That’s according to Jason Harris, deputy division chief of public financial management at the IMF, who told a seminar in Washington DC yesterday that public balance sheets provide a clearer picture of a country’s net worth – its public finances.
Harris said IMF research had found that while countries have very large assets – 220% of GDP globally – these are not being used to generate any revenue and are not managed properly.
“If you go to a finance minister in most countries, they won’t even be able to tell you what their assets are – yet alone how they are being used to generate revenue,” he said.
However, he added: “We estimate that you could get 3% of GDP extra revenue, per year, if assets were better managed.
“If you tell governments they can generate an extra 3% in revenue, they’ll start paying attention.”
Better management of non-financial assets alone could add around 1% of GDP extra revenue, he said.
There has been increased focus on the importance of balance sheets since the IMF published its Fiscal Monitor on Managing Public Wealth, in October.
The International Public Sector Accounting Standards Board, which co-hosted the event in Washington with the IMF and the World Bank, highlighted that accrual accounting can help provide the information around assets and liabilities needed for a good balance sheet.
Director of Governance Global Practice at the World Bank, Ed Olowo-Okere, said at the event: “We could have better financial information in the public sector – and if we are able to get that, the public sector will be better able to manage public wealth. That is fundamental.
“I think there is consensus that IPSAS and accrual can provide that information.”
Harris said that governments spend “way too much time focusing on debt and deficits” and should put more emphasis on comprehensive overviews of public finances, by producing detailed balance sheets.
John Verrinder, acting director of macroeconomic statistics at Eurostat, echoed this: “In Europe we have had a fiscal governance system, which has been highly based on statistics – a deficit/debt fetish, one might say.”
He added that governments reporting on an accrual basis realise the “value” of good asset management.
Carolina Renteria Rodriquez, division chief of the IMF’s Fiscal Affairs Department, told the seminar that managing assets is “very significant to policymakers” because it is about more than raising taxes for more revenue.
“Good asset management improves service delivery – and that is a goal. We have so many challenges and asset management and accrual accounting should help us in achieving those needs of our citizens,” she said.
Balance sheets also promote transparency and accountability and “should be out there” so everyone can see, Harris added: “IPSASB, the IMF and the World Bank play a key role in strengthening the statistical and accounting systems that governments have to draw on, to put these balance sheets together.”
