Comparative Analysis: IMF vs. Russian Govt Finance Statistics

1. Agenda item 2 Implementation of the IMF recommendations in compilation of government finance statistics of the Russian FederationA comparative analysis of Economic classification recommended by the IMF and Classification of expenses used by the Ministry of Finance of the Russian Federation Slide 1

2. Progress in the work of the Ministry of Finance of the Russian Federation in implementation of the • IMF recommendations on GFS • - During recent years the Ministry of finance of Russian Federation has undertaken efforts to implement the IMF recommendations on GFS. • - As a result of these efforts a number of documents under the general • title “ Budgetary classification “ has been prepared, the latter includes: • - classification of revenue • - classification of expenses • - classification of sources of finance of budget deficit • - classification of transactions of the general government sector • (CTGGS) • These classifications are broadly in line with the provisions of the IMF • Manual on GFS (2001), referred below as MGFS • Thus in CTGGS a distinction is made between : • - current transaction • - transactions with non-financial assets • - transactions with financial assets • At the same time a detailed analysis reveals substantial differences between CTGGS and MGFS at the level of individual heading. Slide 2

3. Similarity and differences between the general structures of Classification of expenses used by the Ministry of Finance of the Russian Federation and Economic classification in MGFS • Similarity : approximate correspondence of the major headings of the classifications • Differences: • - In Classification of the Ministry of Finance of RF Subsidies and Grants are not identified as separate headings • Instead of “ Use of goods and services “ there is the heading “ Payments for works and services” • Slide 3

4. Differences in the coverage of economic transactionsand in the content of individual headings of Classification of expenses of the Ministry of Finance of the Russian Federationand Economic classification in MGFS • Differences in the coverage of economic transactions are due to : • - differences in definition of the general government sector • - differences in the coverage of transactions in kind • Differences in the contents of the individual headings are due to the lack in Classification of the Ministry of Finance of RF of precise distinction between : -current transactions and capital and financial transactions • - subsidies and capital transfers • - payments for goods and services and their actual use • - compensation of employees and social benefits • - actual and imputed contributions to social insurance • Slide 4

5. Differences in definition of general government sectorin the documents of the Ministry of Finance of RF and MGFS In the documents of the Ministry of Finance of RF : • There is no comprehensive definition of general government sector, • There is no register of the institutional units included in the general government sector, • There are no clearly defined rules of making distinction between the units to be allocated to general government sector and to the sector of corporations; these rules are particularly needed for treatment of borderline cases, such as , for example, autonomous agencies which can finance their expenses both from state budget allocations and sales of services, • There are no recommendations on compilation of statistics for the public sector, the part of which is the general government sector. Slide 5

6. Capital transfers are not identified in the Classification of expenses of the Ministry of Finance of RF) The list the of most characteristic capital transfers for Russia : • unrequited financing of capital investments of corporations from the state budget, • free privatization of state property, • sale of state property at prices which are well below market prices, • one time financial injections from the state budget to corporations in conditions of financial crisis, • forgiving debts, • restructuring debts, • unrequited construction for other countries, • compensation of losses of producers accumulated for a number of years. Slide 6

7. Other differences between Classification of expenses of the Ministry of Finance of the Russian Federation and Economic Classification of MGFS In Classification of RF: • Subsidies are not identified as a separate heading of classification • Definition of subsidies is not consistent with definition in MGFS and SNA • Expenses on own account construction are treated as current expenses while in MGFS they are allocated to capital formation • Land rent is treated as an item of payments for work and services (together with rentals for use of produced assets) • Payments for work and services (a counterpart of “Use of goods and services”) include some outlays on investments • Distribution of payments for servicing external and internal debt depends on the type of currency rather than on the criteria of residency • Transactions with the rest of the world are not identified as separate headings Slide 7

8. Table of reconciliation of headings “Payments for works, services“in CEMF and “Use of goods and services“ in MGFS Slide 8

9. ( continued) Slide 9

10. Conclusions • Using Classification of expenses of the Ministry of Finance of the Russian Federation for compilation of national accounts requires introduction of a number of adjustments. • The adjustments can be made with the help of the reconciliation tables. • The use of reconciliation tables can not solve radically the problems associated with implementation in Russian statistics of finance of the provisions of the MGFS. • There are considerable differences between other parts of the Budgetary classification of the Ministry of Finance of RF and MGFS in respect of: • i) revenue ii) transactions with non- financial assets iii) transactions with the financial assets • The CIS countries have to continue the work on improvement of national GFS on the basis of the IMF recommendations. • In the course of this work it would be desirable to take into account the relevant provisions of the SNA 2008. • The assistance to this work by the IMF and other international organizations would speed up the progress. This assistance can be provided by organizing seminars and workshops. Slide 10