outcomes of meeting of imf committee on balance of payments statistics june 27 july 1 2005
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Outcomes of Meeting of IMF Committee on Balance of Payments Statistics, June 27 – July 1, 2005

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Outcomes of Meeting of IMF Committee on Balance of Payments Statistics, June 27 – July 1, 2005. Outcomes of BOPCOM’s discussions. Migrants’ transfers Personal effects not be recorded as transaction

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outcomes of bopcom s discussions
Outcomes of BOPCOM’s discussions
  • Migrants’ transfers
    • Personal effects not be recorded as transaction
    • Reclassification of financial assets and liabilities arising from change of residence “other changes”
    • Change of residence usually only applies to persons but may apply to some corporations, e.g., societas europea
    • AEG agreed
outcomes of bopcom s discussions1
Outcomes of BOPCOM’s discussions
  • Technical assistance
    • Technical assistance represents supply of services by donor to recipient, funded by transfer
  • Debt instruments indexed to foreign currency
    • To be classified as denominated in foreign currency
    • Recommended currency of account and currency of settlement be clearly distinguished
    • AEG agreed
outcomes of bopcom s discussions2
Outcomes of BOPCOM’s discussions
  • Interest and index-linked debt instruments
    • Retain present treatment of 1993 SNA (para. 7.104) all changes arising from indexation equal interest
    • AEG’s view:
      • Where linked to broad price index (CPI, GDP deflator, etc.): interest, as per 1993 SNA
      • Where linked to other types of index, use rate on comparable “plain vanilla” issue as interest component, and excess as other changes
outcomes of bopcom s discussions3
Outcomes of BOPCOM’s discussions
  • Reinvested earnings
    • Continue present practice
    • “Income” not well defined or treated consistently create income expert group, not limited to balance of payments including national accountants and financial statisticians
outcomes of bopcom s discussions4
Outcomes of BOPCOM’s discussions
  • Retained earnings of mutual funds
    • Follow AEG’s position (accept ESA95 treatment)
    • Need for further work on defining “collective investment schemes”
  • Financial gold
    • “Unallocated” gold: financial asset
    • “Allocated” gold: commodity
    • Further work required to determine instrument for “unallocated” gold
      • Not discussed by AEG but indications of approval
outcomes of bopcom s discussions5
Outcomes of BOPCOM’s discussions
  • Fee on securities lending and gold lending
    • On securities lending and “unallocated” gold: property income (AEG agreed, treat as interest)
    • On “allocated” gold: service (AEG saw as trivial)
    • Fee on securities lending can be paid directly to custodian but represents a short-circuiting of two transactions: property income payable to lender, and service provided by custodian to lender
    • Further work by IMF and OECD to determine type of financial service by custodian to lender
outcomes of bopcom s discussions6
Outcomes of BOPCOM’s discussions
  • Traded loans: criteria to become security
    • Absence of consensus, status quo obtains
    • AEG agreed, following elaboration of criteria in External Debt Guide
  • Goods for processing
    • Consistent treatment necessary (at present, varies, depending on circumstances)
    • Views divided
    • Extra data on fees, materials, finished goods
    • AEG: No change of ownership to be imputed. Discussion of implications for supply and use tables; reflection of globalized world
outcomes of bopcom s discussions7
Outcomes of BOPCOM’s discussions
  • Merchanting
    • Need to reflect global production and marketing process properly
    • Concern about deviating from change of ownership principle but also grossing up goods transactions
    • Set up working group
    • AEG: further work required (participation in working group)
outcomes of bopcom s discussions8
Outcomes of BOPCOM’s discussions
  • Guarantees
    • Premature to recognize guarantees prior to activation
    • Considered untenable preliminary AEG position (at December 2004, guarantee activation = capital transfers in all cases).
    • BOPCOM’s preference “other changes” in all cases, but accept alternative, on case-by-case basis: (i) capital transfers, (ii) financial claims, and (iii) other changes
    • In July 2005, AEG decided on case-by-case approach, but accepted TFHPSA proposal recognizing financial derivatives-type and insurance-type guarantees as asset at inception
outcomes of bopcom s discussions9
Outcomes of BOPCOM’s discussions
  • Financial instrument classification
    • Accepted for BOP purposesbroad split of instrument and associated income, with additional split on supplementary basis
      • Equity Finance (equity securities (of which mutual funds, and of which money market mutual funds), reinvested earnings, other equity (not including insurance technical reserves)
      • Debt (debt securities (long/short), loans, currency and deposits, accounts receivable/payable (trade credit and advances, other) other debt instruments
      • Other (monetary gold, SDRs, net equity in insurance technical reserves and pension funds), financial derivatives (forwards and options) and employee stock options
outcomes of bopcom s discussions10
Outcomes of BOPCOM’s discussions
  • Distinction between deposits and loans
    • Useful distinction but
    • Blurred in some instances, but not prescribe criteria
    • Further work by ECB
    • AEG agreed with above
outcomes of bopcom s discussions11
Outcomes of BOPCOM’s discussions
  • Valuation of direct investment equity
    • Reassertion of market price principle
    • Split between quoted and unquoted: supplementary
    • Deemed acceptable:
      • Recent transaction
      • NAV, including intangibles and goodwill
      • NAV, excluding intangibles and goodwill
      • Apportioning global value of group to local unit, using appropriate indicator
      • Own funds at book value
      • Capitalization ratios
      • PIMs (or equivalent)
outcomes of bopcom s discussions12
Outcomes of BOPCOM’s discussions
  • Valuation of direct investment equity (cont)
    • Further work, showing pros and cons
    • No consensus on ranking. Further work on descriptions
    • Less acceptable/inferior
      • Use of stock price indices to revalue accumulated flows
      • Historic or acquisition cost
      • Summing of transactions
    • Bilateral/CDIS
outcomes of bopcom s discussions13
Outcomes of BOPCOM’s discussions
  • Land and buildings leased by nonresidents
    • Also to cover other natural resources
    • Needs clarification in new bop manual
    • Where effective change of ownership, create notional resident unit (in same manner as outright purchase)
    • Treat as equity
    • Valuation of acquisition of lease during its life not discussed
outcomes of bopcom s discussions14
Outcomes of BOPCOM’s discussions
  • Institutional sector holding companies
    • If HC has no resident subsidiaries, then OFI
    • If resident subsidiaries, views divided. Status quo (assumes “predominant” activity of subsidiaries): subject to AEG views (January 2006)
    • Recognize problems with classification where resident and nonresident subsidiaries
    • Recognize potential conflict with currency union
    • Activity classification also to be discussed by ISIC
outcomes of bopcom s discussions15
Outcomes of BOPCOM’s discussions
  • Nonresident SPVs linked to general govt
    • Felt TFHPSA proposal incompatible with residence concept
    • Rationale also applies to nongovernment units
    • Recognize need to resolve GFS problem, but not place residence at risk
    • Supported further work in wider context
    • AEG: provided for information only: Initial indications of concern. Support for alternative presentation (e.g., use of reconciliation account, satellite account)
outcomes of bopcom s discussions16
Outcomes of BOPCOM’s discussions
  • Maturity and instrument split
    • Split on instrument in direct investment “other capital”, consistent with instrument split in 1993 SNA, to be recommended on supplementary basis
    • Maturity split (short/long) also on supplementary basis
    • Note meaning of these distinctions in many cases not clear between direct investor and direct investment enterprise
outcomes of bopcom s discussions17
Outcomes of BOPCOM’s discussions
  • Concessional debt
    • See separate presentation
    • No consensus for inclusion of transfer in standard presentation but supplementary basis agreed
    • IMF to consider whether current or capital
outcomes of bopcom s discussions18
Outcomes of BOPCOM’s discussions
  • Rescheduling
    • Rescheduling should not lead to whole instrument being rescheduled
    • Rescheduling of future interest payable/receivable could lead to transactions in new instruments
    • Need to clarify definition of rescheduling
    • For HIPC grant, when granted irrevocably, asset of recipient