Flow of Funds Framework: The Basics³

The interrelations between the various sectors (private, government, monetary, and external) are brought together in this section to set the stage for a full exploration of all such interrelations in the framework of a flow of funds matrix. First, however, it is important to understand the rationale for and uses of a flow of funds matrix. As an analytical tool, the matrix is important for several reasons:

• It summarizes the interrelationships among the different sectors (including the foreign or rest of the world sector) in a systematic and coherent way.

• It helps to bring out inconsistencies in and thereby ensure the consistency of the available data and facilitates macroeconomic analysis.

• It shows which sector of the economy is generating an overall surplus and which is generating a deficit, helps identify the origins and causes of the surpluses and deficits, and sheds light on how the surpluses are utilized and the deficits financed in each sector.

• It is helpful in policy simulations and in analyzing the ramifications of policy options.

At the most aggregative level, an open economy consists of two sectors: the domestic economy and the rest of the world. As discussed for the four sectors covered in this volume, two basic types of transactions can be distinguished for each of these sectors: nonfinancial and financial. The system is “closed” in the sense that the country’s exports (χ) are the rest of the world’s imports (−χ), and hence the sum of transactions across sectors must be zero (+ χ − χ = 0). Similarly, it is possible to derive each sector’s resource or saving-investment gap and to trace the gap’s financing. Since the financial transactions must cover the gap ex post, the resource gap for each sector will always equal the sum of all financial transactions for the sector. The flow of funds account or table simply combines the nonfinancial transactions, the resource gap, and the financial transactions for each sector in a matrix in which the sectors are in columns and the transactions are in rows. An illustrative flow of funds is shown in Box 6.2 for a small open economy; exports (χ) = 100, imports (M) = 300, and borrowing from abroad = 200.

This example illustrates a number of important features embedded in the flow of funds framework.

• As noted, the system is closed, so that the sum across sectors for each transaction (that is, the sum of each row) is identically equal to zero, as is the sum of the resource gaps. The current account of the rest of the world is necessarily the mirror image of the country’s current account, since the world as a whole is a closed economy. Specifically, the country can run a current account deficit (−200) if, and only if, the rest of the world is running a surplus of an equal amount (+200).⁴

• For each sector, the sum of real and financial transactions (excluding the resource gap row, which is a subtotal and not a transaction in itself) is also zero. This relationship reflects the fact that ex post, each sector’s nonfinancial deficit (surplus) is fully covered (utilized).

• Transactions in the “rest of the world” sector are entered from the point of view of the rest of the world, not from the point of view of the country. Thus, under exports, the rest of the world sector shows −100, reflecting the sector’s imports.

• By convention, the signs in the table are as follows: a transaction that increases assets or decreases liabilities of a sector takes a negative sign, and a transaction that decreases assets and increases liabilities takes a positive sign. Thus, the country’s foreign borrowing (an increase in foreign financial liabilities) is entered as a +200. Note that for the “rest of the world” sector, net lending (an increase in financial assets) of−200 is recorded (Box 6.3).

• The flow of funds table is, by design, a zero-sum matrix in which each column and each row sums to zero. Thus, the flow of funds system is a quadruple-entry system. Each transaction is recorded with a double entry—that is, as a real transaction, with a counter entry as a financial transaction in each of the two sectors involved.

The above dichotomy, which divides the world into the domestic economy and the rest of the world, can be further refined by disaggregating the domestic economy into three key sectors (the government, the private sector, and the banking sector). However, before analyzing this expanded flow of funds table, it is important to summarize the accounting conventions guiding the construction of a flow of funds table.

The Recording Conventions

The following conventions are used in the flow of funds accounts.

• Coverage. The flow of funds accounts record transactions between two sectors. Transactions taking place within a given sector are not shown, since they disappear in the consolidation of the sector. Moreover, some transactions (such as changes in arrears, valuation changes, and other items net) are grouped together for each sector under a balancing item (net errors and omissions).

• Source. Whenever data for the same transaction differ (for example, changes in net foreign assets in the balance of payments and in the monetary survey) a single source must be selected. The primary sources used for establishing a flow of funds account are the national income and product accounts and the macroeconomic accounts based on the three linked systems, namely the government finance statistics (GFS), balance of payments statistics (BOPS), and money and banking statistics (MBS).

• Banking system. For the purpose of the flow of funds account, this sector is assumed not to have any nonfinancial transactions—that is, its saving-investment gap is identically equal to zero.

• External sector. This sector is viewed from the point of view of the rest of the world. Therefore, a current account deficit (+CAB) for the country is a current account surplus (—CAB) for the rest of the world and should be entered as such.

Box 6.2.

Illustrative Flow of Funds of a Simple Open Economy

		Domestic Economy	Rest of the World	Horizontal Check
Nonfinancial transactions
	Exports	100	−100	0
	Imports	−300	+300	0
	Resource gap	−200	+200	0
Financial transactions
	Foreign borrowing	+200	−200	0
	Vertical check	0	0	0

View Table

		Domestic Economy	Rest of the World	Horizontal Check
Nonfinancial transactions
	Exports	100	−100	0
	Imports	−300	+300	0
	Resource gap	−200	+200	0
Financial transactions
	Foreign borrowing	+200	−200	0
	Vertical check	0	0	0

Flow of Funds Framework: Schematic Accounts

To complete the detailed flow of funds, it is important to review, for each sector that constitutes a column in the flow of funds table, the methods used to derive and finance nonfinancial balances. Box 6.4 shows the necessary accounting identities.

The flow of funds account (or table) has as its columns the economic sectors and as its rows the various transactions. It has three major blocks: nonfinancial transactions, saving-investment balances, and financial transactions. The first two blocks are obtained simply by entering the nonfinancial transactions (as summarized in Box 6.3) for each sector and summing them to obtain nonfinancial balances. The third block of the table is obtained by enumerating all the financing transactions for each sector. It should be noted that for all sectors, “other items, net” has been added as a balancing item in order to capture (i) those items in the financing of nonfinancial balances that have not been explicitly entered, and (ii) any errors arising from data that are inconsistent across sectors.

A schematic flow of funds account is shown in Table 6.1. The columns represent the broad economic sectors and the rows transactions among the sectors; the first column is simply the aggregation of all the domestic sectors. The upper part of the table covers transactions in goods, services, income, and transfers, the lower part financial transactions such as borrowing or lending.

Table 6.1.

Schematic Flow of Funds Account

Source: Based on Box 6.4.

¹Exports, imports, net factor income, and net transfers can also, in principle, be broken down into the general government and private sectors. However, in practice, this breakdown is hard to obtain and, in any case, little useful purpose is served by such a breakdown here, where the focus is on nonfinancial balances and their financing.

²Balancing item calculated as the difference between nonfinancial balances and total identified financing. Note also that −ΔOIN_d is the sum of the changes in 01N in all sectors in the domestic economy and must be offset by ΔOIN_f in a closed system.

Table 6.1.

Schematic Flow of Funds Account

					Domestic Economy
Transactions/Sectors			Overall Economy (1)	Domestic Economy (2)	General government (3)	Private sector (4)	Banking system (5)	Rest of the World (6)	Horizontal Check (7)
Gross national disposable income (GNDI)			−GNDI	+GNDI	GNDIg	GNDIp			0
	Final consumption		C	−C	−Cg	−Cp			0
	Gross investment		I	−I	−Ig	−Ip			0
	Exports of goods and nonfactor services1		X					−X	0
	Imports of goods and nonfactor services1		−M					M	0
	Net factor income1		Yf					−Yf	0
	Net transfers1		TRf					−TRf	0
Nonfinancial balances			0	(S − l)	(Sg−Ig)	(Sp−Ip)	0	−CAB	0
Foreign financing
	Nonmonetary
		Direct investment	0	FDI		FDI		−FDI	0
		Net foreign borrowing	0	NFB	NFBg	NFBp		−NFB	0
	Monetary
		Change in net foreign assets	0	−ΔNFA			−ΔNFA	+ΔNFA	0
Domestic financing
	Monetary
		Domestic credit	0	0	+ΔNDCg	+ΔNDCP	−ΔNDC		0
		Broad money	0	0		−ΔM2	ΔM2		0
	Nonmonetary
		Nonbank	0	0	NB	−NB			0
	Net errors and omissions2		0	− ΔOINd	ΔOINg	ΔOINp	−ΔOINb	ΔOINf	0
Vertical check			0	0	0	0	0	0	0

Source: Based on Box 6.4.

¹Exports, imports, net factor income, and net transfers can also, in principle, be broken down into the general government and private sectors. However, in practice, this breakdown is hard to obtain and, in any case, little useful purpose is served by such a breakdown here, where the focus is on nonfinancial balances and their financing.

²Balancing item calculated as the difference between nonfinancial balances and total identified financing. Note also that −ΔOIN_d is the sum of the changes in 01N in all sectors in the domestic economy and must be offset by ΔOIN_f in a closed system.

View Table

Table 6.1.

Schematic Flow of Funds Account

					Domestic Economy
Transactions/Sectors			Overall Economy (1)	Domestic Economy (2)	General government (3)	Private sector (4)	Banking system (5)	Rest of the World (6)	Horizontal Check (7)
Gross national disposable income (GNDI)			−GNDI	+GNDI	GNDIg	GNDIp			0
	Final consumption		C	−C	−Cg	−Cp			0
	Gross investment		I	−I	−Ig	−Ip			0
	Exports of goods and nonfactor services1		X					−X	0
	Imports of goods and nonfactor services1		−M					M	0
	Net factor income1		Yf					−Yf	0
	Net transfers1		TRf					−TRf	0
Nonfinancial balances			0	(S − l)	(Sg−Ig)	(Sp−Ip)	0	−CAB	0
Foreign financing
	Nonmonetary
		Direct investment	0	FDI		FDI		−FDI	0
		Net foreign borrowing	0	NFB	NFBg	NFBp		−NFB	0
	Monetary
		Change in net foreign assets	0	−ΔNFA			−ΔNFA	+ΔNFA	0
Domestic financing
	Monetary
		Domestic credit	0	0	+ΔNDCg	+ΔNDCP	−ΔNDC		0
		Broad money	0	0		−ΔM2	ΔM2		0
	Nonmonetary
		Nonbank	0	0	NB	−NB			0
	Net errors and omissions2		0	− ΔOINd	ΔOINg	ΔOINp	−ΔOINb	ΔOINf	0
Vertical check			0	0	0	0	0	0	0

Source: Based on Box 6.4.

¹Exports, imports, net factor income, and net transfers can also, in principle, be broken down into the general government and private sectors. However, in practice, this breakdown is hard to obtain and, in any case, little useful purpose is served by such a breakdown here, where the focus is on nonfinancial balances and their financing.

²Balancing item calculated as the difference between nonfinancial balances and total identified financing. Note also that −ΔOIN_d is the sum of the changes in 01N in all sectors in the domestic economy and must be offset by ΔOIN_f in a closed system.

Flow of Funds Analysis⁵

The flow of funds account provides a comprehensive framework for describing both the influence of economic activity on the financial system and the role of various financial markets in the generation of income, saving, and expenditure. The identities reflected in a flow of funds account are not, however, sufficient to derive a full picture of a country’s financial system. Accounting identities must be complemented by the sectors’ behavioral relationships in terms of production, expenditures, portfolio choices, and external trade. But through the interrelationships it presents, a flow of funds account facilitates the analysis of the interactions between the nonfinancial and financial spheres. Such accounts can be used to trace the impact of fiscal and monetary policy on financial markets, for instance. Flow of funds analysis may be based on past developments or projections; in either case, it is useful to have data covering a period of several years.

Box 6.3.

Sign Conventions in the Flow of Funds Account

	Increase	Decline
Assets	−	+
Liabilities	+	−

View Table

	Increase	Decline
Assets	−	+
Liabilities	+	−

This assignment of signs for financial transactions can be rationalized as follows: an acquisition of an asset implies the use or disposal of purchasing power, while incurring liability implies acquiring purchasing power.

• A deficit for the external sector, which represents the rest of the world, implies an external surplus for the domestic sector.

• The nonfinancial balance of the banking sector is assumed to be zero; the nonfinancial transactions of this sector are implicitly included in the private sector.

The schematic flow of funds table (Table 6.1) follows.

Column 1:	Shows the basic national income identity for the overall economy (that is, the aggregation of the domestic economy shown in column 2, and the rest of the world column sector shown in column 6). This basic identity, which defines gross national disposable income (GNDI), has been developed in detail in Chapter 2 and is summarized in equation 1 of Box 6.4. There is no entry for this column in the financial transactions because in a closed system, financial transactions are all identically zero.
Column 2:	Shows the aggregate domestic economy or the sum of columns 3, 4, and 5. This column shows, for the domestic economy, the basic identity between the excess of GNDI over absorption and the saving-investment gap for the economy.
Column 3:	Shows, for the government sector, the source of the saving-investment gap and (in the lower portion of the column) how this gap is financed.6 The key equations describing the government position and its financing are shown in Box 6.4, equations 2 and 3, respectively.
Column 4:	Shows how, for the nongovernment sector or private sector, the resource gap is derived and financed. This relationship is derived in detail in Chapter 2, equations 2.11 and 2.12 and is shown in Box 6.4, equations 4 and 5.
Column 5:	Depicts the resource gap for the banking system, which by convention is identically zero, and its financing, which is the monetary survey identity. This identity is described in equation 5.8 and is depicted in Box 6.4, equation 6.
Column 6:	Depicts the foreign sector balance and its financing from the rest of the world’s point of view. In particular, this column shows the mirror image of the compiling country’s current account balance and its financing. These relations are described in Chapter 5, and are shown in Box 6.4, equations 7 and 8.
Column 7:	Provides a horizontal check. It shows that, for each row, the sum of the elements in columns (1), (3), (4), (5), and (6) are zero; column (2) is only a subtotal of columns (3), (4), and (5).

View Table

Column 1:	Shows the basic national income identity for the overall economy (that is, the aggregation of the domestic economy shown in column 2, and the rest of the world column sector shown in column 6). This basic identity, which defines gross national disposable income (GNDI), has been developed in detail in Chapter 2 and is summarized in equation 1 of Box 6.4. There is no entry for this column in the financial transactions because in a closed system, financial transactions are all identically zero.
Column 2:	Shows the aggregate domestic economy or the sum of columns 3, 4, and 5. This column shows, for the domestic economy, the basic identity between the excess of GNDI over absorption and the saving-investment gap for the economy.
Column 3:	Shows, for the government sector, the source of the saving-investment gap and (in the lower portion of the column) how this gap is financed.6 The key equations describing the government position and its financing are shown in Box 6.4, equations 2 and 3, respectively.
Column 4:	Shows how, for the nongovernment sector or private sector, the resource gap is derived and financed. This relationship is derived in detail in Chapter 2, equations 2.11 and 2.12 and is shown in Box 6.4, equations 4 and 5.
Column 5:	Depicts the resource gap for the banking system, which by convention is identically zero, and its financing, which is the monetary survey identity. This identity is described in equation 5.8 and is depicted in Box 6.4, equation 6.
Column 6:	Depicts the foreign sector balance and its financing from the rest of the world’s point of view. In particular, this column shows the mirror image of the compiling country’s current account balance and its financing. These relations are described in Chapter 5, and are shown in Box 6.4, equations 7 and 8.
Column 7:	Provides a horizontal check. It shows that, for each row, the sum of the elements in columns (1), (3), (4), (5), and (6) are zero; column (2) is only a subtotal of columns (3), (4), and (5).

It is also instructive to look at the flow of funds table from the perspective of the rows—that is, in terms of the transactions. As noted, for each column (sector), the sum for all transactions (financial and nonfinancial) is also zero. It is important to keep in mind two features of this table that involve the rows. First, the row summarizing the nonfinancial balances is a subtotal of all the nonfinancial transactions and therefore should not be counted twice during the process of verifying that the sum of a sector’s transactions is zero. Second, “net errors and omissions” is included to ensure consistency between and within sectors. These are balancing items, some of which we have previously encountered—for example, “errors and omissions” in the balance of payments and “other items, net” in the monetary survey.

• Nonfinancial balances. For the overall economy, the income-expenditure balance (S − I) is also called the “resource gap” because it indicates that if the country does not have sufficient resources to cover its expenditures, a deficit on the external current account is generated. If income exceeds expenditures, a surplus is generated.

• Sectoral balances. These allow analysts to identify domestic sectors that are facing financing difficulties. Each sector generates (through nonfinancial transactions) either a negative balance (deficit) or a positive balance (surplus). A negative balance may stem from a decline in saving, an increase in investment, or a combination of the two.

• Financing of nonfinancial balances. The flow of funds account also provides an overall description of the intersectoral financial flows that are intermediated through the country’s financial system, which plays the crucial role of attracting and allocating saving. For the whole economy, the saving-investment balance is matched by the current account balance, which is financed through capital and financial account transactions, changes in net foreign assets, or exceptional financing (such as the accumulation of external arrears). The saving-investment balance of a given sector is financed by the other domestic sectors and the rest of the world.

Box 6.4.

Main Economic Sectors: Nonfinancial Balances and Their Financing

Sector	Accounting Identity
Economy
Saving-investment gap	S − I = CAB
	or −S + I + CAB = 0
Definition of GNDI	$\begin{array}{c}-GNDI+C+I+\chi -M+Y_f+T{R}_f=0\left(1\right)\hfill \end{array}$
Government
Saving-investment gap	$S_g-I_g=GND{I}_g-C_g-I_g\left(2\right)$
Financing of the gap	$\begin{array}{c}{F}_g=NF{B}_g+\mathrm{\Delta }ND{C}_g+NB\left(3\right)\hfill \\ (S_g-I_g)+F_g=0\hfill \\ \text{or}(S_g-I_g)+NF{B}_g+\mathrm{\Delta }ND{C}_g+NB=0\hfill \end{array}$
Private sector
Saving-investment gap	$=S_p-I_p=GND{I}_p-C_p-I_p\left(4\right)$
Financing of the gap	$\begin{array}{c}FD{I}_p+NF{B}_p+\mathrm{\Delta }ND{C}_p-\mathrm{\Delta }M2-NB=F_p\left(5\right)\hfill \\ (S_p-I_p)+FD{I}_p+NF{B}_p+\mathrm{\Delta }ND{C}_p-\mathrm{\Delta }M2-NB=0\hfill \end{array}$
Banking sector
Saving-investment gap	Sb − Ib = 0 by convention.
Monetary survey identity	$\begin{array}{c}\mathrm{\Delta }M2=\mathrm{\Delta }NFA+\mathrm{\Delta }NDC+\mathrm{\Delta }OI{N}_b\text{or}\hfill \\ \mathrm{\Delta }M2-\mathrm{\Delta }NFA-\mathrm{\Delta }NDC-\mathrm{\Delta }OI{N}_b\equiv 0\left(6\right)\hfill \end{array}$
Financing of the gap
Foreign sector (as viewed from abroad)
Saving-investment gap	$\begin{array}{c}-CAB=-\chi +M-Y_f-T{R}_f\left(7\right)\hfill \\ -F_f=-FDI-NFB+\mathrm{\Delta }NFA\hfill \end{array}$
Financing of the gap
Balance of payments identity	$\begin{array}{c}CAB+F_f\equiv 0\left(8\right)\hfill \\ -CAB-FDI-NFB+\mathrm{\Delta }NFA+\mathrm{\Delta }OI{N}_f\equiv 0\hfill \end{array}$

View Table

Sector	Accounting Identity
Economy
Saving-investment gap	S − I = CAB
	or −S + I + CAB = 0
Definition of GNDI	$\begin{array}{c}-GNDI+C+I+\chi -M+Y_f+T{R}_f=0\left(1\right)\hfill \end{array}$
Government
Saving-investment gap	$S_g-I_g=GND{I}_g-C_g-I_g\left(2\right)$
Financing of the gap	$\begin{array}{c}{F}_g=NF{B}_g+\mathrm{\Delta }ND{C}_g+NB\left(3\right)\hfill \\ (S_g-I_g)+F_g=0\hfill \\ \text{or}(S_g-I_g)+NF{B}_g+\mathrm{\Delta }ND{C}_g+NB=0\hfill \end{array}$
Private sector
Saving-investment gap	$=S_p-I_p=GND{I}_p-C_p-I_p\left(4\right)$
Financing of the gap	$\begin{array}{c}FD{I}_p+NF{B}_p+\mathrm{\Delta }ND{C}_p-\mathrm{\Delta }M2-NB=F_p\left(5\right)\hfill \\ (S_p-I_p)+FD{I}_p+NF{B}_p+\mathrm{\Delta }ND{C}_p-\mathrm{\Delta }M2-NB=0\hfill \end{array}$
Banking sector
Saving-investment gap	Sb − Ib = 0 by convention.
Monetary survey identity	$\begin{array}{c}\mathrm{\Delta }M2=\mathrm{\Delta }NFA+\mathrm{\Delta }NDC+\mathrm{\Delta }OI{N}_b\text{or}\hfill \\ \mathrm{\Delta }M2-\mathrm{\Delta }NFA-\mathrm{\Delta }NDC-\mathrm{\Delta }OI{N}_b\equiv 0\left(6\right)\hfill \end{array}$
Financing of the gap
Foreign sector (as viewed from abroad)
Saving-investment gap	$\begin{array}{c}-CAB=-\chi +M-Y_f-T{R}_f\left(7\right)\hfill \\ -F_f=-FDI-NFB+\mathrm{\Delta }NFA\hfill \end{array}$
Financing of the gap
Balance of payments identity	$\begin{array}{c}CAB+F_f\equiv 0\left(8\right)\hfill \\ -CAB-FDI-NFB+\mathrm{\Delta }NFA+\mathrm{\Delta }OI{N}_f\equiv 0\hfill \end{array}$

As noted above, the usefulness of a flow of funds system lies in the fact that the system describes the financing of various economic sectors and the broad categories of market instruments used in financial transactions. By explicitly describing the main macroeconomic identities, the flow of funds helps analysts to formulate behavioral hypotheses and to design a consistent check of financial programs. The system’s interlocking nature provides a basis for analyzing the origins of an imbalance in one economic sector and the potential repercussions for other sectors. Examples illustrating these analytical uses of the flow of funds are given below.

Exercises

• Tables 6.2 through 6.6 present the basic macroeconomic accounts for Poland. On the basis of these tables, the nonfinancial transactions balances and the flow of funds for Poland have been derived for 1993 (Table 6.6). Using Table 6.6 as a model, prepare the flow of funds for 1994.

• On the basis of Table 6.6, what can be said about the significant differences in economic developments in Poland between 1993 and 1994? Compare the 1993 and 1994 nonfinancial domestic balances (you may wish to compute ratios relative to GDP). How do they relate to the external sector nonfinancial balance? What factors may have influenced the level of domestic investment and gross national saving during 1993–1994?

• Suppose that government capital outlays in 1994 were higher by 1 trillion zlotys. How would Table 6.6 change? In answering this question, explore alternative means of financing the increase in government spending (for example, tax increases, reductions in other expenditures, bank borrowing, nonbank borrowing, and foreign financing). Assume that higher government spending also raises output by 1 trillion zlotys—that is, there are no multiplier effects.

• Assume that the nongovernment saving-investment balance in 1994 remains unchanged from its 1993 level, but that the general government deficit is higher than in 1993. What can you conclude about the current account of the balance of payments in 1994? Suppose that the current account of the balance of payments improves in 1994. Under the above scenario (an unchanged private sector saving-investment balance), what can you conclude about Poland’s fiscal position in 1994 compared with the previous year?

Table 6.2.

Components of Aggregate Demand

(In trillions of zlotys; at current market prices)

Source: Based on Table 2.3.

Table 6.2.

Components of Aggregate Demand

(In trillions of zlotys; at current market prices)

			1990	1991	1992	1993	1994
Consumption			376.7	663.3	957.4	1,300.3	1,751.0
	Public (CG)		(108.1)	(195.2)	(289.6)	(318.3)	(386.9)
	Private (CP)		(268.7)	(468.1)	(667.8)	(982.0)	(1,364.1)
Gross investment (l)			143.5	161.0	174.4	242.3	335.8
	Fixed investment		117.6	157.7	193.0	239.8	341.1
		Public (IG)	(21.6)	(26.1)	(39.3)	(51.0)	(67.9)
		Private (IP)	(96.0)	(131.6)	(153.7)	(188.8)	(273.6)
	Changes in stock		25.9	3.3	−18.6	2.5	−5.3
Domestic demand (A)			520.3	824.3	1,131.8	1,542.6	2,086.8
Foreign balance (X−M)			40.0	−15.5	17.6	15.2	17.3
	Exports of goods and services (X)		160.5	190.3	272.4	357.3	515.0
	Imports of goods and services (M)		120.5	205.8	254.8	342.1	497.7
GDP at market prices			560.3	808.8	1,149.4	1,557.8	2,104.1
Net income from abroad (Yf)			−31.9	−30.1	−54.4	−63.4	−33.8
Net current transfers (TRf)			18.4	12.8	39.9	51.5	26.9
Gross national disposable income (GNDI)			546.8	791.5	1,134.9	1,545.9	2,097.2

Source: Based on Table 2.3.

View Table

Table 6.2.

Components of Aggregate Demand

(In trillions of zlotys; at current market prices)

			1990	1991	1992	1993	1994
Consumption			376.7	663.3	957.4	1,300.3	1,751.0
	Public (CG)		(108.1)	(195.2)	(289.6)	(318.3)	(386.9)
	Private (CP)		(268.7)	(468.1)	(667.8)	(982.0)	(1,364.1)
Gross investment (l)			143.5	161.0	174.4	242.3	335.8
	Fixed investment		117.6	157.7	193.0	239.8	341.1
		Public (IG)	(21.6)	(26.1)	(39.3)	(51.0)	(67.9)
		Private (IP)	(96.0)	(131.6)	(153.7)	(188.8)	(273.6)
	Changes in stock		25.9	3.3	−18.6	2.5	−5.3
Domestic demand (A)			520.3	824.3	1,131.8	1,542.6	2,086.8
Foreign balance (X−M)			40.0	−15.5	17.6	15.2	17.3
	Exports of goods and services (X)		160.5	190.3	272.4	357.3	515.0
	Imports of goods and services (M)		120.5	205.8	254.8	342.1	497.7
GDP at market prices			560.3	808.8	1,149.4	1,557.8	2,104.1
Net income from abroad (Yf)			−31.9	−30.1	−54.4	−63.4	−33.8
Net current transfers (TRf)			18.4	12.8	39.9	51.5	26.9
Gross national disposable income (GNDI)			546.8	791.5	1,134.9	1,545.9	2,097.2

Source: Based on Table 2.3.

Table 6.3.

General Government Operations¹

(In trillions of zlotys)

Source: Table 3.1.

¹Comprising the state budget, extrabudgetary funds, and local governments.

²1993 data include revenues from the VAT that replaced turnover taxes in July 1993.

³interest obligations on external debt are recorded on a cash basis, interest obligations on domestic debt are recorded on an accrual basis.

⁴Assume net repayment remains unchanged in U.S. dollar terms from previous year.

⁵Excludes external interest payments arrears, which are recorded on a cash basis above the line.

⁶Unallocated financing.

Table 6.3.

General Government Operations¹

(In trillions of zlotys)

			1990	1991	1992	1993	1994
Revenues			254.3	341.9	503.0	742.2	977.5
	Tax revenues		210.5	285.6	418.7	608.5	831.5
		Personal income tax	17.7	23.3	81.1	140.4	203.1
		Social security contributions	43.8	79.0	111.5	146.0	192.4
		Enterprise income tax	82.8	59.4	50.6	66.0	70.6
		Excess wage tax (Popiwek)	8.8	27.1	17.0	10.0	3.9
		VAT, turnover taxes, and excises2	37.3	61.2	103.4	177.5	243.0
		Customs duties	3.5	17.1	26.8	43.8	75.0
		Other	16.6	18.5	28.3	24.8	43.5
	Nontax revenue		43.8	54.6	79.5	121.3	140.0
	Capital revenue		…	1.7	4.8	12.4	6.0
Expenditure and net lending			236.1	405.8	579.2	787.2	1,019.6
	Current		218.7	366.3	535.0	729.3	961.6
		Wages and salaries	57.3	94.1	135.3	185.4	206.7
		Purchases of goods and services	28.7	46.7	70.0	99.9	135.3
		Interest payments3	2.4	12.6	36.7	53.4	86.9
		Subsidies	43.1	41.4	37.1	35.3	42.8
		Income transfers	85.8	140.4	229.1	320.7	458.1
		Other	1.4	31.1	26.8	34.6	31.8
		Capital and net lending	16.7	29.5	39.3	50.9	61.0
		Net lending	0.7	10.0	4.9	7.0	−3.0
Overall balance			18.2	−63.9	−76.2	−45.0	−42.1
Financing			−18.2	63.9	76.2	45.0	42.1
	Domestic		−16.2	41.9	81.4	46.6	83.0
		Banking system	−16.3	41.2	75.6	35.2	66.8
		Nonbank	0.1	0.7	5.8	11.4	16.2
	Foreign (net)4		−4.1	−0.9	−2.8	−5.9	−43.0
	Change in arrears5		−2.6	12.9	−6.4	4.3	2.1
	Other6		4.0	…	4.0	…	…
GDP			560.3	808.8	1,149.4	1,557.8	2,104.1

Source: Table 3.1.

¹Comprising the state budget, extrabudgetary funds, and local governments.

²1993 data include revenues from the VAT that replaced turnover taxes in July 1993.

³interest obligations on external debt are recorded on a cash basis, interest obligations on domestic debt are recorded on an accrual basis.

⁴Assume net repayment remains unchanged in U.S. dollar terms from previous year.

⁵Excludes external interest payments arrears, which are recorded on a cash basis above the line.

⁶Unallocated financing.

View Table

Table 6.3.

General Government Operations¹

(In trillions of zlotys)

			1990	1991	1992	1993	1994
Revenues			254.3	341.9	503.0	742.2	977.5
	Tax revenues		210.5	285.6	418.7	608.5	831.5
		Personal income tax	17.7	23.3	81.1	140.4	203.1
		Social security contributions	43.8	79.0	111.5	146.0	192.4
		Enterprise income tax	82.8	59.4	50.6	66.0	70.6
		Excess wage tax (Popiwek)	8.8	27.1	17.0	10.0	3.9
		VAT, turnover taxes, and excises2	37.3	61.2	103.4	177.5	243.0
		Customs duties	3.5	17.1	26.8	43.8	75.0
		Other	16.6	18.5	28.3	24.8	43.5
	Nontax revenue		43.8	54.6	79.5	121.3	140.0
	Capital revenue		…	1.7	4.8	12.4	6.0
Expenditure and net lending			236.1	405.8	579.2	787.2	1,019.6
	Current		218.7	366.3	535.0	729.3	961.6
		Wages and salaries	57.3	94.1	135.3	185.4	206.7
		Purchases of goods and services	28.7	46.7	70.0	99.9	135.3
		Interest payments3	2.4	12.6	36.7	53.4	86.9
		Subsidies	43.1	41.4	37.1	35.3	42.8
		Income transfers	85.8	140.4	229.1	320.7	458.1
		Other	1.4	31.1	26.8	34.6	31.8
		Capital and net lending	16.7	29.5	39.3	50.9	61.0
		Net lending	0.7	10.0	4.9	7.0	−3.0
Overall balance			18.2	−63.9	−76.2	−45.0	−42.1
Financing			−18.2	63.9	76.2	45.0	42.1
	Domestic		−16.2	41.9	81.4	46.6	83.0
		Banking system	−16.3	41.2	75.6	35.2	66.8
		Nonbank	0.1	0.7	5.8	11.4	16.2
	Foreign (net)4		−4.1	−0.9	−2.8	−5.9	−43.0
	Change in arrears5		−2.6	12.9	−6.4	4.3	2.1
	Other6		4.0	…	4.0	…	…
GDP			560.3	808.8	1,149.4	1,557.8	2,104.1

Source: Table 3.1.

¹Comprising the state budget, extrabudgetary funds, and local governments.

²1993 data include revenues from the VAT that replaced turnover taxes in July 1993.

³interest obligations on external debt are recorded on a cash basis, interest obligations on domestic debt are recorded on an accrual basis.

⁴Assume net repayment remains unchanged in U.S. dollar terms from previous year.

⁵Excludes external interest payments arrears, which are recorded on a cash basis above the line.

⁶Unallocated financing.

Table 6.4.

Balance of Payments in Convertible Currencies¹

(In billions of zlotys; unless otherwise indicated)

Source: Based on Table 4.3.

¹Converted from Table 4.3.

²Includes credit extended, cost of debt reduction, short-term capital, valuation changes, and errors and omissions.

³Includes both official and commercial banks’ net international reserves.

⁴On an accrual basis, including unrecorded trade and statistical discrepancy.

Table 6.4.

Balance of Payments in Convertible Currencies¹

(In billions of zlotys; unless otherwise indicated)

			1990	1991	1992	1993	1994
Merchandise exports, f.o.b.			142,633	134,950	190,723	246,092	385,155
Merchandise imports, f.o.b.			−103,797	−134,410	−183,747	−287,630	−404,151
	Trade balance		38,836	540	6,976	−41,538	−18,996
Services, net			57	236	344	369	1,295
Receipts			16,844	16,678	21,965	33,440	47,718
Payments			−16,787	−14,182	−17,278	−26,756	−46,423
Income net			−32,015	−31,051	−22,523	−23,404	−33,767
	Interest payment due		−37,145	−35,990	−30,890	−32,462	…
		Paid	−4,503	−9,360	−14,948	−14,981	…
		Debt relief provided	−24,187	−15,367	–	–	…
		Arrears incurred	−8,455	−11,263	−15,942	−17,481	…
Current transfers, net			18,430	4,230	7,195	16,829	26,859
Unrecorded trade			−	2,929	16,105	31,701	72,964
	Current account
		(Excluding unrecorded trade)	25,308	−23,785	−3,665	−41,429	−24,609
		(Including unrecorded trade)	25,308	−20,856	12,440	−9,728	48,355
	Capital and financial account		−41,287	−85,497	4,128	26,575	60,920
Medium- and long-term capital, net			−24,976	−64,080	−3,979	−8,532	704
	Disbursements		4,066	8,313	7,658	16,702	20,314
	Amortization due		−29,042	−72,393	−11,637	25,234	−19,610
		Paid	(−3,506)	(−3,670)	(−6,036)	(−16,358)	(−11,430)
		Debt relief provided	(−24,558)	(−30,977)	(2,752)	−	(…)
		Arrears incurred	(−978)	(−37,746)	(−2,849)	(−8,876)	(…)
Direct investment			95	1,237	3,870	10,507	12,316
Short-term capital and other, net2			−16,406	−22,654	4,237	24,600	47,900
	Overall balance		−15,979	−109,282	463	−14,854	36,311
	Financing		15,979	109,282	−463	14,856	−36,311
Change in international reserves
		(−, increase)3	−42,199	13,929	−22,006	−11,503	−57,580
	Of which: use of Fund resources, net		4,750	3,405	−	−2,627	13,497
Debt relief (interest and principal)			48,745	46,344	2,752	−	179,512
Change in arrears			9,434	49,009	18,790	26,357	−158,243
Memorandum items:
	Exchange rate (zloty/U.S. dollar; period average)		9,500	10,576	13,626	18,115	22,723
	Current account (percent of GDP)
		(Excluding unrecorded trade)	4.5	−2.9	−0.3	−2.7	−1.2
		(Including unrecorded trade)	4.5	−2.6	1.1	−0.6	2.3
	Exports of goods and services
		(trillions of zlotys)4	160.5	190.3	272.4	357.3	515.0
	Imports of goods and services
		(trillions of zlotys)4	120.5	205.8	254.8	342.1	497.7

Source: Based on Table 4.3.

¹Converted from Table 4.3.

²Includes credit extended, cost of debt reduction, short-term capital, valuation changes, and errors and omissions.

³Includes both official and commercial banks’ net international reserves.

⁴On an accrual basis, including unrecorded trade and statistical discrepancy.

View Table

Table 6.4.

Balance of Payments in Convertible Currencies¹

(In billions of zlotys; unless otherwise indicated)

			1990	1991	1992	1993	1994
Merchandise exports, f.o.b.			142,633	134,950	190,723	246,092	385,155
Merchandise imports, f.o.b.			−103,797	−134,410	−183,747	−287,630	−404,151
	Trade balance		38,836	540	6,976	−41,538	−18,996
Services, net			57	236	344	369	1,295
Receipts			16,844	16,678	21,965	33,440	47,718
Payments			−16,787	−14,182	−17,278	−26,756	−46,423
Income net			−32,015	−31,051	−22,523	−23,404	−33,767
	Interest payment due		−37,145	−35,990	−30,890	−32,462	…
		Paid	−4,503	−9,360	−14,948	−14,981	…
		Debt relief provided	−24,187	−15,367	–	–	…
		Arrears incurred	−8,455	−11,263	−15,942	−17,481	…
Current transfers, net			18,430	4,230	7,195	16,829	26,859
Unrecorded trade			−	2,929	16,105	31,701	72,964
	Current account
		(Excluding unrecorded trade)	25,308	−23,785	−3,665	−41,429	−24,609
		(Including unrecorded trade)	25,308	−20,856	12,440	−9,728	48,355
	Capital and financial account		−41,287	−85,497	4,128	26,575	60,920
Medium- and long-term capital, net			−24,976	−64,080	−3,979	−8,532	704
	Disbursements		4,066	8,313	7,658	16,702	20,314
	Amortization due		−29,042	−72,393	−11,637	25,234	−19,610
		Paid	(−3,506)	(−3,670)	(−6,036)	(−16,358)	(−11,430)
		Debt relief provided	(−24,558)	(−30,977)	(2,752)	−	(…)
		Arrears incurred	(−978)	(−37,746)	(−2,849)	(−8,876)	(…)
Direct investment			95	1,237	3,870	10,507	12,316
Short-term capital and other, net2			−16,406	−22,654	4,237	24,600	47,900
	Overall balance		−15,979	−109,282	463	−14,854	36,311
	Financing		15,979	109,282	−463	14,856	−36,311
Change in international reserves
		(−, increase)3	−42,199	13,929	−22,006	−11,503	−57,580
	Of which: use of Fund resources, net		4,750	3,405	−	−2,627	13,497
Debt relief (interest and principal)			48,745	46,344	2,752	−	179,512
Change in arrears			9,434	49,009	18,790	26,357	−158,243
Memorandum items:
	Exchange rate (zloty/U.S. dollar; period average)		9,500	10,576	13,626	18,115	22,723
	Current account (percent of GDP)
		(Excluding unrecorded trade)	4.5	−2.9	−0.3	−2.7	−1.2
		(Including unrecorded trade)	4.5	−2.6	1.1	−0.6	2.3
	Exports of goods and services
		(trillions of zlotys)4	160.5	190.3	272.4	357.3	515.0
	Imports of goods and services
		(trillions of zlotys)4	120.5	205.8	254.8	342.1	497.7

Source: Based on Table 4.3.

¹Converted from Table 4.3.

²Includes credit extended, cost of debt reduction, short-term capital, valuation changes, and errors and omissions.

³Includes both official and commercial banks’ net international reserves.

⁴On an accrual basis, including unrecorded trade and statistical discrepancy.