1. Introduction

Sage De Clerck, and Tobias Wickens
Published Date:
March 2015
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This chapter describes the purpose and evolution of this Manual, the uses of government finance statistics, the structure of the government finance statistics framework, major methodological changes from the previous editions of this Manual, the implementation of the methodology, and the structure of this Manual.

Purpose of the Manual

1.1 The Government Finance Statistics Manual 2014 (GFSM 2014)—the third edition of this Manual1—describes a specialized macroeconomic statistical framework, the government finance statistics (GFS) framework, designed to support fiscal analysis. The Manual (i) provides the economic and statistical reporting principles to be used in compiling the statistics; (ii) describes guidelines for presenting fiscal statistics within an analytic framework that includes appropriate balancing items;2 and (iii) is harmonized with other macroeconomic statistical guidelines. The Manual does not treat systematically the practical aspects of compiling the statistics.3

1.2 Fiscal policy is the use of the level and composition of the general government and public sectors’ spending and revenue—and the related accumulation of government assets and liabilities—to achieve such goals as the stabilization of the economy, the reallocation of resources, and the redistribution of income. The primary purpose of the GFSM 2014 is to provide a comprehensive conceptual and reporting framework suitable for analyzing and evaluating fiscal policy, especially the performance of the general government sector and the broader public sector of any economy. These concepts of sectors are described in Chapter 2. In short, the general government sector consists of resident institutional units that fulfill the functions of government as their primary activity. This sector includes all government units and all nonmarket, nonprofit institutional units (NPIs) that are controlled by government units. The function of government units, broadly described, is to implement public policy through the provision of primarily nonmarket goods and services and the redistribution of income and wealth, with both activities supported mainly by compulsory levies on other sectors. The public sector consists of all resident institutional units controlled directly, or indirectly, by resident government units—that is, all units of the general government sector and resident public corporations.

1.3 Fiscal statistics have traditionally been used to analyze the size of government; its contribution to aggregate demand, investment, and saving; the impact of fiscal policy on the economy, including resource use, monetary conditions, and national indebtedness; the tax burden; tariff protection; and the social safety net. In addition, analysts have become increasingly interested in fiscal rules, structural deficits, assessing the effectiveness of spending on poverty alleviation, the sustainability of fiscal policies, net debt, net wealth, and contingent claims against government, including the obligations for social security pensions. See the annex to Chapter 4 for the description of the use of GFS in fiscal analysis.

1.4 The GFSM 2014 supports the compilation of internationally comparable statistics for the general government sector, the public sector, and their subsectors. Public corporations, nonfinancial as well as financial, can carry out government fiscal policies in a variety of ways, and analysis of their fiscal activities frequently requires statistics on all of their activities rather than statistics on specific transactions. Even when statistics are compiled for only the general government sector, some information on public corporations is required. To reflect transactions with public corporations, the change in the level of equity ownership held by units of the general government sector and the exposure to risks associated with guarantees provided to these corporations should be recorded.

1.5 The basic concepts, classifications, and definitions employed in this Manual reflect economic principles that should be universally valid regardless of the circumstances in which they are applied. Therefore, the GFS framework is applicable to all types of economies regardless of the institutional or legal structure of a country’s government, the sophistication of its statistical development, the financial accounting system of government, or the extent of public ownership of for-profit entities. Nevertheless, the fact that the institutional and economic structures of countries differ greatly means that the various parts of this Manual will not be equally relevant.

The Evolution of International Statistical Guidelines on GFS


1.6 The evolution of international statistical guidelines for compiling GFS started in the early 1970s, with a draft of A Manual on Government Finance Statistics. This draft was circulated in English, Spanish, and French to governments, central banks, central statistical offices, and international organizations for comments, and was also discussed at several regional seminars. Based on comments received and the application of the earlier draft in compiling data for the IMF’s Government Finance Statistics Yearbook, A Manual on Government Finance Statistics, 1986 (GFSM 1986) was published. The GFSM 1986 provided guidance to compile GFS but was not directly aligned with other macroeconomic statistics.

1.7 The Government Finance Statistics Manual 2001 (GFSM 2001) updated the internationally recognized guidelines for compiling statistics required for fiscal analysis that were established by the GFSM 1986. The revised guidelines were harmonized with the corresponding standards of other internationally recognized macroeconomic statistical guidelines to the extent possible, consistent with the goal of supporting fiscal analysis. Also, the revised guidelines incorporated, for the first time, an integrated balance sheet approach to compiling and presenting GFS.

The Update of the GFSM 2001

1.8 The GFSM 2014 updates the internationally recognized guidelines for compiling statistics required for fiscal analysis that were established by the GFSM 2001. The revised guidelines are harmonized with the updates in other macroeconomic statistical manuals and guides. The other statistical manuals are the overarching System of National Accounts 2008 (2008 SNA)4 and two specialized manuals: the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6)5 and the Monetary and Financial Statistics Manual (MFSM).6 The updates to these manuals draw on the text of the 2008 SNA to avoid an inference that a different meaning is intended.7 For debt-related issues, the GFSM 2014 is supplemented with the Public Sector Debt Statistics: A Guide for Compilers and Users (PSDS Guide) and the External Debt Statistics: Guide for Compilers and Users, 2013 (2013 EDS Guide).

1.9 The revised manuals and guides address important international economic developments in recent years and take into account improved recording and methodological treatments of various types of events. Furthermore, the development of International Public Sector Accounting Standards and continued efforts to harmonize statistical reporting and financial reporting have led to additional changes incorporated in the GFSM 2014. The changes incorporated in GFSM 2014 can broadly be summarized as8

  • Methodological changes in the 2008 SNA

  • Clarifications of existing methodological guidelines

  • Presentational changes

  • Editorial changes.

Uses of the GFS Framework

1.10 The GFS framework is designed to provide statistics that enable policymakers and analysts to study developments in the financial operations and financial position of government. GFS also allow an assessment of the liquidity and sustainability of the finances of the general government sector or the public sector in a consistent and systematic manner. The GFS framework can be used to analyze the operations of a specific level of government, transactions between levels of government, and the public sector.

1.11 The GFS framework produces summary information on the overall performance and financial position of the general government or public sector through the use of balancing items, such as the net operating balance, net lending/net borrowing, and the change in net worth. These balancing items are defined and measured within the integrated and comprehensive GFS reporting framework.

1.12 In contrast to summary measures, the detailed data of the GFS framework can be used to examine specific areas of government operations. For example, one might want information about particular forms of taxation, the level of expense incurred on a type of social service, or the amount of government borrowing from deposit-taking corporations.

1.13 The harmonization of the GFS framework with other macroeconomic datasets means that data from GFS can be utilized as source data, or can be combined with data from other datasets to assess general government or public sector developments in relation to the rest of the economy. Similarly, the establishment of internationally recognized statistical guidelines permits GFS to be used in cross-country analyses of government operations and stock positions, such as comparisons of ratios of taxes, expense, or debt to gross domestic product.

Structure and Features of the GFS Framework

1.14 The GFS framework pertains to the general government and public sectors as defined in the 2008 SNA and Chapter 2 of this Manual. These sectors are defined in terms of institutional units, which are economic entities that are capable, in their own right, of owning assets, incurring liabilities, and engaging in economic activities and transactions with other entities.

1.15 Stock positions and economic flows are integrated in the GFS framework and are presented in several statements, as described in Chapter 4. Two types of economic flows are recorded in the GFS framework: transactions and other economic flows.9 For the most part, transactions are interactions between two institutional units that take place by mutual agreement. The Statement of Operations and the Statement of Sources and Uses of Cash record the results of all transactions during a reporting period. They are classified as revenue, expense, net investment in nonfinancial assets, net acquisition of financial assets, or net incurrence of liabilities. Transactions that generate revenue or expense result in a change in net worth. All other types of transactions result in equal changes to assets and/or liabilities and do not result in a change to net worth.

1.16 Other economic flows include price changes and a variety of other economic events that affect the holdings of assets and liabilities, such as debt write-offs and catastrophic losses. The Statement of Other Economic Flows summarizes these changes in assets, liabilities, and net worth.

1.17 The Balance Sheet for the general government or public sector is a statement of the stock positions of nonfinancial and financial assets owned, the stock positions of claims of other units on the general government or public sector in the form of liabilities, and the sector’s net worth, equal to the total value of all assets minus the total value of all liabilities.

1.18 In addition to the core statements in the GFS framework, two supplementary statements are included due to their analytic usefulness. To provide a clear statistical explanation of the factors causing changes in net worth, the Statement of Total Changes in Net Worth combines the results of the Statement of Operations and the Statement of Other Economic Flows in one statement.

1.19 Contingencies, such as loan guarantees and implicit guarantees to provide social benefits when various needs arise, can have important economic influences on the general economy but do not result in transactions or other economic flows recorded in the GFS framework until the event or condition referred to actually occurs. A second supplementary statement, the Summary Statement of Explicit Contingent Liabilities and Net Implicit Obligations for Future Social Security Benefits, summarizes the explicit and some implicit contingent liabilities.

1.20 The comprehensive treatment of transactions and other economic flows in the GFS framework provides a full explanation of the changes between the opening and closing balance sheet stock positions. That is, the stock position of a given type of asset or liability at the beginning of a reporting period plus the changes in that asset or liability indicated by transactions and other economic flows equals the stock position at the end of the period. Such an integrated statistical framework permits the effects of policies and specific economic events to be described and analyzed fully.

1.21 Various classifications are applied to the economic flows and stock positions recorded in the GFS framework. For example, each revenue transaction is classified according to whether it is a tax or another type of revenue; expense transactions are classified by purpose (functional classification) and by economic type (economic classification); assets are classified according to whether they are financial or nonfinancial; and financial assets and liabilities are classified by type of instrument, maturity, and the sector of the unit that issued the asset or that holds the liability.

1.22 Despite harmonization of the GFS framework with the 2008 SNA, there are differences between the two statistical frameworks because of the different analytic purposes they serve. The most important difference is that the focus of the GFS framework is the impact of economic events on government finances—taxing, spending, borrowing, and lending—while the 2008 SNA also focuses on the production and consumption of goods and services. As a result, the treatment of government production activities in GFS differs from the treatment of those activities in the 2008 SNA. Significant differences relate to the treatment of own-account capital formation, and the degree of consolidation. In addition, the recording of pension schemes for government employees may be different from the 2008 SNA in some circumstances (see Appendix 7 for more details on the relationship between GFS and other macroeconomic statistics).

1.23 In many cases, compiling GFS will be the first step in compiling statistics for the general government sector of the national accounts. For this reason, some data that normally would not appear in a standard GFS presentation should be maintained in underlying source data because they are needed for the national accounts. For example, the detailed classification of subsidies in GFS is based on the nature of the recipient of the subsidy, while classification in the 2008 SNA is based on whether the subsidy is on a product or production.

1.24 Definitions of concepts in the GFS framework are the same as in the 2008 SNA, but the coverage of a particular category of transactions may be slightly different. For example, compensation of employees recorded as an expense in GFS does not include the compensation of employees engaged in own-account capital formation, but can be reconciled with compensation of employees in the 2008 SNA that includes the compensation of all employees. The definition and composition of compensation of employees, however, are identical in both frameworks. To note where the coverage or some other aspect of a concept differs from the same concept in the 2008 SNA, the indicator “[GFS]” is added after the GFS title and an explanation of the difference is provided.

Methodological Differences with the GFSM 1986

1.25 The methodology for compiling GFS described in this Manual differs substantially from the methodology of the GFSM 1986. The following paragraphs summarize the major differences. Details are provided in Appendix 1.


1.26 The coverage of the GFS framework is the general government sector as defined in the 2008 SNA, which is defined on the basis of institutional units. To capture the fiscal transactions and activities taking place outside the general government sector, the GFS framework should also be used to compile statistics for the public sector and its subsectors. The coverage of the GFSM 1986 is defined on a functional basis under which general government data include all the relevant transactions of any unit carrying out a function of government. Therefore, some transactions of units of the broader public sector carrying out functions of government are included in general government data, unlike GFSM 2014. In addition, some transactions are excluded from general government data in GFSM 1986 as they relate to production or market trading activities.

Basis of Recording Economic Events

1.27 The GFS framework records economic flows on an accrual basis, which means that flows are recorded at the time economic value is created, transformed, exchanged, transferred, or extinguished. However, the framework also encompasses the traditional cash-based reporting. In the GFSM 1986, transactions are recorded only when cash is received or paid.

1.28 Using the accrual basis of recording also means that nonmonetary transactions are fully integrated in the GFS framework. In the GFSM 1986, only selected nonmonetary transactions are recorded as memorandum items.


1.29 Economic flows as well as assets, liabilities, and net worth are valued at current market prices in the GFS framework. While current market prices are readily available for assets and liabilities that are traded in active markets, valuation according to market-value equivalents is used for valuing assets and liabilities that are not traded in markets, or are traded only infrequently. In the GFSM 1986, debt securities are valued at the amount the government is obligated to pay when the debt matures (face value), which may differ from both the nominal value and the current market value.

Balance Sheets

1.30 Complete balance sheets, which include all stock positions of nonfinancial and financial assets, liabilities, and net worth, are included in the GFS framework. The GFSM 1986 reports only on the stock positions of certain debt liabilities.

Integration of Flows and Stock Positions

1.31 The comprehensive recording of transactions and other economic flows permits a full integration of economic flows and stock positions and the reconciliation of differences between the opening and closing balance sheets. In the GFSM 1986, such a reconciliation of the stock positions of the debt liabilities is not possible without collecting additional information.

The Analytic Framework

1.32 In the GFS framework, several balancing items are introduced. The multiple balancing items facilitate analysis of the general government sector or the public sector based on a variety of considerations rather than a single measure. In the GFSM 1986, the emphasis of the analytic framework is focused on a single balancing item, the overall deficit/surplus.

1.33 The GFS framework’s use of definitions of revenue and expense as transactions that bring about changes in net worth leads to a different treatment of transactions in nonfinancial assets. The GFSM 1986 treats cash transactions in nonfinancial assets as capital revenue and expenditure, which affected the overall deficit/surplus. In the GFS framework, the difference between revenue and expense is a balancing item, the net operating balance, measuring the change in net worth resulting from transactions—it is a sustainability measure before considering the net investment in nonfinancial assets.

1.34 In the GFS framework, all transactions involving the acquisition or disposal of financial assets are treated as financing transactions, and net lending (+) / net borrowing (-) is a balancing item calculated as the net operating balance minus the net investment in nonfinancial assets. Net lending/net borrowing is also equal to the net acquisition of all financial assets minus the net incurrence of all liabilities from transactions. In the GFSM 1986, the net acquisition of financial assets for policy purposes is designated as lending minus repayments and treated like expenditure in deriving the overall deficit/surplus. In the GFSM 2014 framework, the supplementary fiscal indicators include the calculation of an overall fiscal balance that treats the net acquisition of selected financial assets similarly to the net acquisition of financial assets for policy purposes in the GFSM 1986 (see the annex to Chapter 4).

Harmonization with Other Methodologies

1.35 Recognizing the important linkages between GFS and other macroeconomic datasets, this Manual is more closely harmonized with the 2008 SNA and BPM6 than was the case for the GFSM 1986. Where differences exist due to the different analytic purposes of various datasets, guidance is provided on the reconciliation between datasets to ensure consistency (see Appendix 7). Also, recognizing the close relationship that exists between GFS and accruals-based public sector accounting standards, the systematic documentation of similarities and differences between statistical guidelines and accounting standards has informed changes in both. Therefore, the GFSM 2014 is also more closely harmonized with accounting standards than was the case with the GFSM 1986 (see Appendix 6).

Implementation of the GFS Framework

1.36 Some countries may be able, at least initially, to compile only a part of the integrated GFS framework. It is not feasible to lay down general priorities for data collection when economic circumstances may vary widely from one country to another. In practice, priorities usually are best established by national authorities that are familiar with the situation, needs, and challenges of their countries.

1.37 It is recognized that the implementation of the fully integrated GFS framework presented in this Manual will take some time. In particular, many countries will need to revise their underlying accounting systems to accommodate the accrual basis of reporting and fully reflect the revised classifications of the GFS framework.10

1.38 Nonetheless, it is likely that many countries will follow a similar path as they implement the GFS framework. For example, a possible first step on the migration path could be that countries would adopt the classification structure of the Statement of Operations or the Statement of Sources and Uses of Cash and adjust their cash-based statistics to address known deficiencies, such as by incorporating information on revenue or expense arrears. Another step could be the assembly of balance sheet information on financial assets and liabilities that would allow estimates to be made of the other economic flows as they relate to these financial instruments. A more difficult step is likely to be the collection of a complete set of information about the stock positions of nonfinancial assets held at a given time and their valuation at current market prices. Finally, a fully developed accrual accounting system could be introduced that provides for complete and fully integrated balance sheets to be prepared.

1.39 Good dissemination practices are essential in addition to good data compilation. As well as provision of metadata, aspects of good dissemination practices include a predictable release schedule, readily accessible published data, and identification of internal government access to statistics before public release. In recent years, international guidelines have been developed on good data dissemination practices—namely, the IMF’s General Data Dissemination System, Special Data Dissemination Standard, and Special Data Dissemination Standard Plus.11

Structure of the Manual

1.40 The remainder of this Manual can be divided into two general topics. Chapters 2 through 4 develop the concepts used in the framework, and Chapters 5 through 10 describe the classifications used and the types of economic flows or stock positions included in each classification category.

1.41Chapter 2 describes the coverage of the general government and public sectors, and their subsectors. Chapter 3 first explains the concepts of transactions, other economic flows, and stock positions of assets and liabilities. It then describes the accounting rules governing their recording, including timing, valuation, and consolidation. Chapter 4 presents the analytic framework, which is the integrated presentation of transactions, other economic flows, and stock positions in a manner that permits the calculation of aggregates and balancing items as summary measures of the activities of the general government and public sectors.

1.42Chapters 5 through 10 describe the classifications of transactions, other economic flows, and stock positions of assets and liabilities. Chapter 5 is devoted to revenue transactions, which increase net worth. Chapter 6 is devoted to expense transactions, which decrease net worth. Chapter 7 describes the balance sheet and the classification of stock positions of assets and liabilities. Chapter 8 provides a classification of transactions in nonfinancial assets, while Chapter 9 provides a classification of transactions in financial assets and liabilities. Chapter 10 covers other economic flows.

1.43 An annex to Chapter 4 describes the use of GFS to build well-defined indicators for fiscal analysis, while an annex to Chapter 6 describes the Classification of the Functions of Government (COFOG).

1.44 This Manual includes nine appendixes. Appendix 1 lists the methodological changes from the GFSM 2001 to this Manual, and the differences of the GFSM 2014 framework from the GFSM 1986. Appendix 2 describes the various organizational structures used to provide social protection and the associated statistics compiled for the general government and public sectors. Appendix 3 provides guidance on selected public sector debt issues. Appendix 4 covers a description of cross-cutting issues such as the recording of leases, licenses, permits and other contracts, public-private partnerships, and insurance and standardized guarantee schemes. Appendix 5 elaborates on the implications of regional arrangements for GFS compilation. In Appendix 6, a description of the relationship between GFS and International Public Sector Accounting Standards is provided, while Appendix 7 describes the relationship between GFS and other macroeconomic statistics. Appendix 8 provides the classification codes used in the GFS framework. Appendix 9 contains a glossary of terms used in the GFS framework.

The first edition was published in 1986 with the title A Manual on Government Finance Statistics. It is referred to as the GFSM 1986. The second edition was published in 2001 with the title Government Finance Statistics Manual 2001. It is referred to as the GFSM 2001.

Balancing items summarize the net value of the activities covered by a set of reporting entries, such as the net value of total revenue minus total expense. Chapter 4 provides details on the GFS analytic framework and its balancing items.

Guidance on compilation practices can be found in Government Finance Statistics: Compilation Guide for Developing Countries, 2011, Quarterly Government Finance Statistics: Guide for Compilers and Users, and other related material.

Commission of the European Communities, International Monetary Fund, Organisation for Economic Co-operation and Development, United Nations, World Bank, System of National Accounts 2008 (Brussels/Luxembourg, New York, Paris, Washington, 2009).

International Monetary Fund, Balance of Payments and International Investment Manual, 6th ed. (Washington, 2009).

Monetary and Financial Statistics Manual (Washington, 2000)—revision of the MFSM, 2000 edition, to also align with the 2008 SNA, is pending at the time of publication of GFSM 2014.

This manual also draws on United Nations, Classifications of Expenditure According to Purpose (New York, 2000) for the Classification of Functions of Government introduced in Chapter 6.

The major changes are described in more detail in Appendix 1.

Economic flows reflect the creation, transformation, exchange, transfer, or extinction of economic value. Transactions and other economic flows are defined and described in more detail in Chapter 3.

Although the GFS framework uses some accounting terms, it is important to remember that it is a statistical reporting framework that might differ in important ways from the underlying financial accounting system from which most of GFS will be derived (see Appendix 6).

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