Presentation of GFS in the European Statistical System (with emphasis on the excessive Deficit Procedure) Seminar on GFS - Istanbul Denis Besnard Eurostat

1
Presentation of GFS in the European Statistical
System (with emphasis on the excessive Deficit
Procedure)Seminar on GFS - IstanbulDenis
Besnard Eurostat
2
Contents

• What are Government Financial Statistics?
• 1) Data to be reported regularly to Eurostat
• 2) A precise methodological framework required
  for their compilation

2
3
1) GFS data to be reported to Eurostat

• This is a "package", including
• Notification tables, twice a year (end of March
  and end of September) "basis" of the EDP
  (published)
• A set of supplementary tables in a "questionnaire
  relating to the EDP notification tables" (not
  published)
• Some supplementary tables linked to "special
  events" related to the "financial crisis" and for
  "intergovernmental lending" (published)
• Annual or quarterly tables part of the
  "transmission programme", annex B of the
  (Parliament and Council) Regulation on ESA
  (published)

3
4
The four notification tables

• These tables were designed in 1993 and
  progressively improved until the current version
  completed in 2000
• They must cover 4 years plus the current year in
  which the notification takes place as forecasts
  (planning), not controlled and assessed by
  Eurostat
• Each year must be given a status final,
  half-final, half-finalised
• Table 1 is a "summary table" (4 blocks)
• Table 2 (for each sub-sector) explains the
  transition between the public accounts budget
  balance (labelled as "cash", "accrual" and
  "mixed") and deficit/surplus B9 for EDP (6
  blocks)
• Table 3B (for government sector and each
  sub-sector) explains the contributions of the
  deficit/surplus and other factors to the
  variation in the debt level (consolidation at the
  level of the sector and at the level of
  sub-sectors) (3 blocks)
• Table 4 Provision of other data in accordance
  with the statements contained in the Council
  minutes of 22/11/1993.

4
5
Table 1
Net borrowing (-)/ net lending () EDP
B.9 General government S.13 - Central
government S.1311 - State government
S.1312 - Local government S.1313 -
Social security funds S.1314 General
government consolidated gross debt Level at
nominal value outstanding at end of year By
category Currency and deposits
AF.2 Securities other than shares, exc. Fin.
derivatives AF.33 Short-term AF.331
Long-term AF.332 Loans AF.4
Short-term AF.41 Long-term AF.42 Gene
ral government expenditure on Gross fixed
capital formation
P.51 Interest (consolidated)
EDP D.41 p.m. Interest
(consolidated)
D.41 (uses) Gross domestic product at current
market prices B.1g
6
Table 2
Working balance in central government
accounts Basis of the working balance
(cash) Financial transactions included in the
working balance Loans, granted () Loans,
repayments (-) Equities, acquisition ()
Equities, sales (-) Other financial
transactions (/-) of which transactions
in debt liabilities (/-) Detail 1
() Non-financial transactions not included in
the working balance Detail 1
() Difference between interest paid () and
accrued (EDP D.41)(-)
7
Table 2 suite
Other accounts receivable () Detail 1
() Other accounts payable (-) Detail 1
() Working balance (/-) of entities not part of
central government Net borrowing (-) or net
lending () of other central government bodies
Detail 1 () Other adjustments (/-) (please
detail) Detail 1 () Net borrowing
(-)/lending() (EDP B.9) of central government
(S.1311) (ESA 95 accounts)
8
Table 3
Net borrowing()/lending(-)(EDP B.9) of central
government (S.1311) (with opposed sign) Net
acquisition () of financial assets Currency and
deposits (F.2) Securities other than shares
(F.3) Loans (F.4) Increase () Reduction
(-) Short term loans (F.41), net
Long-term loans (F.42) Increase ()
Reduction (-) Shares and other
equity (F.5) Portfolio investments, net(2)
Shares and other equity other than portfolio
investments Increase ()
Reduction (-) Other financial assets (F.1, F.6
and F.7)
9
Table 3 suite
Adjustments Net incurrence (-) of liabilities in
financial derivatives (F.34) Net incurrence (-)
of other liabilities (F.5, F.6 and F.7) Issuances
above(-)/below() nominal face value Difference
between interest (EDP D.41) accrued(-) and
paid(4)() of which interest flows
attributable to swaps and FRAs Redemptions of
debt above()/below(-) nominal
value Appreciation()/depreciation(-)(3) of
foreign-currency debt (5) Changes in sector
classification (K.12.1)(5) (/-) Other volume
changes in financial liabilities (K.7, K.8,
K.10)(5)(-) Statistical discrepancies Difference
between capital and financial accounts
(B.9-B.9f) Other statistical discrepancies
(/-) Change in central government (S.1311)
consolidated gross debt (for sub-sectors,
only) Central government contribution to general
government debt (ab-c) Central government gross
debt (level) (b) Central government holdings of
other subsectors debt (level) (c)
10
Table 4
Trade credits and advances (AF.71 L) Amount
outstanding in the government debt from the
financing of public undertakings In case of
substantial differences between the face value
and the present value of government debt, please
provide information on i) the extent of these
differences ii) the reasons for these
differences Gross National Income at current
market prices (B.5g)(1) (1) Data to be
provided in particular when GNI is substantially
greater than GDP.
11

• Supplementary table for the financial crisis
• Part 1 Net revenue/cost for general government
  (impact on government deficit)
• A REVENUE (abcd)
• a) Guarantee fees receivable
• b) Interest receivable
• c) Dividends receivable
• d) Other
• B EXPENDITURE (efgh)
• e) Interest payable
• f) Capital injections recorded as
  deficit-increasing (capital transfer)
• g) Calls on guarantees
• h) Other
• C Net revenue/cost for general government (A-B)
• Part 2 Outstanding amount of assets, actual
  liabilities and contingent liabilities of general
  government
• Assets / Liabilities
• D Closing balance sheet

12
Questionnaire relating to the EDP notification
tables
Table 1 "Revision of general government
net lending ()/ net borrowing (-) and revision
of general government consolidated gross
debt" Table 2 Breakdown of financial
transactions included in the working
balance Table 3 Adjustments for sector
delimitation in EDP tables Table 4 Breakdown
of other accounts receivable/payable (F.7)
reported in EDP tables Table 5 Taxes and social
contributions other accounts receivable/payable
(F.7) of general government Table 6
Recording of EU flows in EDP tables Table 7
Military equipment expenditure (weapons and
supporting equipment) Table 8 Central
government claims, debt cancellation Table 9
Guarantees recording Table 10 Capital
injections, super-dividends and privatisations
Table 11 Public-Private Partnerships
(PPPs) Table 12 Securitisation operations
Table 13 Sale and leaseback operations
13
The ESA GFS tables (transmission programme)

• A number of tables out of 29 are specifically
  dedicated to GFS (consistent with data notified)
  
• Table 2 (annual) "Main aggregates of general
  government" showing Revenue and Expenditure,
  highly relevant for government (t 3/9)
• Table 9 (annual) "Detailed tax and social
  contribution receipts by type of tax and social
  contribution and receiving subsector including
  the list of taxes and social contributions
  according to national classification" (T9)
• Table 11 (annual) "General government expenditure
  by function" (t12)
• Table 25 "Quarterly Non-Financial Accounts of
  General Government" (t3)
• Table 26 (quarterly) "Financial accounts of
  general government" (t3)
• Table 28 (quarterly) "Government debt (Maastricht
  debt) for general government"

13
14
Annex ESA central framework and GFS transactions
and aggregates (abstract from ESA10chapter 20)
The ESA central framework In the ESA central
framework, net lending/net borrowing (B.9) is the
balancing item of the capital account. The
balancing item of general government in the ESA
GFS presentation is identical to the net
lending/net borrowing (B.9). In the ESA central
framework, the first account is the production
account, and therefore the first resource of an
institutional sector in the ESA is its output.
As the majority of services provided by
government are not sold at economically significan
t prices and so are non-market, government output
is measured by convention as the sum of
production costs. Similarly, final collective
consumption expenditure, consisting of services
provided to the community by government such as
general services, defence, safety and public
order, are measured as the sum of production
costs. Also by convention, collective consumption
expenditure (P.32) is equal to the actual
final consumption (P.4) of government. Final
individual consumption expenditure of households
provided directly by government on a non-market
basis is also measured by its production
costs. As a result, two types of flows are
"imputed" in the ESA accounts of government 1)
On the resources side, the non-market output,
other (P.132) in the production account 2) On
the uses side, the actual final consumption (P.4)
and the social transfers in kind - non-market
production (D.631), in the redistribution of
income in kind account, and in "use of adjusted
disposable income account.
15
(annex) The ESA GFS presentation of
statistics The same basic transaction categories
are used in the ESA GFS presentation, but mainly
on the basis of actual monetary flows, to obtain
the total revenue and the total expenditure of
government. Only a selection of imputed flows is
taken into account imputed social contributions
and capital transfers in kind. Eliminating from
the resources side the non-market output (P.132)
to obtain total revenue, and eliminating from the
uses side the actual final consumption (P.4P.32)
and the social transfers in kind - non-market
production (D.631) to obtain total
expenditure results in the same balancing item
the net lending/net borrowing (B.9). The only
social transfers in kind that are accounted for
in the GFS aggregate total expenditure of
government are social transfers in kind provided
to households via market producers (D.632), as
they are subject to real payments of government
units. These transactions are also those to be
added to the sum of production costs (equal to
non-market output, other - P.132) to obtain the
final consumption expenditure of the general
government. P.3 P.132 D.632
16
(annex) ESA Resources ESA GFS
Revenue P.1 Output, of which Market output
(P.11) Sales of goods and
services Output for own final use (P.12)
Sales of goods and services Non-market
output (P.13), of which - Payments for
non-market output (P.131) Sales of goods and
services - Non-market output, other (P.132)
Not accounted for in Total revenue D.2 Taxes on
production and imports (receivable)
Total taxes D.3 Subsidies
(receivable) Other current revenue D.4
Property income Other current
revenue D.5 Current taxes on income and wealth
Total taxes D.61 Social
contributions
Total social contributions D.7 Other
current transfers Other current
revenue D.91r Capital taxes (receivable)
Total taxes D.92r Investment grants
(receivable) Other capital
revenue D.99r Other capital transfers
(receivable) Other
capital revenue
17
(annex) ESA Uses and capital transactions ESA
GFS Expenditure P.2 Intermediate
consumption Intermediate consumption D.1
Compensation of employees
Compensation of employees D.2 Taxes on production
and imports (payable) Other current
expenditure D.3 Subsidies (payable)
Subsidies D.41 Interest
Interest D.4 Property income (excluding D.41)
Other current expenditure D.5 Current taxes on
income Other current expenditure D.62 Social
benefits other than social transfers 1in kind
Social benefits other than ST in kind
18
2) Methodological framework required for data
compilation

• When EDP started ESA 1979
• Eurostat had to take decisions, as this National
  Accounts Manual was of small (if any) usefulness
  for some issues arising very quickly (so, when
  possible, reference to manuals below)
• SNA93, followed by ESA95 (close but not identical
  applicable from 2000 onwards) was an important
  step from a methodological point
• 1) the shift from cash to accrual
• 2) the inclusion of balance sheets and thus the
  identification of change in stocks factors
  (transactions / other flows)
• 3) a change in principles for government sector
  delineation and definition of institutional units
• 4) the identification of new financial
  instruments (notably financial derivatives)
• 5) the notion of rearranged transactions
  ("rerouting", "partitioning" and "recognising the
  principal party to a transaction")
• 6) the definition of consolidation and netting

18
19
Eurostat Manual

• But high need for interpretation, implementation
  guidance and supplementation
• In 1999, Eurostat elaborates the "Manual on
  Government Deficit and Debt" - MGDD (more recent
  edition in 2013)
• The Manual has a specific structure for each
  chapter ("background of the issue", "treatment in
  national accounts", "rationale of the treatment")
  and provides simplified examples (under the form
  of "T accounts") but it is not a compilation
  guide (normally, no mention of sources data,
  except in some cases)
• The content of the Manual is largely at the
  initiative of Eurostat (coordination,
  propositions), based on its control experience
  but is written in cooperation with experts from
  Member States (Task Forces)
• It may also result from a request from Member
  states facing a specific issue asking for
  Eurostat advice (rules of procedures specified in
  2009) result is included in the Manual if
  considered by Eurostat " "of common interest"
• From 2012 onwards, in principle, annual edition
  of the Manual
• Shortly, a new edition for the adaptation to
  ESA10

19
20
The structure of the Manual reflects what must be
covered by the GFS methodological framework

• What is the delineation of the government sector?
• What is the time of recording of transactions?
• How to record the operations, frequently very
  specific, between government and public
  corporations, notably "capital injections"?
• How to record the relations between government
  and the financial sector (including the central
  bank and "defeasance")?
• Which problems are raised by the sales of
  (financial and non-financial) assets by
  government?
• What are the basic criteria for recording leases,
  licences and concessions (including
  public-private-partnerships)?
• How to record the debt related transactions by
  government and guarantees it may grant?
• What is the measurement of government debt,
  including operations on derivatives repos and
  securities lending?

20
21

• Thank you for your attention
• denis.besnard_at_eu.europa.ec