Heartiest Welcome to the
Participants of the Third Group
Training Course at UNSIAP,
UNSIAP TARUN DAS SESSION 1-2 GFS 1
Course Outline and
Analytical Framework of GFS
Prof. Tarun Das, IILM, New Delhi, India
Presently with MOF, Govt of Mongolia
2. Profile of Resource Person
3. Learning Outcome and Course Modules
4. GFS – Analytical Framework
5. GFS- Basic Concepts
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1.1 Resource Person- Prof. Tarun Das
• Professor (Public Policy and Research
Methodology), Institute of Integrated
Learning in Management (IILM), 3 Lodhi
Institutional Area, New Delhi-110003,
• Presently working as ADB Adviser on
Fiscal Management & Strategic Planning,
Ministry of Finance , Government of
Mongolia, Ulaanbaatar, Mongolia.
• Worked as Country Co-coordinator for the
IMF GFS and SDDS, World Bank GDF, and the
Commonwealth Secretariat DRMS for India.
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1.2 Resource Person- Prof. Tarun Das
• Work Experience: 35 yrs as Development
Economist in the government of India: Last
assignments: Economic Advisor, Planning
Commission (1986-1988) and Economic
Adviser, Min of finance (1986-2006)
• Worked as Consultant to the World Bank,
ADB, UNDP, UNESCAP, ILO, UNCTAD, UNITAR,
GDN, UN Commission for Africa, UNSIAP.
• Worked on Fiscal Management for the
Govts of Cambodia, Indonesia, Lao PDR,
Mongolia, Nepal, Philippines and Samoa.
• Govt. Delegate to World Bank, ADB, IMF,
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1.3 Resource Person- Prof. Tarun Das
• Research/Teaching Interest:
Econometrics, Research Methodology, Public
Policy, Economic Reforms, Poverty, Inequality,
Public Debt and External Debt
• Possesses diversity in skills in teaching,
training, research, policy planning and
modeling. Published books and papers on
structural reforms, fiscal policies, public and
external debt, transport modeling, poverty and
inequality, FDI, privatisation, technology
• Qualifications: MA in Econ. (Gold Medalist),
Calcutta University, 1969.
– Ph. D. in Econ, as Commonwealth Scholar,
East Anglia Univ., England, 1977.
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2.1 Learning Outcome
Develop a comprehensive understanding of
the basic concepts, analytical framework,
database, methodology, uses, applications
and limitations of economic statistics.
Develop skills and capabilities for analytical
presentation, networking and teamwork
through workout sessions in groups.
More emphasis will be laid on understanding
basic concepts, methodology, techniques, uses
and limitations for official statistics, rather
than formal proofs and derivation of formula.
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1 Teaching techniques will consist of formal
lectures, case studies and workout sessions.
2 If time permits, selected case studies may be
given so as to facilitate participants to relate
to theoretical concepts with real life situations
in economic analysis, policy formulation and
3 The participants would present and discuss
these case studies in the class.
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3. Participants will be provided with complete
course material well in advance. To make
classroom presentations by the resource
person more meaningful and effective,
participants are required to come prepared
and collect related information and data from
journals and websites, and participate actively
in classroom sessions.
4 To develop comprehensive understanding,
teamwork and networking with each other,
participants are encouraged to participate
actively in group discussions and workout
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2.4 Course Modules
Modules Number of
1. Government Finance Six
2. Balance of Payments Six
3. Monetary and Fiscal Four
4. Productivity Measures Four
and Analysis (PM)
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2.5 Selected References
• Government Finance Statistics 1986
• Government Finance Statistics Manual
• Government Finance Statistics (GFS)
• Monetary and Financial Statistics Manual
• Monetary and Financial Statistics (MFS):
Compilation Guide 2007
• International Financial Statistics (IFS)
• Balance of Payments Manual 2005
• Balance of Payments Statistics Yearbook
• Website: www.imf.org
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3.1 Classification of Sectors
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3.2 Classification of Sectors
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3.3 Common Govt Accounting System
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3.5 Types of Transactions
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3.6 Distinctions in the nature of
government’s money flow transactions
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3.7 Organisation of government
flows by nature of flows
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3.8 Analytical Framework for
Classification of govt operations
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4.1 GFS Basic Concepts
• All of the data recorded in the GFS system
are either flows or stocks.
Flows and Stocks
• Flows refer to economic actions and effects
of events within an accounting period.
• Stocks refer to the value of assets or
liabilities at a point in time.
• Flows reflect the creation, transformation,
exchange, transfer or extinction of
economic value; they involve changes in the
volume, composition or value of an
institutional unit’s assets and liabilities.
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4.2 Flows and Stocks
• Flows and Stocks are related by the
following fundamental relation:
S¹ = Sº+ F or F = S ¹ - Sº
where Sº = values of a specific stock at the
beginning of an accounting period
S¹= values of a specific stock at the end of
an accounting period
F = Net value of all flows during the period
that affected that particular stock.
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4.3 Types of Flows
• Flows are classified into (i) transactions and
(ii) other flows.
• A transaction is an economic flow that is an
interaction between two institutional units by
mutual agreement or an action within an
institutional unit, which is analytically useful to
treat like a transaction.
• Illegal transactions (forbidden by govt laws and
regulations) are treated the same way as legal
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4.4 Exchange and Transfer
• A transaction could be an exchange or a
• An exchange (sometimes called a transaction
of “something for something” or a transaction
with a quid pro quo) involves a provision of
something of economic value in return for a
counterpart item of economic value.
• Purchases of goods and services, acquisition of
assets, compensation of employees, dividends,
etc. are all exchanges.
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• A transfer (also called a transaction of
“something for nothing” or a transaction
without a quid pro quo) involves a provision
(or receipt) of an economic value by one party
without receiving (or providing) a counterpart
item of economic value.
• Govt grants, subsidies, social security benefits
are examples of transfers.
• All taxes and duties and Non-life
insurance premiums and claims are also
treated as transfers.
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4.6 GFS Accounting Principals
• Every transaction is either a monetary or
non-monetary transaction. A monetary
transaction is one in which one institutional
unit makes a payment (receives a
payment) or incurs a liability (acquires an
asset) stated in units of currency.
• Since all flows are to be expressed in
monetary terms in GFS Accounts , the
monetary values of non monetary
transactions need to be estimated.
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4.7 Rerouting and Partitioning
• Some transactions are not recorded in the
form in which they appear to take place.
Instead they are modified to bring out their
underlying economic relationships.
• Rerouting records a transaction as taking
place in channels different from that
observed. Social contributions paid by
employers directly to the retirement scheme
provide an example.
• Partitioning unbundles two or more different
transactions that appear as a single
transaction. For example, bank interests
payable to financial intermediaries are
partitioned into two components- interests
and service charges.
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4.8 Reassignment and Imputation
Reassignment – Central govt collects
taxes and transfers fixed proportions to
the subnational governments.
Imputation of transactions refers to
constructing entries in the accounts when
no actual transactions occur.
• Retained earnings of direct investment
enterprises are treated as reinvestments
made by them.
• Property income earned on technical
reserves held by insurance corporations
and pension funds are deemed to be
payable to policy holders who are then
deemed to pay back to them.
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4.9 Reassignment and Imputation
• When government has a nonresident
entity to undertake fiscal functions related
to government borrowing and/or incurring
government outlays abroad, transactions
are imputed in the accounts of both the
government and the nonresident entity to
reflect the fiscal activities of the govt.
• Retained earnings of investment funds are
treated as if they were distributed to
shareholders who are then deemed to
reinvest in the investment fund.
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4.10 Other economic flows
• Other economic flows are changes in the
volume or value of an asset or liability
that does not result from a transaction or
• Volume changes are described as other
changes in the volume of assets or simply
other volume changes.
• Value changes are described as holding
gains and losses.
• Examples are unilateral write offs of
claims by creditors, reclassification of
assets, monetization/demonetization of
gold, and other events.
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4.11 Other changes in volume of assets
• Events that involve the addition to or
deletion from the balance sheet of an
existing asset or liability with no changes
in its quantity or quality. Example- A river
bridge destroyed by cyclone is abandoned
before its complete construction.
• Events that change the quantity or
quality of assets. Example- Creation of
land by reclaiming sea.
• Events that lead to changes in the
classification of assets. Examples-
privatization, corporatization or outright
sale of Govt's telecom department.
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4.12 Holding gains and losses
Holding gains and losses on
assets and liabilities, together
with the corresponding
changes in net worth, arise as
a result of changes in the
prices of those assets and
liabilities, including changes
resulting from exchange rate
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4.13 Credits and Debits
• A debit is an increase in an asset, a
decrease in a liability, or a decrease in
• Conversely, a credit is a decrease in an
asset, an increase in a liability, or an
increase in net worth.
• Revenue entries, which represent an
increase in net worth, are recorded as
• Conversely, an expense refers to a
decrease in net worth and is recorded as a
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4.14 Net changes in assets
• In the case of the flows in financial
assets and liabilities, the terms “net
changes in assets” and “net changes
in liabilities” are used to reflect the
nature of the financial flows, which
are recorded on a net basis separately
for each financial asset and liability.
• For both assets and liabilities, a
positive change indicates an increase
in stocks and a negative change
indicates a decrease in stocks.
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4.15 Time of Recording of Flows
• Once a flow is identified, the time at which
it occurred must be determined so that
the results of all flows within a given
accounting period can be compiled.
• Determination of timing is very important
for maintaining consistency of financial
accounts but is complicated due to
existence of leads and lags in receipts
• Broadly, time of recording is determined
on four bases: accrual basis, the due-
for-payment basis, the commitment
basis, and the cash basis.
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4.16 Time of Recording of Flows
• Accrual accounting records flows at the
time when an economic value is created,
transformed, exchanged, transferred, or
• In other words, the effects of economic
events are recorded in the period in which
they occur, irrespective of whether cash
was received or paid or was due to be
received or paid.
• A due-for-payment basis records flows
at the time when payments fall due. If a
payment is made before it is due, then the
flows are recorded when the cash
payment is made.
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4.17 Time of Recording of Flows
• A commitment basis records flows when
a unit has committed itself to a
transaction. Normally, this basis applies
only to acquisition of financial assets or
incurrence of liabilities, and purchases of
goods, services, and labor inputs.
• The time of recording generally is when a
commitment is made or a purchase order
is issued. Flows for which the commitment
basis is not applicable must be recorded on
one of the other three bases.
• A cash basis records flows when cash is
received or disbursed. In its strict form,
only those flows that involve cash as the
medium of exchange are included.
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4.18 Advantages of Accrual Accounting
• International best practices use the accrual
basis for recording of flows, as it matches the
time of recording with the timing of the
events giving rise to the actual resource flows.
• With the cash basis, the time of recording
may diverge significantly from the time of
events and transactions to which the cash
• The due-for payment basis usually records
transactions after the resource flows have
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4.19 Advantages of Accrual Accounting
• The timing of the commitment basis will
precede the actual resource flows.
• The accrual basis provides the most
comprehensive information because all
resource flows are recorded, including non
monetary transactions, imputed transactions,
and other flows.
• Such a comprehensive recording ensures the
integration of flows and changes in balance
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• Market prices are the basis for valuation of
both flows and stocks.
• Market prices refer to current exchange
value, i.e., the values at which goods and
other assets, services, labor are exchanged or
else could be exchanged for cash.
• The basis of transaction valuations is
generally actual market prices agreed upon
by transactors. This practice is consistent with
that of the SNA.
• Conceptually, all stocks of A&L are valued at
market prices prevailing at the time to which
the international investment position relates.
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4.21 Different Concepts of Values
• Fair value : Market-equivalent value, for
which an asset could be exchanged, or a
liability settled, between knowledgeable,
willing parties in an arm’s-length transaction.
• Nominal value : Amount the debtor owes
to the creditor, comprising outstanding
principal & accrued interest.
• Amortized value : Initial amount at which
the financial asset or liability was measured
less principal repayments.
• Face value: Undiscounted principal
amount to be repaid.
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4.22 Different Concepts of Values
• Book value : The value recorded in an
enterprise’s records. It may have different
meanings because the book value is
influenced by timing of acquisition, company
takeovers, frequency of revaluations, tax and
• Historic cost reflects the cost at the time of
acquisition, but sometimes it may also reflect
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4.23 Aggregation and Netting
• Aggregates are summations of elementary
items in a class of flows or positions. For
example, compensation of employees is the
sum of all flows that are classified as
compensation of employees.
• In the case of flows in financial assets and
liabilities, the term “net” have dual meanings
(summing all debits/ credits for a financial
asset or a liability type and netting of an
asset against a liability).
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4.24 Aggregation and Netting
• “Net recording” refers to aggregations where
all debit entries of a particular asset or
liability are netted against all credit entries in
the same asset or liability type (e.g.,
acquisitions of foreign currency are netted
against the sales of the foreign currency;
bond issues are netted against redemption).
• When net is used together with a type of
financial instrument such as “net financial
derivative”, it means netting of a financial
asset against the same type of liability.
• Title of some derived measures uses the
term “net” such as “net lending/borrowing”
and “net fiscal deficit”.
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4.25 Differences with SNA 1993
In general, the transactions of the 1993 SNA
that are not recorded in the GFS system
include the following:
• The output and simultaneous distribution of
non-market goods and services;
• The output of fixed assets constructed on
government own account and the costs of
producing those assets;
• Certain transactions related to employer social
insurance schemes providing retirement
benefits and anaged by general government
• Transactions reflecting the reinvestment of
earnings on direct foreign investment.
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Have a Good Day
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