This presentation was made by Giovanna Dabbicco, Italy, at the 17th Annual Meeting of OECD Senior Management Officials held at the OECD, Paris, on 2-3 March 2017
Reporting debt in the public sector - Giovanna Dabbicco, Italy
1. OECD 17° ACCRUALS
Challenges with Reporting Debt in the
Public Sector *
Giovanna Dabbicco
ISTAT
2-3 March 2017
The views expressed are those of the author and not necessarily of ISTAT or other organizations
2. Key statistical issues: Debt 1/3
• Various Measures of Debt i.e. Nominal
(Face) value; Market value
– But rather complementary perspectives
• Gross Debt measure versus Net of
financial assets
– a single definition for Net Government Debt at
international level is not yet agreed
• Narrow versus Wide range of financial
liabilities.
3. Key statistical issues: Debt 2/3
• Liabilities coverage
– debt instruments mainly: debt securities and loans
– But other accounts payable, and further
– IN/OUT Debt (UN) Recognition i.e.
• Unrecognized unfunded government pension
liabilities ; civil servants' pension funds
• Unreported leases
• Unreported (OFF) PPP public-private liabilities
• (Contingent ) Liabilities of public corporations
• Sale leaseback liabilities
• Swap payments “off-market” exchange rate
4. Key statistical issues: Debt 3/3
• Sustainability VS debt
• Gross debt level has proven to be not the same as
sustainability
– i.e. Sovereign crisis involved countries respecting gross debt
ceiling
– Countries may use cash and liquidity at minimum to reduce debt;
incentive disposal of financial assets
• Net debt may be better and more informative because it
takes account of assets
• But ultimately projection of cash flows are needed to see
if debt obligations can be met as they fall due.
– i.e. government to model tax flow into the future
5. Key statistical issues: PPP & Concessions
1/2
• PPP VS Concessions
– Government VS final user is main source of revenue of
the partner after construction
– ‘Dedicated’ asset built (or exiting)
• Procurement contracts VS PPP & Concessions
– Economic owner of the asset built: Either government or
the partner ( on/off -balance sheet: GFCF & Debt)
• Economic owner
– Who bears Risks & Rewards
– If not conclusive Control of the asset
• EPEC guide + MGDD
– 16 themes to assess
6. Key statistical issues: PPP & Concessions
2/2
– To measure: overall contractual value and adjusted value
of PPP contracts
• Reporting specific issue : If corporation assessed as
economic owner and if government obtains legal and
economic ownership at the end of the contract without an
explicit payment Government to gradually builds up other
accounts receivable and private partner to gradually
accrues other accounts payable.
– Both values equal to the residual value of the assets
at the end of the contract period;
– Or alternatively, Capital transfer approach
7. Key statistical issues : Leases 1/2
Three types in macroeconomic statistics:
– Operating leases, Financial leases, and Resource leases
– Distinction criteria: difference between legal and economic ownership
• As PPP, economic owner determined by assessing which
unit bears majority of risks and receive majority of rewards of
assets
– Operating & Resource leases Legal = economic owner
– Financial lease change of economic owner: Legal ≠ economic
owner
• One indicator of Financial Lease: period usually whole of the economic
life of the asset
• One indicator of Operating Lease: legal owner (decides and) provides
asset’s repair and maintenance
• Impact of Symmetry if Accounting Model for Lessee ≠ Lessor
8. Operating lease Rentals as payments for a Service, Intermediate
consumption or final consumption expenditure by general
government, households and NPISHs
Leased asset shown on Balance Sheet of Lessor
GFCF + CFC Legal=Economic owner= Lessor
Financial lease User financed by a (notional) loan from the lessor
Loan= Present Value of Payments
Re-payment of principal and payments of interest on the
Loan
FISIM (if lessor is a financial intermediary): intermediate
consumption or final consumption expenditure by general
government, households and NPISHs)
Leased asset on balance sheet of Lessee
GFCF +CFC Economic owner= Lessee
Resource lease Payments for the use as rents = Payables due (Property
Income)
Resource (i.e. Land) on Balance Sheet of Lessor
No CFC but decline in value recorded as an economic
disappearance of non-produced assets (‘depletion of natural
resources’ [K.21])
Key statistical issues :Leases’ Recording 2/2