Government Finance Statistics

• Author: John Pitzer
• Pages: 16-

Page 16

Financial events around the world have underscored how government fiscal policies must take a wide variety of circumstances into account at the design stage. For example, public finance analysts use fiscal statistics to examine many economic issues: the size of the public sector; its contribution to aggregate demand, investment, and saving; the impact of fiscal policy on the economy, including resource use, monetary conditions, and national indebtedness; the tax burden; tariff protection; and the social safety net. In addition, analysts have become increasingly interested in assessing the effectiveness of spending on poverty alleviation, the sustainability of fiscal policies, net debt, net wealth, and contingent claims, including the liabilities of social security schemes.

Fiscal analysts often need to use balancing items, which are select groupings of accounting entries calculated and expressed as a single amount. The new manual provides various balancing items from which analysts can choose one to fit a specific purpose. Examples include the following:

* The net operating balance, which is the change in net worth resulting from transactions, is a measure of the sustainability of current government operations.

* Net lending/borrowing summarizes the government's financial transactions and is calculated as the increase in financial assets less the incurrence of liabilities. It provides a measure of the government's demand for credit.

* By dividing financial assets and liabilities into domestic and foreign components, the demand for foreign borrowing can be calculated.

* The cash surplus/deficit is a measure of the cash required to finance a government's operations, including it acquisition of nonfinancial assets.

* The manual also includes an overall fiscal balance, which is net lending/borrowing adjusted for alternative treatments of selected transactions in assets (mainly financial assets) because many governments engage in such transactions as a means to carry out public policy rather than to manage its liquidity. The GFS also introduces some entirely new and important features. For example, transactions and other flows are recorded using the accrual basis in accounting rather than the cash...