and international accounts, which should promote consistency in the data reported for other flows in the two datasets.

The Balance Sheet

A6.109 In addition to classifying financial assets and liabilities by the characteristics of the financial instrument, categories of the general government balance sheet are also classified according to the residence of the other party to the instrument (the debtors for financial assets and the creditors for liabilities). Because there has been a growing recognition of the role of balance sheet analysis in understanding sustainability and vulnerability, currency composition and maturity analysis of the balance sheet are encouraged as additional information. In the IIP, the highest level of classification used is the functional categories. However, in addition, the IIP is disaggregated by financial instrument, and most of these instruments are further disaggregated according to the counterpart institutional sector (which is the lender for assets and the borrower for liabilities) and maturity. The currency composition of the IIP debt assets and liabilities is a memorandum item.

A6.110 General governments’ financial asset/liability position with nonresidents as reported in the GFS balance sheet follows the same classification of instruments and accounting rules as the IIP. The maturity and currency breakdowns, as suggested in the Public Sector Debt Statistics: Guide for Compilers and Users and the GFSM 2014, are also fully consistent with the IIP.

Annex to Appendix 6

Overview of the Monetary Statistics Framework

A6.111 This annex describes the framework for the compilation of monetary statistics in accordance with the methodology recommended in the MFSM-CG. The monetary statistics cover position and flow data on the assets and liabilities of the financial corporations sector and its subsectors.

A6.112 The monetary statistics include data for all institutional units in the financial corporations sector, as described in Chapter 3 of the MFSM-CG. For compiling the monetary statistics, the financial corporations sector is divided into central bank subsector, other depository corporations subsector, and other financial corporations subsector. Taken together, the central bank and other depository corporations constitute the depository corporations subsector.

A6.113 The framework for the monetary statistics recommended in the MFSM-CG embodies two levels of data compilation and presentation. At the first level, position and flow data reported by individual institutional units are aggregated into sectoral balance sheets, which contain comprehensive data for the individual financial corporations subsectors—that is, the central bank, other depository corporations, and other financial corporations. At the second level, the data in the sectoral balance sheets are consolidated into surveys.

Table A6.9Financial Assets and Liabilities in Government Finance Statistics (GFS) and Balance of Payments
GFS: Financial assets and liabilitiesBalance of payments: Financial assets and liabilities
62Financial assets63Liabilities3.1Direct Investment
6201Monetary gold and special drawing rights (SDRs)6301Special drawing rights (SDRs)3.1.1Equity and investment fund shares
62011Monetary gold3.1.1.1Equity other than reinvestment of earnings
62012Special drawing rights (SDRs)3.1.1.2Reinvestment earnings
6202Currency and deposits6302Currency and deposits3.1.2Debt instruments
6203Debt securities6303Debt securities3.2Portfolio investment
6204Loans6304Loans3.2.1Equity and investment fund shares
6205Equity and investment fund shares6305Equity and investment fund shares3.2.2Debt instruments
62051Equity63051Equity3.3Financial derivatives
62052Investment fund shares or units63052Investment fund shares or units3.4Other investment
6206Insurance, pension, and standardized guarantee schemes [GFS]6306Insurance, pension, and standardized guarantee schemes [GFS]3.4.1Other equity
3.4.2Currency and deposits
62061Nonlife insurance technical reserves63061Nonlife insurance technical reserves3.4.3Loans
62062Life insurance and annuities entitlements63062Life insurance and annuities entitlements3.4.4Insurance, pension, and standardized guarantee schemes
62063Pension entitlements [GFS]63063Pension entitlements [GFS]3.4.5Trade credit and advances
62064Claims of pension funds on pension manager63064Claims of pension funds on pension manager3.4.6Other accounts receivable/payable—other
3.4.7Special drawing rights
62065Provisions for calls under standardized guarantee schemes63065Provisions for calls under standardized guarantee schemes3.5Reserve assets
6207Financial derivatives and employee stock options6307Financial derivatives and employee stock options
62071Financial derivatives63071Financial derivatives
62072Employee stock options63072Employee stock options
6208Other accounts receivable6308Other accounts payable
62081Trade credit and advances63081Trade credit and advances
62082Miscellaneous other accounts receivable63082Miscellaneous other accounts receivable
621Domestic631Domestic
6212–6218Same instrument breakdown as above, but excluding monetary gold and SDRs6312–6318Same instrument breakdown as above, but excluding monetary gold and SDRs
622External632External
6221–6228Same instrument breakdown as above6321–6228Same instrument breakdown as above

A6.114 Surveys are compiled for financial corporations subsectors and for the entire financial corporations sector. The depository corporations survey (DCS) and its component surveys—the central bank survey (CBS) and the other depository corporations survey (ODCS)—are the major focus of the monetary statistics and constitute a core set of data for macroeconomic analysis. The DCS contains position and flow data on the depository corporations’ liabilities that are components of broad money, as nationally defined, and data on the depository corporations’ assets that are claims on (i.e., credit to) other sectors of the economy. The DCS also contains data on the depository corporations’ claims on and liabilities to nonresidents. The CBS and ODCS show the data that are consolidated to obtain the DCS and other data that are used in monetary and credit analysis at the separate levels of the central bank and other depository corporations.

A6.115 The monetary statistics framework also includes the financial corporations survey (FCS), which extends the coverage beyond the depository corporations covered in the DCS. In the FCS, the position and flow data from the DCS are consolidated with the data from the other financial corporations survey (OFCS), which contains position and flow data consolidated for insurance corporations and pension funds, other financial intermediaries, and financial auxiliaries. The FCS thereby provides the position and flow data for analyzing claims on and liabilities to all other sectors of the economy and nonresidents, at the level of the entire financial corporations sector. In particular, the FCS shows a comprehensive measure of credit extended by financial corporations.

A6.116 The purpose of the sectoral balance sheets is to provide a framework for the collection and presentation of data in a format that facilitates the compilation of surveys, as described in the preceding paragraphs. The data for a sectoral balance sheet are obtained from the individual institutional units within a financial corporations subsector and are classified into standard components, in accordance with the sectorization, instrument classification, and accounting principles in the MFSM-CG. In addition, sectoral balance sheets are directly useful for analyses requiring subsector data that are more highly disaggregated than the asset and liability categories shown in the corresponding financial subsector surveys.

A6.117 The surveys contain position and flow data31 encompassing all assets and liabilities for the units covered by the respective survey. Each is based on data for all institutional units within the subsector. Thus, the term survey refers to comprehensive data for all units in a subsector, rather than to sample survey data that would cover only a subset of units or only a subset of the asset and liability accounts.

A6.118 The DCS covers the accounts of the depository corporations and is a consolidation of the CBS and the ODCS. The FCS is a consolidation of the DCS and the OFCS.

A6.119 For many economies, the DCS will constitute the principal set of monetary statistics for macroeconomic policy. The DCS is a consolidated statement of positions and flows for the accounts of all financial sector corporations that incur liabilities included in the national definition of broad money. The framework of the DCS is designed to facilitate analysis of broad money and its components, credit aggregates and their components, and depository corporations’ foreign assets and liabilities and other assets and liabilities.

A6.120 By maintaining the balance-sheet identity in the DCS, the broad money liabilities of depository corporations are linked to their claims on (i.e., credit to) nonresidents and sectors of the domestic economy, and to their other assets and liabilities. This balance sheet identity is reflected in the position and flow data in the DCS.

A6.121 The DCS is structured to facilitate macroeconomic analysis that makes use of the linkages between the monetary statistics and other macroeconomic statistics. The balance sheet presentation of the DCS links depository corporations’ broad money liabilities to their foreign assets and liabilities and to their claims on and liabilities to central government, thereby linking the monetary statistics to the IIP and GFS, respectively.

A6.122 The DCS can be rearranged to show that broad-money liabilities (BML) equal the sum of net foreign assets (NFA), domestic credit (DC), and other items (net) (OIN). That is, the opening or closing positions in the DCS can be shown as

where DC comprises credits to resident sectors (domestic credit). OIN denotes a residual category for other liabilities less other assets, when other liabilities includes all liabilities not included in broad money.

A6.123 Total flows (closing positions less opening positions) for the DCS are shown as

where Δ denotes a total flow (period-to-period change). The flow data in each category in the DCS are decomposed into separate flows for transactions, valuation changes, and other changes in volume.

A6.124 Changes in broad money liabilities can arise from changes in the foreign assets and foreign liabilities of the depository corporations, as can be seen from the identity that links ΔBML to ΔNFA, shown in the preceding paragraph.

    Other Resources Citing This Publication