1、SUSTAINABLE PUBLIC FINANCES THROUGH COVID-19 2020 Association of Chartered Certified Accountants July 2020 About ACCA ACCA is the Association of Chartered Certified Accountants. Were a thriving global community of 227,000 members and 544,000 future members based in 176 countries that upholds the hig

2、hest professional and ethical values. We believe that accountancy is a cornerstone profession of society that supports both public and private sectors. Thats why were committed to the development of a strong global accountancy profession and the many benefits that this brings to society and individu

3、als. Since 1904 being a force for public good has been embedded in our purpose. And because were a not-for-profit organisation, we build a sustainable global profession by re-investing our surplus to deliver member value and develop the profession for the next generation. Through our world leading A

4、CCA Qualification, we offer everyone everywhere the opportunity to experience a rewarding career in accountancy, finance and management. And using our respected research, we lead the profession by answering todays questions and preparing us for tomorrow. Find out more about us at SUSTAINABLE PUBLIC

5、FINANCES THROUGH COVID-19 Governments are adopting innovative, and sizable, policy interventions to support their economies. The majority of these interventions are not captured by traditional economic metrics, such as debt-to- GDP ratios. To address this problem, this report calls for governments t

6、o use accounting data and take a balance-sheet approach to effectively manage their finances through the COVID-19 crisis. The report includes 24 recommendations directed to governments and public finance professionals, which will help the public sector navigate the crisis and build back for a greene

7、r and more inclusive future. AUTHORS Alex Metcalfe Michael Taylor Head of public sector policy, ACCA Chief economist, ACCA Foreword I am glad that ACCA produced this timely research study on the Sustainable Public Finances through COVID-19. Public financial management is at a crossroad amidst the CO

8、VID-19 pandemic, specifically to balance between the competing goals of fiscal discipline and control on one hand, and speed and flexibility on the other hand. Nevertheless, the three fundamental objectives of public financial management remain valid: to maintain a sustainable financial position, to

9、 allocate resources to ministries and programmes effectively, and to deliver public services with good value for money. Ministers of finance and all the finance professionals who work with them, need a variety of tools in their toolkits to achieve these objectives. In tackling the COVID-19 crisis, t

10、he International Monetary Fund called on governments “to do what it takes but to keep the receipts.” This entails ensuring the funds are spent for the purpose intended and accounted for and reported appropriately. Also, governments would need to prevent fraud and meet citizens expectations on transp

11、arency of public spending. This report demonstrates that a substantial portion of the collective global response is not just health response spending, but governments are living to their sovereign responsibility as the ultimate social insurance scheme to help citizens and businesses to get through t

12、he crisis. Governments are able to offer guarantees, provide equity injections and to agree to defer tax payments. These are referred to in this report as below-the-line interventions. Just as governments must keep receipts for their spending, it is also critical to record and manage the assets and

13、liabilities being created through the below-the-line policy measures. Government spending and borrowing will show up in statistics as deficits and debts. They can be tracked, and countries compared, using measures like the ratio of debt to GDP. However, many of these below-the-line interventions do

14、not show up in the traditional economic measures unless, for example, a guarantee is called in and money flows. This report makes the case for the public finance toolkits to include a balance sheet approach to managing public finances. This is an important insight to policy makers and public finance

15、 professionals. Governments are going to face enormous challenges over the coming months and years, as we work to build back better, and we must ensure that public money is well-managed with a long term perspective to sustain the wellbeing of citizens and future generations. This must include unders

16、tanding the impact that policies will have on a countrys public sector net worth. Ed Olowo-Okere Director, Governance Global Practice, World Bank Group 4 Contents Executive summary 7 Summary of report recommendations 8 Introduction 11 Acknowledgements 11 1. A new economic reality for public finance

17、13 2. Public finance innovation: expanding the toolkit 19 3. Taking a balance-sheet approach to COVID-19 23 4. The effect of COVID-19 on public sector balance sheets in 10 countries 29 5. Using public sector balance sheets to build back better 34 Conclusion 43 Appendix A Detailed presentation of cou

18、ntry-specific case studies 44 US 44 Japan 45 UK 47 Italy 48 Brazil 50 Canada 51 South Africa 52 Indonesia 53 New Zealand 54 Turkey 55 Appendix B Methodological overview of public sector balance sheet forecasts 56 References 58 5 6 SUSTAINABLE PUBLIC FINANCES THROUGH COVID-19 | EXECUTIVE SUMMARY COVI

19、D-19 has caused a global economic downturn like no other and governments across the world have embarked on fiscal interventions of an unprecedented scale in order to minimise the long-term economic damage. Governments have responded with conventional revenue and expenditure interventions alongside n

20、ew policy interventions such as furlough schemes that subsidise firms to keep employees on their payrolls, taxable grants paid to self-employed workers affected by COVID-19, and large- scale loan guarantees to support struggling firms. The aim of these measures is to provide a lifeline to firms and

21、households during the period governments require citizens to be economically inactive, with the hope that businesses can continue operating after restrictions are lifted. There has also been a new focus on below-the-line interventions such as guarantees and equity injections. The International Monet

22、ary Fund (IMF) estimates the global total fiscal policy response to be $9 trillion, with $4.6 trillion being below-the-line measures. The below-the-line interventions are not sufficiently captured in many traditional economic indicators, such as the debt-to-GDP ratio or public sector net debt. A loa

23、n guarantee, for example, would only affect debt-to-GDP if a loss is realised. These provisions or contingent liabilities can have a substantial impact on public finances if they crystallise. Between 1990 and 2014, the IMF recorded 230 contingent liability realisations with an average fiscal cost of

24、 6.1% of the affected countrys GDP. It is important, therefore, that governments adopt a balance-sheet approach to this crisis, paying attention to their public sector net worth. In adopting a balance-sheet approach, governments will benefit from: nincreased clarity on the true position of the publi

25、c finances, as well as an understanding of the fiscal room available for further government action nimproved value for money and financially sustainable policies, and nenhanced public sector resilience and the embedding of key financial metrics to drive performance management. Within this report we

26、set out the impact of COVID-19- related fiscal policy interventions on the public sector balance sheets in 10 countries, covering a diverse range of geographies and levels of development. This analysis shows that just over half of the government interventions by the 10 countries in the sample are in

27、 the form of below-the-line activity. In particular, four of the ten countries (Italy, UK, Japan and Turkey) have announced fiscal policy interventions that are dominated by below-the-line interventions. For each of these countries, debt-to-GDP ratios by themselves would not accurately capture the i

28、mpact of their fiscal policy responses. The research also forecasts the net worth of the 10 countries in 2022. By then, the average net worth is forecasted to drop from negative 17% of GDP to negative 30% of GDP. The largest deteriorations in government net worth are expected to occur in the US (dow

29、n 27 points) and Japan (down 20 points). After the crisis, governments are likely to want to stabilise their spending first and then begin to rebuild their balance sheets. In the current environment, some combination of public spending cuts and tax increases will be required over time in many countr

30、ies but governments can minimise their reliance on these two measures by taking a balance-sheet approach to fostering sustainable public Executive summary 7 PUBLIC FINANCE PROFESSIONALS CLEARLY HAVE AN IMPORTANT ROLE TO PLAY IN PREPARING THE BALANCE SHEETS. SUSTAINABLE PUBLIC FINANCES THROUGH COVID-

31、19 | EXECUTIVE SUMMARY finances. This can be achieved through maximising the return on public assets, focusing on value for money in the use of public resources, and taking a multi-capital approach by expanding the scope of the public sector balance sheet. The central recommendation of this report i

32、s that governments must take a balance-sheet approach to managing their finances through this crisis. Balance sheet information can improve decision making, should act as the benchmark for new fiscal targets, and will support governments in using sufficient fiscal firepower to rebuild the economy fo

33、r a more inclusive and greener future. The balance-sheet approach is founded on accrual accounting but even governments operating on a cash basis can apply the mindset of balance-sheet management to their decision making. All public sector organisations maintain some form of accounting data and can

34、consider this information when deciding whether a change represents value for money and what its implications are for net worth even where reliable accrual information does not exist. To be credible, public sector balance sheets must be properly prepared, audited and disclosed. Public finance profes

35、sionals clearly have an important role to play in preparing the balance sheets. They can also contribute to transparency and accountability by providing clear, understandable narratives to help non-experts make decisions at a time when many countries will need to navigate a series of difficult polic

36、y choices. Public finance professionals around the world must provide critical input to achieving sustainable public finances, applying a balance-sheet approach to the management of government decision making. It is time for balance sheet information to take primacy in informing policymakers on how

37、to achieve an inclusive and sustainable recovery. Summary of report recommendations The following recommendations were included in the report and are highlighted here for ease of access. Key recommendation 1. Governments must turn their attention to public sector balance sheets to manage their finan

38、ces properly through this crisis. Balance sheet information can improve decision making, should act as the benchmark for new fiscal targets, and will support governments in using sufficient fiscal firepower to rebuild their economies for a more inclusive and greener future. In response to the COVID-

39、19 crisis, governments should take the following steps 2. Reference or implement full-accrual IPSAS, the only globally accepted accounting standards for the public sector, in the production of their general-purpose financial reports. 3. Consider producing a consistent, multipurpose Chart of Accounts

40、 that supports the preparation of full accrual financial statements, as well as providing information for other reporting purposes. 4. Minimise reliance on either tax increases or austerity by taking a balance-sheet approach to fostering sustainable public finances. This can be achieved through maxi

41、mising the return on public assets, focusing on value for money in the use of public resources, and by expanding the scope of the PSBS to include a broader range of capitals. 5. Consider creating an Asset and Liability Committee to provide expert advice on how best to weigh risk and return objective

42、s to unlock the value of the PSBS. 6. Consider the privatisation of certain public assets and services, where this will provide value for money and improve the governments financial sustainability. a) Equally, governments should avoid poor-value privatisations, which provide immediate cash but reduc

43、e public sector net worth. b) Governments not operating on a full accrual basis should be particularly careful in pursuing a policy of privatisation to fund the recovery or support the public finances, as the lack of good data increases the risk of poor value for money for citizens. 7. Consider expa

44、nding their balance sheet analysis to take a multi-capital approach, which could include natural, human, social, and physical / financial capitals. 8. Consider publishing a vision or overall objective that will help guide the finance function during the crisis. 8 SUSTAINABLE PUBLIC FINANCES THROUGH

45、COVID-19 | EXECUTIVE SUMMARY For example, in New Zealand, the Treasurys vision is to raise the living standards of New Zealanders. 9. Reset current economic frameworks, in light of the COVID-19 crisis, and consider what fiscal rules will guide their decision making during the recovery phase. a) New

46、frameworks should include fiscal rules that move beyond debt to GDP ratios and instead rely on public sector net worth, providing a comprehensive view of public finances that includes public assets and non-debt liabilities. b) As part of resetting fiscal limits, governments should develop medium-ter

47、m plans for capital spending that support a green recovery and inclusive growth while also considering the possible economic multipliers arising from any public investment decision. c) Revised fiscal frameworks should also provide a planned path to recovery, setting out how sustainable public financ

48、es will be achieved over the medium- to long-term. 10. Consider adopting the non-authoritative guidance issued by the IPSAS Board on reporting long-term financial sustainability (RPG 1), as well as the Boards guidance on financial statement discussion and analysis (RPG 2). 11. Direct independent fis

49、cal policy institutions either to begin fiscal sustainability reporting or to increase its frequency. Central finance departments should be required to respond publicly to these reports in a timely manner. 12. Require that public sector balance sheets be properly audited and disclosed. Independent audit increases the reliability and credibility of financial statements and, for qualified opinions, sets out areas of improvement. 13. Provide Supreme Audit Institutions with the independence and necessary resources to conduct performance audits