Republic of Madagascar
Technical Assistance Report-Government Finance Statistics Mission

This Technical Assistance paper on the Republic of Madagascar explains the need for the Malagasy authorities to adopt the Government Finance Statistics Manual (GFSM) 2014 concepts, definitions, and methodology as part of the macroeconomic statistics improvement Project. The report recommends that it is important to improve macroeconomic analysis and monitoring of the overall impact of government finances on the country’s economy, something that other public finance ‘figures’ of a budgetary and accounting nature are not intended to do. The report shows that steady progress continues with the preparation of a bridge table between the chart of accounts and the GFSM 2014 classifications. Notable improvements have been made in the presentation of Other Net Treasury Operations, the detailed components of which were identified and can now be presented on a gross basis. Based on the progress made, the prospect of compiling consolidated GFS covering all subsectors of the Malagasy general government in a not-too-distant future is encouraging.

Abstract

This Technical Assistance paper on the Republic of Madagascar explains the need for the Malagasy authorities to adopt the Government Finance Statistics Manual (GFSM) 2014 concepts, definitions, and methodology as part of the macroeconomic statistics improvement Project. The report recommends that it is important to improve macroeconomic analysis and monitoring of the overall impact of government finances on the country’s economy, something that other public finance ‘figures’ of a budgetary and accounting nature are not intended to do. The report shows that steady progress continues with the preparation of a bridge table between the chart of accounts and the GFSM 2014 classifications. Notable improvements have been made in the presentation of Other Net Treasury Operations, the detailed components of which were identified and can now be presented on a gross basis. Based on the progress made, the prospect of compiling consolidated GFS covering all subsectors of the Malagasy general government in a not-too-distant future is encouraging.

Summary of Mission Outcomes and Priority Recommendations

1. At the request of the Ministry of Finance and Budget (MFB) of Madagascar, and in consultation with the African Department of the International Monetary Fund (IMF), a technical assistance (TA) mission on government finance statistics (GFS) from the Statistics Department visited Antananarivo from March 4 to 15, 2019. The purpose of the mission was for the Malagasy authorities to adopt the Government Finance Statistics Manual (GFSM) 2014 concepts, definitions, and methodology as part of the macroeconomic statistics improvement project, namely the Enhanced Data Dissemination Initiative 2 (EDDI 2), financed by the Department for International Development (DFID); and Madagascar’s Strategic Plan to Modernize Government Finances (Programme Stratégique de Modernisation des Finances Publiques – PSMFP). This mission is also a continuation of previous TA missions on this topic (January and December 2016, and March 2018).

2. Reliable, regularly disseminated GFS make it possible to:

  • Improve macroeconomic analysis and monitoring of the overall impact of government finances on the country’s economy, something that other public finance “figures” of a budgetary and accounting nature are not intended to do;

  • Specify the calculation of certain indicators, such as the debt ratio, at various levels of the government and public sector;

  • Improve international data comparisons;

  • Increase the transparency of government finances for the purpose of the democratic process, among other things; and therefore

  • Build market confidence in the financial situation and governance of the State and the general government as a whole.

3. Madagascar has made notable efforts in recent years to improve its GFS production, as evidenced by the following monitoring activities:1

  • The procedures for adapting the Table of Comprehensive Treasury Operations (Tableau des Opérations Globales du Trésor – OGT) to the GFSM 2014 analytical framework and classifications have been grasped and are well underway.

  • Annual GFS reporting to the IMF Statistics Department resumed in 2016, and technical dialogue has been initiated between the MFB Research Directorate (Direction des études – DE) and that department.

  • A statutory document governing DE statistics activities with a view to, among other things, increasing this directorate’s prerogatives and systematizing source data reporting has been prepared. GFS compilation and dissemination are mentioned in the new DGT organizational chart The process to adopt this statutory document is ongoing.

  • Steady progress continues with the preparation of a bridge table between the chart of accounts and the GFSM 2014 classifications.*

  • Broadening the scope of GFS to extrabudgetary units, namely Administrative Public Entities (Établissements Publics Administratifs – EPA) and major nonmarket Industrial and Commercial Public Entities (Établissements Publics à Caractères Industriel et Commercial – EPIC), including the National Social Security Fund (Caisse Nationale de Prévoyance Sociale – CNaPS) and decentralized subnational governments (Collectives Territoriales Décentralisées – CTD), is now conceivable. This process has already begun through the collection of consolidated balances or financial statements from EPA and CTD, and the prospect of obtaining source data on CNaPS operations is good. * However, some problems affecting EPA and CTD accounting balances that were identified during the mission are a priority and will have to be resolved first.

  • Reporting of monthly or quarterly GFS to the Statistics Department is planned for the near future.*

  • Notable improvements have been made in the presentation of Other Net Treasury Operations (Autres Opérations du Trésor – AONT), the detailed components of which were identified and can now be presented on a gross basis.

  • At the mission closing meeting, the Director General of the Treasury announced that he had informed the Minister of Finance and Budget of the project to adopt an OGT version compliant with the GFSM 2014 at end-2019* pursuant to the performance contract2 This adoption will end the practice of producing two distinct sets of statistics at the same time.3

4. Based on the progress made, the prospect of compiling consolidated GFS covering all subsectors of the Malagasy general government in a not-too-distant future is encouraging. The mission therefore recommends continuing to adapt the monthly OGT to GFSM 2014 specificities and expanding the scope of GFS to include CNaPS, EPA, and CTD accounting or financial statements on the basis of the work already undertaken during the mission. However, the problems affecting EPA and CTD accounting balances are a priority and will have to be resolved first. The mission reiterates the need to continue the adoption of the statutory document governing DE activities.

Table 1.

Priority Recommendations

article image

Further details on the priority recommendations and corresponding actions/milestones are available in the action plan under the “Detailed Technical Assessment and Recommendations” section.

Detailed Technical Assessment and Recommendations

article image
article image
article image

A. Introduction

5. The purpose of this mission was for the Malagasy authorities to adopt GFSM 2014 concepts, definitions, and methodology as part of the macroeconomic statistics improvement project, namely the Enhanced Data Dissemination Initiative 2 (EDDI 2), financed by the DFID; and Madagascar’s PSMFP. The mission’s work was coordinated by the Research Directorate of the Directorate General of the Treasury of the Ministry of Finance and Budget, which is responsible for compiling GFS and with which most of the working meetings were held. The mission thanks the Malagasy authorities for their hospitality and for the availability and excellent cooperation of staff from the entities with which it met

6. The DE continues to produce two types of fiscal data:

  • The OGT, which is a framework for measuring the monthly financial operations of the budgetary central government, structured according to the GFSM 1986 analytical framework. This table is the basis of government finance information reported to IMF African Department missions; and

  • Annual GFS in the GFSM 2014 format, which are limited to the operations of the budgetary central government at the moment At present, these statistics are mainly intended for publication in the Government Finance Statistics Yearbook (GFSY) by the IMF Statistics Department, but it is primarily through these annual statistics that the production of Malagasy GFS could be improved.4 As part of the adoption of the GFSM 2014 analytical framework, classifications, and other methodological aspects, the OGT in its current form will have to be replaced by this manual’s Statement of Government Operations (SGO) or by a version of this statement tailored to Madagascar’s specific situation.

B. Mission Work

7. Based on the progress made thus far and given the prospect that consolidated GFS expanded to various subsectors of the Malagasy general government will be established in a not-too-distant future, the mission focused its efforts on the following:

  • Building bridge tables between the balance accounts used respectively by EPA, CTD, and the CNaPS and the GFSM 2014 categories;

  • Using these bridge tables to prepare draft GFS for 2017 covering extrabudgetary units (EPA), local governments (CTD), and the social security subsector;

  • Furthering the adaptation of the OGT to the GFSM 2014 analytical framework developed during the previous mission;

  • Reviewing the work completed since the last mission to gain a better understanding of AONTs.

C. National Social Security Fund

8. Together with DE officials, the mission met with CNaPS accounting and IT staff to inquire about the availability of annual accounting documentation on this entity’s financial operations.5 The CNaPS representatives stated that they were prepared to provide all the annual accounting information and to designate a contact with whom the DE could work if need be (for example, to obtain any clarifications or additional information).

Recommendation:

  • Gather the accounting and financial statements and initiate data processing using the draft bridge table created during the mission once it is reviewed and validated by the DE, even provisionally.

D. Extrabudgetary Entities (EPAs) and Decentralized Subnational Governments (CTDs)

9. The data sources for extrabudgetary entities (currently limited to EPA) and subnational governments consist in the respective consolidated accounting balances of these two subsectors. The mission developed bridge tables between the items of these balances and the GFSM 2014 classification categories. This classification work will have to be carefully reviewed by the DE, and then revised or corrected if necessary. The mission then applied these bridge tables to 2017 data. The immediate aim was to put in place an Excel procedure for processing data rather than producing reliable statistics for these two subsectors, which is currently not possible. The mission encountered the following problem: accounting data are not recorded in accordance with the balance architecture because there is no hierarchical distinction and each account, including root accounts (totals and subtotals), is a divisional account6 This has multiple implications:

  • Only the most basic accounts can be classified accurately;

  • The nature of root accounts is unclear because, in principle, they are a group of basic components; and therefore

  • These root accounts cannot be classified properly unless all components are assigned the same GFS category;

  • The correspondence table proposed can only be provisional and will be modified as soon as the above problem is resolved.

10. It is reasonable to assume that accounting staff is aware of these anomalies and is striving to resolve them. In any event, this aspect will have to be monitored by the DE.

Recommendation:

  • Closely monitor the modifications made to government accounting and balance presentation, notably for EPA and CTD, in order to establish GFS for these subsectors as soon as the aforementioned anomalies are resolved.

E. Other Net Treasury Operations

11. The mission examined the work carried out by the DE since the previous mission to develop AONTs based on their detailed components. Appendix 1 of this report contains details on these operations and an explanatory note. Details on the breakdown into revenue, expenditure, and financing operations integrated into the OGT as well as their classification based on GFSM 2014 categories are presented in the OGT sheet of the GFS compilation file attached to this report.

F. Prospects and Other Recommendations

12. The prospect of Madagascar adopting key aspects of international standards on GFS compilation and dissemination7 is encouraging and includes:

  • Producing monthly statistics covering the budgetary central government; and

  • Producing annual statistics covering the consolidated operations of various subsectors of the Malagasy general government.

13. The mission therefore recommends continuing to adapt the monthly OGT to GFSM 2014 specificities and, for annual statistics, expanding the scope of GFS to CNaPS, EPA, and CTD accounting or financial statements on the basis of the work already undertaken during the mission. However, the problems mentioned earlier affecting EPA and CTD accounting balances will first have to be resolved.

14. Consolidating the GFS of the general government will require the identification of the main intergovernmental transfers. To this end, transfers received and sent by each subsector will have to be identified for each entity. For budget transfers received, the source data do not necessarily have to come from the entity’s internal information, but be based, for example, on the budget execution status. Items requiring consolidation are generally:

  • Interest;

  • Capital transfers and grants;

  • Taxes (except social contribution transfers);

  • Other transfers that could prove to be important, on a case-by-case basis.

15. The mission also reiterates the need to continue the adoption of the statutory document governing DE activities.

Recommendations:

  • Continue adapting the monthly OGT to GFSM 2014 specificities;

  • Restart the process for the statutory document governing DE activities;

  • Continue expanding the scope of annual GFS to EPA, CTD, and the CNaPS;

  • To the extent possible, compile GFS for budgetary and extrabudgetary government, social security, and local government for 2017 and 2018 for the next mission;

  • Identify intergovernmental transfers;

  • Consolidate the various subsectors and establish GFS for the consolidated general government;

  • If these tasks cannot be completed, collect as much source data as possible to lay the groundwork for the next mission.

G. Balance Sheet

16. The previous mission had organized a meeting with a number of units that may potentially provide information on the various aspects of the government’s assets in order to initiate the collection of core information for the purpose of preparing a balance sheet.

No progress appears to have been made in this area. The information that accounting balances could contain regarding the stock of financial assets and liabilities could be used to develop a financial balance sheet.

Recommendation:

  • The mission recommends collecting source data on the various elements of the government’s balance sheet.

H. Next Mission

17. Another and likely final mission is planned as part of the DFID project mentioned at the beginning of this document. The aim will be to consolidate statistics for the various subsectors that will have been compiled in the meantime. To give the DE the time it needs to carry out the work (compile GFS for each subsector and identify the main intergovernmental transfers), the suggestion is to conduct this mission as late as possible, that is, towards the end of the IMF’s fiscal year (April 2020).

I. Officials Met During the Mission

article image

Appendix I. Treatment of Other Net Treasury Operations

Scope of General Government

The Malagasy general government sector encompasses the central government, the social security fund, decentralized subnational governments, 22 regions, and around 1,695 municipalities.1 The central government consists of the budgetary central government and its divisions, made up of autonomous government agencies (that is, units under its control with public service missions and national jurisdiction), such as EPA (120) and EPIC (56), professional public institutions (25), and one cultural public institution.

The general government’s operations, in the strict sense of the term, are recorded in three types of budgets:

  • General budget

  • Annex budgets

  • Treasury special accounts

These budgets comprise the budgetary central government as defined in the GFSM 2014.

The autonomous government agencies, meanwhile, make up the extrabudgetary central government.

The budgetary central government and the autonomous government agencies form the consolidated central government (sometimes simply, but inaccurately, referred to as the central government). The weight of the entire budgetary central government in Madagascar’s public finances is predominant.

There is one social security agency, the CNaPS, which manages the social insurance system of private-sector workers and which alone makes up the country’s social security subsector. The social insurance funds of government authorities—Malagasy Pension Fund (Caisse Malagasy de Retraite – CMR) and Civilian and Military Pension Fund (Caisse de Retraite Civile et Militaire -CRCM)—are attached to the budgetary central government as Treasury special accounts and are not part of the social security subsector.

The operations of the budgetary central government, autonomous agencies, the CNaPS, and decentralized subnational governments cover what is known as the consolidated set of the general government entities of Madagascar.

OGT Field and Recording of AONTs

Aside from the GFS prepared specifically on the basis of the GFSM 2014 for the purpose of standardizing statistics, reporting them to the IMF Statistics Department, and having them published in the GFSY, Madagascar’s government finance operations are presented in the OGT. This table covers the budgetary central government’s budget operations, in the strict sense (Cf. above), recorded as “Treasury operations,” namely:

  • The budgetary central government’s general budget operations in revenue and expenditure;

  • AONTs comprising:

    • Treasury special accounts,2 that is

      • Advances, loans, and shareholdings

      • Trading accounts:

      • CMR and CRCM operations

      • Other trading accounts

    • Correspondent operations:

    • annex budgets

    • other correspondents

  • VAT refunds

  • Operations to be classified and regularized

As their name indicates, AONT operations are presented on a net basis. Therefore, the AONT operation amount in the OGT is limited to a single line, concealing large revenue and expenditure and financing amounts as well as their nature, substantially reducing the analytical value of these amounts.

The DE split AONTs according to their economic components, which are presented in the two Excel files submitted to the DE (Cf. Appendix II). The AONT type is also shown at the end of this appendix.

Insofar as transactions affect net worth or are transactions in nonfinancial assets (and therefore nonfinancial transactions within the meaning of national accounts), they must be treated on a gross basis so that the GFS can be reported to the IMF Statistics Department.

National Printing Office and Postal and Telecommunications Office

The manner in which annex budgets, public institutions, and subnational governments are treated depends on their position within the general government sector. If the choice is made to consider these entities as part of the general government, their revenue and expenditure operations should be recorded on a gross basis. If, however, they are excluded from the general government, on the basis of their market activities for example, the balance of their operations— similar to a debit or credit position—can be treated on a net basis.

Public Institutions

EPA fall within the purview of general government, as do EPIC, for as long an analysis of whether or not they are of a market nature has not been performed.3 Their operations must therefore be treated on a gross basis. However, for these entities to constitute “extrabudgetary” operations, they will have to appear in gross revenue, expenditure, and financing in a separate “extrabudgetary” column of the GFS questionnaire.

Decentralized Subnational Governments

Treatment will have to be the same as for public institutions.

Operations with Third Parties

Third parties are normally entities outside the budgetary administration field, or even the public administration field, that are required to deposit all or some of their cash holdings in the Treasury. These are therefore deposit accounts payable (Treasury commitments), which can be recorded on a net basis.

VAT Refunds

VAT refunds must be recorded as negative revenue.

Operations to be Classified and Regularized

These operations will be recorded differently depending on their nature. A distinction between the various types of operations will therefore have to be made.

Types of Other Net Treasury Operations

article image

* Cf. note in text.

Appendix II. Excel Files Prepared by the Mission as an Integral Part of the Report

  • A bridge table for EPA and CTD entitled: “Madagascar: TA Report on the Government Finance Statistics Mission (March 4–15, 2019) Appendix II-EPA and CDT Classification Mapping

  • A bridge table for the CNaPS entitled: “Madagascar: TA Report on the Government Finance Statistics Mission (March 4–15, 2019) Appendix II-CNAPS Classification Mapping

  • A data compilation file for EPA based on the consolidated balance entitled: “Madagascar: TA Report on the Government Finance Statistics Mission (March 4–15, 2019) Appendix II-EPA GFS for 2017

  • A data compilation file for the CTD entitled: “Madagascar: TA Report on the Government Finance Statistics Mission (March 4–15, 2019) Appendix II-CDT GFS for 2017

  • A data compilation file for the CNaPS entitled: “Madagascar: TA Report on the Government Finance Statistics Mission (March 4–15, 2019) Appendix II-CNAPS GFS for 2017

  • An AONT classification file containing detailed headings, with a reconciliation with the OGT net amount for 2017 entitled: “Madagascar: TA Report on the Government Finance Statistics Mission (March 4–15, 2019) Appendix II-AONT Classification 2017

  • A bridge table for GFS for 2017 entitled: “Madagascar: TA Report on the Government Finance Statistics Mission (March 4–15, 2019) Appendix II-BCG GFS for 2017” This is the same file as the one provided by the DE containing notes on the OGT sheets and Table 8_A The OGT sheet in this file includes a detailed classification and presentation of AONTs in the OGT table.

Appendix III. Strategic Plan to Modernize Government Finances

article image
article image
article image
article image
1

The activities followed by an asterisk are outlined in the PSMFP monitoring document of the MFB Directorate General of the Treasury (Direction Générale du Trésor - DGT) (Appendix III).

2

The date specified in the aforementioned PSMFP monitoring document was January 2019.

3

Cf. section A of the second part of this report.

4

Eventually, GFS will have to be built compiled on accrual basis and extend beyond budgetary central government operations by incorporating the operations of extrabudgetary units (mainly nonmarket EPA and EPIC), the CNaPS, and CTD.

5

This accounting information is shared regularly with the DGT, according to them. However, they said they were willing to provide it directly to the DE, as necessary.

6

In addition, balances are not balanced.

7

For example, according to the Special Data Dissemination Standard.

1

The provinces sometimes mentioned in certain documents are geographical entities without administrative significance.

2

Treasury special accounts are accounts open on the books of the Treasury used to track expenditures and revenues carried out outside the budgetary central government’s general budget by government entities without legal personality. They also include “investment accounts financed with external resources” and special-purpose accounts.

3

This is also the view of the PEFA.