Republic of Belarus
Technical Assistance Report-Work of Mission on Development of Potential in Area of Government Finance Statistics

In consultation with the Republic of Belarus Ministry of Finance (MoF), a government finance statistics (GFS) technical assistance (TA) mission from the IMF’s Statistics Department (STA) visited Minsk from November 13 through 24, 2017. The main objective of the mission was to take stock of the progress in government finance statistics in the Republic of Belarus and to provide assistance to the MoF in improving the quality of statistical data. Government finance statistics provide a comprehensive conceptual and accounting framework suitable for the analysis and evaluation of fiscal policy, and in particular the performance of the general government sector of any country. One of the biggest advantages of the introduction of GFS methodology into budgeting is the achievement of consistency in budgeting, financial reporting, and statistics. Use of the same terminology by those engaged in budgeting, reporting, and statistics should ensure common understanding among all of the stakeholders. The comparability of numbers, tables, and accounts is significantly enhanced, which means an improvement in productivity and in the timely availability of data.

Abstract

In consultation with the Republic of Belarus Ministry of Finance (MoF), a government finance statistics (GFS) technical assistance (TA) mission from the IMF’s Statistics Department (STA) visited Minsk from November 13 through 24, 2017. The main objective of the mission was to take stock of the progress in government finance statistics in the Republic of Belarus and to provide assistance to the MoF in improving the quality of statistical data. Government finance statistics provide a comprehensive conceptual and accounting framework suitable for the analysis and evaluation of fiscal policy, and in particular the performance of the general government sector of any country. One of the biggest advantages of the introduction of GFS methodology into budgeting is the achievement of consistency in budgeting, financial reporting, and statistics. Use of the same terminology by those engaged in budgeting, reporting, and statistics should ensure common understanding among all of the stakeholders. The comparability of numbers, tables, and accounts is significantly enhanced, which means an improvement in productivity and in the timely availability of data.

Executive Summary

In consultation with the Republic of Belarus Ministry of Finance (MoF), a government finance statistics (GFS) technical assistance (TA) mission from the IMF’s Statistics Department (STA) visited Minsk from November 13 through 24, 2017.

The main objective of the mission was to take stock of the progress in government finance statistics in the Republic of Belarus and to provide assistance to the MoF in improving the quality of statistical data.

Government finance statistics provide a comprehensive conceptual and accounting framework suitable for the analysis and evaluation of fiscal policy, and in particular the performance of the general government sector of any country. One of the biggest advantages of the introduction of GFS methodology into budgeting is the achievement of consistency in budgeting, financial reporting, and statistics. Use of the same terminology by those engaged in budgeting, reporting, and statistics should ensure common understanding among all of the stakeholders. The comparability of numbers, tables, and accounts is significantly enhanced, which means an improvement in productivity and in the timely availability of data.

The mission noted that the annual and quarterly GFS data for Belarus are compiled for all subsectors of the general government sector and are provided in a timely manner to the IMF STA via the Integrated Collection System (https://www-ics.imf.org). As of 2017, it is possible to compile a balance sheet for the general government sector on a quarterly basis. At this point GFS are compiled only in monetary form (with some elements of nonmonetary transactions). An analysis of the available source data/budget classifications and conversion tables used to compile statistics revealed some inconsistencies with the Government Finance Statistics Manual 2014 (GFSM 2014). The technical capacities allow for the automated compilation of GFS data.

The Belarusian economy experienced a recession in 2015–2016, and significant public funds were injected into state-owned enterprises (SOEs). Under the current legislation and/or SOE business plans, capital injections into enterprises experiencing financial distress were recorded in GFS as an acquisition of financial assets, which did not always correspond to the economic reality. Measures taken by the government to bail out SOEs should be recorded in accordance with the requirements of GFSM 2014, that is, depending on the economic substance of the specific operation, and its impact on the deficit or lack thereof should be considered on a case-by-case basis.

Pursuant to a decision by the Ministry of Finance, as of 2018 contributions to the authorized capital of SOEs will be recorded on the expenditure side of the budget.

The mission was informed that some transactions, i.e., transactions that do not actually pass through bank accounts, are not recorded in the accounting statements and consequently were not reported in GFS. This concerns directed credits from foreign governments (e.g., a Russian loan for nuclear power plant construction) and from international institutions (loans from the International Bank for Reconstruction and Development (IBRD) for specific projects).

Defining coverage of the general government sector and the public sector is extremely important not only for GFS purposes, but also for the compilation of other macroeconomic and financial statistics. At present GFS in Belarus cover the national budget and local budgets, the budget of the Social Security Fund (SSF) under the Ministry of Labor and Social Security, and other state extrabudgetary funds, as well as extrabudgetary funds of institutions supported by the budget, that is, only government units. The National Statistical Committee (NSC) is the agency responsible for defining institutional sectors in Belarus. The NSC has prepared a methodology for defining institutional sectors of the economy based on the requirements of the System of National Accounts 2008 (2008 SNA). The mission was informed that a list of institutional units in the general government sector and the public sector for 2016 should be ready by the end of 2017.

As part of the project to modernize public financial management supported by the IBRD, the Ministry of Finance is preparing to implement public sector accounting and financial reporting reform by introducing the International Public Sector Accounting Standards (IPSAS). A conceptual framework is currently being developed.

The mission discussed and generally agreed with the Ministry of Finance on the priority recommendations and action plan for the introduction of GFSM 2014. A detailed list of actions is presented in Subsection A of the Technical Documentation section.

Table 1.

Republic of Belarus: Priority Recommendations

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Implementation of the previous mission’s recommendations is presented in Subsection B of the Technical Documentation section.

The mission would like to express its gratitude to the staff of the Ministry of Finance and specialists from other agencies, including the NSC and the National Bank, for their productive cooperation and assistance during the mission’s visit to Minsk. The mission is also grateful for the support of the staff of the IMF Resident Representative Office in Minsk.

Detailed Overview and Mission Recommendations

A. Source Data: Budget Classifications And Conversion Tables

1. The budget classification (BC) approved by Resolution No. 208 of the Republic of Belarus (RB) Ministry of Finance (MoF) of December 31, 2008, includes: a classification of budget revenue, a functional classification of budget expenditures, a classification of budget expenditures by program, by institution and by economic type, a classification of budget deficit financing, and a classification of types of public debt of the Republic of Belarus. A uniform budget classification is used at all levels of the RB’s budget system.

2. The mission finds that the budget classifications are not entirely consistent with the analytic framework of the Government Finance Statistics Manual 2014 (GFSM 2014) – the concepts of the Government Finance Statistics Manual 1986 (GFSM 1986) are still being used in the budget classifications. Revenue is broken down into: (a) tax revenue; (b) contributions to state social insurance; (c) nontax revenue; and (d) grants. The Nontax revenue group (the Revenue from income-generating activity subgroup) includes income from the sale of state property, that is, transactions in nonfinancial assets. The main categories in the economic classification of expenditures are: (a) current expenditures; (b) capital expenditures; (c) lending minus repayments; and (d) financial reserve. That is, the difference between nonfinancial/financial assets and expenditures is not defined. The financial reserve is not even a transaction. Wages and social contributions are listed under the item Purchases of goods and payment for services. Deficit financing (sources of financing) covers the net incurrence of liabilities, proceeds from privatization, payments related to the acquisition of shares and an increase in the state’s stake in authorized capital, as well as the exchange rate difference, that is, holding gains/losses.

3. Starting in 2019, some changes will be made – budget loans will be moved to sources of financing, and contributions to authorized capital will be classified under expenditures as capital transfers.

Recommendation:

In parallel with the accounting and financial reporting reform being carried out in the public sector as part of the project to modernize public financial management supported by the International Bank for Reconstruction and Development (IBRD), incorporate the analytical framework and classification code system provided in GFSM 2014 into the RB budget system.

4. The mission analyzed the conversion tables used in the compilation of government finance statistics (GFS) and recommended the revision of some of the classification codes that are not consistent with GFSM 2014. For example, the following were recorded as current claims under the revenue item Premiums, fees, and claims related to nonlife insurance and standardized guarantee schemes (145): (a) compensation for losses, damages; (b) funds confiscated for violation of the legislation; and (c) other nontax revenue. These items have nothing to do with standardized guarantee schemes. It turned out that the Other nontax revenue item consists of around 30 different subitems of varying content such as: income from the transfer of a portion of net profits and other payments from the performance of lottery activities, the toll for travel by heavy and/or oversize vehicles on common-carrier roads, the fee for the placement (distribution) of outdoor advertising, proceeds from the sale of complaint and suggestion books, and so on. The conversion tables are provided in Subsection C of the Technical Documentation section.

Recommendation:

Follow the corrected conversion tables in the compilation of GFS.

B. Annual Reporting for 2016

5. Data from the RB’s 2016 annual reporting provided for the International Monetary Fund’s Yearbook were reviewed during the mission. The GFS annual reporting by the Republic of Belarus covers all of the budgets in the budget system and is compiled on a consolidated basis. GFS are presented with a breakdown by the following subsectors of the general government sector: central government (republican budget and extrabudgetary funds), social security funds (Social Security Fund of the Ministry of Labor and Social Security), and local governments. In addition, consolidated data for the central government and social security funds are calculated for reference purposes. The data in the GFS annual reporting contain the Statement of Operations, but there are no data based on the accrual method. The only difference from the Statement of Sources and Uses of Cash is in the noncash operations (netting of mutual claims, transfer of property). Other comments regarding the 2016 GFS are presented in Subsection D of the Technical Documentation section.

Recommendation:

Provide the IMF Statistics Department (STA) with updated annual reporting data on GFS for 2015–2016, make changes following the corrected conversion tables and other recommendations by the mission.

C. Capital Injections Into Enterprises

6. Capital injections into enterprises may be recorded in GFS: (a) as an expense (capital transfers) or (b) as transactions in financial assets (issuance of a loan or an addition to equity). A capital injection in the form of a capital transfer is recorded when funds are provided: (a) without receiving anything of equal value in exchange; (b) without a reasonable expectation of a realistic rate of return; (c) to compensate for the impairment of assets or capital as a result of large operating deficits accumulated over two or more years, or exceptional losses due to factors outside the control of the enterprise (GFSM 2014, paragraph A3.50). When a capital injection is made in a form other than a loan and there is a realistic expectation of a return on the investment, an increase in financial assets in the form of equity is recorded in GFS (GFSM 2014, paragraph A3.49). When the government intervenes by means of a capital injection that is legally in the form of a loan to a corporation in distress, the statistical treatment depends on whether the investor unit obtains an effective financial claim1 on the corporation (GFSM 2014, paragraph A3.27).

7. The Republic of Belarus Ministry of Finance reviewed the contributions to the authorized capital of enterprises and decided that in terms of their economic substance these contributions are capital transfers, not the acquisition of equity. Starting in 2018, contributions to the authorized capital of state-owned enterprises (SOEs) will be recorded “above the line,” that is as expenditures, in the budget, and accordingly in its execution.

Recommendation:

Following this same principle, revise the 2015–2017 GFS – record contributions to the authorized capital of SOEs as capital transfers.

8. The Belarusian authorities took a number of steps aimed at the repayment of corporate debt to banks (including the honoring of guarantees) by issuing government bonds and local government bonds. Within the legal framework of the Republic of Belarus, these operations were recorded as an assignment of a right of claim – the right of claim was transferred to central or local government authorities, while some of the loans were transferred to the Asset Management Agency (AMA), which was created specifically for this purpose.

9. There are several possibilities for recording the assumption of debt in statistics:

  • a. The new creditor (central/local government authorities or the AMA) acquires an effective financial claim on the corporation, and the value of the claim is equal to the amount of repaid debt to banks. The new creditor records an increase in liabilities (securities) and the acquisition of financial assets (loans). If it turns out that the corporation is still not able to repay the loan to the government, debt forgiveness is recorded – the unpaid amount is recorded in expenditures as a capital transfer;

  • b. The new creditor (central/local government authorities or the AMA) acquires an effective financial claim on the corporation, and the value of the claim is less than the amount of repaid debt to banks. The new creditor records an increase in liabilities (securities), the acquisition of financial assets (loans), and expenditures in the form of a capital transfer (in the amount of the difference between the securities issued and the financial asset acquired in the form of loans). If it turns out that the financial claim was not effective and the corporation is not able to repay the loan to the government, debt forgiveness is recorded – the unpaid amount is recorded in expenditures as a capital transfer;

  • c. The new creditor (central/local government authorities or the AMA) does not acquire an effective financial claim on the corporation, and records an increase in liabilities (securities) and expenditures in the form of a capital transfer.

10. The mission received an official letter from the Republic of Belarus Ministry of Finance in which the Belarusian authorities expressed confidence that the loans made to enterprises under contracts for the assignment of claims are the same as budget loans (see Subsection D of the Technical Documentation section). That is, these loans assume the repayment of funds to the budget – the specific deadlines for repayment are established by decrees of the President of the Republic of Belarus. In the opinion of the Republic of Belarus Ministry of Finance, the government (in the person of central/local government authorities or the AMA) acquired effective financial claims, which should be recorded as the acquisition of financial assets.

11. The mission suggests that Decree No. 281 of the President of the Republic of Belarus of June 29, 2015, on Stabilization of the Financial Condition of Organizations under the Gomselmash (Gomel Agricultural Machinery) Holding Company be considered as an example. Pursuant to the decree, in 2015 the central government issues government bonds in the amount of US$425.8 million, with redemption in 2019–2022 at an interest rate of 7 percent. The bonds are acquired by banks (banks and the amounts that they are supposed to acquire are specified in the decree). The funds received by the government as a result of the bond issue are transferred to the Gomselmash Holding Company in the form of a loan. Gomselmash uses the loan to repay bank credits (the same banks and the same amounts as the bonds issued). So, Gomselmash now has a debt to the central government, with a final repayment date of June 30, 2022. At this point it appears that the recording of this transaction as the acquisition of financial assets by the central government does not raise any doubts. But later on, in 2017, another decree is issued (No. 372 of October 10, 2017), which shifts the final repayment date for the debt owed by Gomselmash to the government to December 31, 2029.

12. When guarantees are called, this same sort of arrangement is treated as a budget loan provided to an enterprise. Decree No. 280 of the President of the Republic of Belarus of August 7, 2017, on Measures for the Financial Recovery of Organizations in the Agro-Industrial Complex, can be considered as an example. It outlines strict measures that will be undertaken in the event that the deadlines for repayment of the debt to the respective budget are not met. The annex to this decree lists 16 enterprises and one can see that guarantees were provided to each of them from one year to the next. For example, Vileyka Mixed Feed Mill Open Joint-Stock Company (OJSC) owes the government for calling guarantees in 2004, 2008, 2009, 2010, 2011, 2012, 2014, and 2015. That is, new guarantees were provided in spite of the fact that the enterprise itself was not able to repay the loans received. Under the guarantee provided in 2004, the amount of accrued interest owed on the called guarantees was more than the amount of the guarantee that was called.

13. The mission would like to point out that a guarantee provided by the government to a corporation in distress that has a high likelihood of being called should be recorded as if this guarantee were called at the time it was provided, that is, as the assumption of debt.

14. The mission notes that the scale of this kind of government assistance to enterprises is quite large, not only in terms of the amount, but also in terms of the number of recipients of assistance and the number of legal documents. It is a challenge for both statisticians and analysts to keep track of all of the changes. The fact that not a single case of the assumption and/or forgiveness of debt was reported out of such a large volume points to the absence of individual assessment. The idea that all of these rights of claim are real financial assets raises doubts and is not consistent with the economic reality – that the Belarusian economy experienced a crisis. The existence of repayment deadlines established by decrees of the President of the Republic of Belarus cannot be considered a sufficient criterion for an effective financial claim. And the same is true for the fact that some credits provided by the national budget or local governments in previous years (under various arrangements) are being repaid. An emphasis still needs to be placed not on the existence of contracts and repayment deadlines, but on the reasonable expectation that the claim will be satisfied and on the economic substance of these transactions. All of this assistance to enterprises has come at a very high price to the government (national and local government authorities), which can be seen in real terms in an increase in debt. For the enterprises, the debt reorganization meant an easing of the original terms. The state was also the initiator – it was the state that sought to provide assistance (see the Public Sector Debt Statistics: Guide for Compilers and Users (PSDSG), paragraph 4.57).2 The correct recording of these operations is as capital transfers to enterprises. The amounts received from enterprises (principal and interest) are recorded under revenue as capital transfers (1442).

15. According to Belarusian data provided to the IMF, in 2016 net acquisition of financial assets in the general government sector increased by 1,569.6 million rubles, while net incurrence of liabilities declined by 35.1 million rubles. Net lending was equal to 1,604.7 million rubles. Based on the Belarusian data for 2016, the mission prepared two versions of the recalculation of transactions in financial assets and liabilities – see Subsection F of the Technical Documentation section. In the first version, the amounts incorrectly shown as a reduction in accounts payable are moved to the loans category under financial assets, and we obtain the actual figure for the net incurrence of liabilities, but the net acquisition of financial assets turns out to be 2.6 times more than the net incurrence of liabilities. Net lending remains the same. In the second version, we move the acquisition of financial assets (loans and equity) “above the line,” as capital transfers. The numbers obtained appear to be the ones most consistent with the economic reality – net incurrence of liabilities is equal to 999.1 million rubles, net acquisition of financial assets is equal to 253.6 million rubles, and net borrowing is 737.5 million rubles. The net incurrence of liabilities is greater than the net acquisition of financial assets, and as a result we have net borrowing, not net lending.

Recommendation:

The mission recommends that careful consideration be given to cases involving the repayment of enterprises’ debt to banks/honoring of guarantees. Record transactions in GFS according to their economic substance. Revise the years 2015–2017.

D. Nonmonetary Operations

16. According to the accrual method, all events that lead to the creation, conversion, exchange, transfer, or disappearance of economic value are recorded in the Statement of Operations or in the Statement of Other Economic Flows. All entries in GFS have to be measured in monetary terms. In some cases, the amounts entered are the actual payments that form part of flows, and in other cases the amounts entered are estimated by reference to monetary value. All operations, whether they are monetary operations or not, are included in statistics that are compiled on an accrual basis.

17. One of the steps in the transition from the cash basis of reporting GFS to the accrual basis is the introduction of some nonmonetary items: (a) in-kind transactions; (b) debt transactions; (c) accounts payable; and (d) accrued interest. The inclusion of these elements significantly expands the coverage of flows and the analytical possibilities of fiscal statistics. This enables countries to take advantage of the benefits of accrual accounting, without incurring the cost of the full adoption of this type of accounting. The next step is the recording of other economic flows in statistics, that is, holding gains/losses (for example, holding gains/losses on assets and liabilities resulting from changes in foreign exchange rates) and other changes in the volume of assets (including classification changes, GFSM 2014, paragraph 10.77).

18. During the mission it became clear that some of the transactions related to loans from foreign governments and international organizations were not recorded in GFS. This is true for tied (or earmarked) loans from the IBRD, as well as the loan from the Russian Federation for construction of the nuclear power plant (NPP). The government/Republic of Belarus Ministry of Finance is the debtor, and everything is reported correctly in public debt statistics, that is in the stock of debt. The problem is that the funds are not posted to government bank accounts – the funds are paid directly to the contractors under the relevant projects. These transactions are not reported in the budget at all, and therefore they are not reported in GFS, either. It should be noted that the payment of interest and principal on the debt is handled through the budget.

19. Two types of these loans are identified depending on who the ultimate beneficiary is: beneficiaries in the general government sector or corporations. The reporting for these two types of credits in GFS will also be different. The way of reporting in GFS is provided in Subsection G of the Technical Documentation section.

Table 2.

Transactions involving tied loans (in millions of dollars)

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Republic of Belarus Ministry of Finance data.

Recommendation:

Include nonmonetary transactions involving tied loans in GFS. Revise the years 2015–2017.

E. Coverage of GFS

20. 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. In the compilation of statistics, it is important to ensure full coverage of the general government sector/subsectors (central government, regional or local governments, and social security funds). At this time the Republic of Belarus GFS cover the national budget, the SSF budget, and local government budgets – that is, all budgetary units.

21. The mission held a working meeting with specialists from the Republic of Belarus National Statistical Committee (NSC). One of the issues discussed during the meeting was the distribution of institutional units by sector of the economy, since this is one of the governing principles of all macroeconomic statistics. The maintenance of a list or register of such units and their classification by sector will provide for a harmonized classification in all sets of macroeconomic data. NSC Resolution No. 219 of December 30, 2015, on Approval of the Statistical Classification SK 00.007–2015 – Institutional Units by Sector of the Economy, entered into force on January 1, 2017. This statistical classification was developed on the basis of the 2008 System of National Accounts (SNA 2008), and it follows the general structure of the classification of institutional sectors in SNA 2008. Explanations regarding the application of the classification for the coding of institutional units have also been added. The NSC states that the criteria for the assignment of institutional units to sectors (subsectors) of the economy have been defined in full accord with the methodological provisions of SNA 2008.

22. The control criterion needs to be used when deciding whether a resident institutional unit is public or private. The mission notes that the definition of criteria of government control over commercial or nonprofit institutional units in the resolution referred to above is not consistent with the provisions of GFSM 2014. In the resolution, control over commercial institutions (paragraph 3.4) is defined primarily by the government’s stake (50 percent or more), while control over nonprofit institutions (paragraph 3.6) is defined by the degree of financing and influence over their activities. Following GFSM 2014, more indicators of control need to be taken into account – ownership of the majority of the voting interest, control of the board or other governing body, control of the appointment and removal of key personnel, control of key committees of the entity, golden shares and options, regulation and control, control attached to borrowing from the government, control by a dominant public sector customer or group of public sector customers, and so on.

Recommendation:

When determining control criteria, follow Box 2.2 – Government Control of Corporations and Box 2.1 – Government Control of Nonprofit Institutions in GFSM 2014.

23. The mission was informed that there are plans to have a list of general government sector and public sector units for 2016 before the end of 2017. This is a challenging task, since the public sector in the Republic of Belarus is extremely large. The mission would like to mention the NPP and AMA. While the NPP is under construction, it is considered a public nonmarket producer, and it should be in the general government sector. When the NPP begins to produce electricity and sales cover more than 50 percent of costs, the NPP will move into the nonfinancial corporations sector. The way of reporting this in GFS is presented in Subsection H of the Technical Documentation section.

24. The Asset Management Agency OJSC was established in order to acquire assets arising from loans made by banks and the Development Bank to agricultural entities from said banks and the Development Bank on the basis of agreements on the assignment of claims. The founders of the AMA are the central government and local governments, while management of the agency has been delegated to the State Property Committee. The central government’s shares have been placed under the fiduciary management of Belagromprombank (Belarusian Agro-Industrial Bank) OJSC. According to the laws of the Republic of Belarus, the AMA is not a bank or a nonbank lending and financial institution, although the taxation of its income is performed according to the procedure established for banks. Thus, the AMA acts as a creditor of agricultural companies, but the funds received (loans and interest) from debtors must be turned over to the central government, with the exception of funds needed to cover the AMA’s operating costs.

25. Bearing in mind that: (i) the AMA was created for the purpose of performing a specific task and operates as a special agent of the government; (ii) the AMA does not borrow independently in the market and does not assume any risk associated with its activities; (iii) the financing of restructuring operations was performed through capital injections by the central and local governments; and (iv) the acquisition of financial assets from banks and the Development Bank was performed not at market value, the AMA should be classified in GFS as a general government unit (see GFSM 2014, paragraph 2.130).

Recommendation:

Include the NPP and the AMA in the general government sector and revise the GFS data accordingly. Governed by the list of general government sector units presented by the NSC, consider the possibility of including data of other nonmarket NPIs that are controlled by government units in GFS.

F. Dissemination of Debt Statistics

26. In 2010 the World Bank (WB) and the IMF created a unified public sector debt database.3 The database was organized for the purpose of facilitating the timely dissemination of quarterly debt statistics for the general government sector and the public sector and to support macroeconomic analysis. The standard format facilitates the comparison of data from different countries. The database contains information about general government sector and public sector debt with a breakdown by instruments, maturities, residence of the creditor, and currency. The submission of quarterly data on central government debt with a breakdown by instruments is a minimum requirement for participation. The PSDSG is also available in Russian http://www.tffs.org/pdf/method/2013/russian/psdsr.pdf.

27. Staff of the Main Public Debt Administration under the Ministry of Finance expressed an interest in joining this initiative.

Recommendation:

Join the unified World Bank/IMF database. Provide for the submission of quarterly data on gross central government and general government sector debt in terms of loans and debt securities.

Technical Documentation

A. Action plan for the introduction of GFSM 2014

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B. Implementation of recommendations from the GFS mission (July 22 through August 2, 2013)

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C. Conversion tables4

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D. Revision of GFS data for 2016

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E. Letter from the Republic of Belarus Ministry of Finance

REPUBLIC OF BELARUS MINISTRY OF FINANCE

7 Sovetskaya Street, Minsk, 220010

Tel: (017) 222 61 37, Fax: (017) 222 45 93

Govt. Agency Universal Classification Code 02200, Settlement Acct. No. 3604900000573

ASB Belarusbank OJSC, Code 795, Taxpayer Identification No. 1000691903

November 24, 2017

No. 2–1–6/233

Dalia Budko

International Monetary Fund Expert

With regard to the recording of transactions under contracts assigning the right of claim on loans made to organizations in the real sector of the economy, which was raised during the International Monetary Fund’s technical assistance mission on government finance statistics in the Republic of Belarus, the Ministry of Finance has the following to report.

Transactions involving the reassignment of bank loans to the national and local budgets are essentially the same as budget loans (they entail the repayment of funds to the budget). The need to repay said funds is also determined by the legislation of the Republic of Belarus, among other things (decrees of the President of the Republic of Belarus establish specific deadlines for the repayment of funds to the budget with regard to all decisions).

In accordance with the 2014 edition of the Government Finance Statistics Manual (Box 6.3 – Transactions with Public Corporations), only if the government makes an investment in a public corporation without a reasonable expectation of a realistic rate of return on the investment is this recorded as a capital transfer.

In light of the above, we believe that transactions under contracts assigning a right of claim need to be recorded “below the line,” that is, in sources of budget deficit financing.

/s/

V. V. Amarin

Minister

2–1 Tikhonovich

309 42 62

F. Versions of the recalculation of transactions in financial assets and liabilities in 2016, millions of rubles

Official data of the Republic of Belarus submitted to the IMF

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Version 1: amounts incorrectly shown as a reduction in accounts payable moved to the category of loans of financial assets

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Version 2: contributions to authorized capital, guarantees called, and other “bad” assets recorded “above the line”

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*Corrected figures are highlighted in yellow.

G. Models for recording tied loans in GFS

A double-entry system is used in GFS to report all flows. In a double-entry system each transaction is recorded by two entries of equal value, which are traditionally called credit and debit entries.

Transactions that are currently still missing from GFS are presented in the models.

A simplified model in which a general government sector unit is the ultimate beneficiary. The government obtains an external loan, and the general government sector unit acquires fixed capital. The general government sector unit obtains funds on a non-refundable basis.

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A simplified model in which a state-owned enterprise is the ultimate beneficiary. The government obtains an external loan and makes a loan to an SOE. The SOE obtains funds on a refundable basis, that is, it must repay the loan to the government, with the relevant entries in the budget.

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H. Model for recording the nuclear power plant in GFS

A simplified model (we do not show interest and taxes) for recording flows related to inclusion of the NPP in the general government sector and its removal from the general government sector when the NPP begins to produce and sell electricity at market prices.

At the point that the government obtains the loan and makes a loan to the NPP:

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During the construction of the NPP:

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At the point that the NPP is reclassified from GG to the nonfinancial corporations sector. Entries are made only in the statement of change in net worth due to other changes in the volume of assets and liabilities and accordingly in the balance sheet of assets and liabilities (see GFSM 2014, paragraph 10.77):

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I. List of officials met during the mission

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1

An “effective financial claim” is understood to be a claim that is supported by a contract (agreement) between the creditor and the debtor, with a reasonable expectation to be called, that the original debtor will reimburse the new creditor.

2

The debt assumer (new debtor) does not acquire an effective financial claim on the original debtor. This may be the case when the original debtor is bankrupt or no longer a going concern, or when the debt assumer seeks to convey a benefit to the original debtor. The debt assumer records an expense in the form of a capital transfer/grant to the original debtor, and an increase in debt liabilities to the original creditor.

3

Quarterly Public Sector Debt (QPSD) database (http://data.worldbank.org/data-catalog/quarterly-public-sector-debt).

4

Crossed items show amendments in the Conversion table suggested by the mission,

5

BC – Republic of Belarus Budget Classification, approved by Republic of Belarus Ministry of Finance Resolution No. 208 of December 31, 2008.