Transcript Update of the Fifth Edition of the IMF’s Balance of Payments Manual ESCWA Workshop on the Compilation of Statistics on Trade in Services Cairo, Egypt February.

Update of the Fifth Edition of
the IMF’s Balance of
Payments Manual
ESCWA Workshop on the Compilation of Statistics
on Trade in Services
Cairo, Egypt
February 6-9, 2007
Background

At its meeting in 2000, the IMF Committee on Balance
of Payments Statistics (BOPCOM) asked the IMF to
begin the process of planning for a Manual update

The first important step was the production of an
Annotated Outline in April 2004.
 This
set out the issues to be addressed in a
proposed chapter order
 Comments
were invited from IMF member
countries.
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Background (2)

Around the same time, BOPCOM set up three, and
eventually, four expert groups to advise it on the
technical issues identified.

These groups covered direct investment (DITEG),
currency unions (CUTEG), reserve assets (RESTEG),
and other balance of payments issues (BOPTEG).

In total, 30 countries and 9 international agencies, in
addition to the IMF, were represented in these groups.
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Background (3)

For each technical issue, an issue paper was prepared
as well as an outcome paper
 These
papers were published on the IMF’s external
website.

BOPCOM has by-and-large accepted the TEGs
recommendations.
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WHY THE NEED FOR AN UPDATE?



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

take into account financial innovations and growth in financial
services;
clarify selected areas (e.g., scope of direct investment, services);
increase emphasis on the international investment position (to be
called “Balance of Payments and International Investment Position
Manual”);
demonstrate the integration between international accounts statistics
and other macroeconomic statistics;
take into account specialized manuals and classification
systems;
deal with the special issues related to currency unions and other
regional monetary and economic arrangements.
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Key Changes: (1) Position Data

In many respects the basic framework for balance of
payments data in the updated Manual is to be the same
as in BPM5.

However, there is to be a greater emphasis on positions
 The
international investment position (IIP) is to have a
far more prominent position in the updated manual

There is a possibility of further breakdown of the
IIP by currency; and

By remaining maturity.
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Key Changes:
(2) Related Manuals and Guides
The advances in thinking that are incorporated in other
guides and manuals since 1993 are to be adopted.
These include:

The International Trade in Services Manual, drawing on
the more detailed discussion than is in BPM5

The External Debt Guide, such as its definition and
identification of debt

The Guidelines for the Reserve Data Template, such as
the expanded description of what constitutes reserve
assets

The Government Finance Statistics Manual (2001) and
the Monetary and Financial Statistics Manual (2000) are
also being drawn upon.
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Key Changes: (3) Sectorization

The sectorization is to be brought closer to that
of the SNA
 This
is to allow further harmonization between the two
systems,
 but
the new Manual is to allow for an ease of
transition from BPM5 by identifying the BPM5 sectors
 A central
bank sector is to replace the monetary
authorities.
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Key Changes: (4) Globalization
The updated manual is to take account of developments
arising from globalization

This is most notable in the changes proposed for:
 Goods
for processing, to be treated as a service, if the
goods do not change ownership

In essence, in BPM5 a change of ownership is
imputed
 Merchanting,
to be treated as trade in goods, on a net
basis

In BPM5 no change of ownership of goods but a
service was recorded.
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Key Changes: Globalization (cont’d.)

Repairs on goods to be classified as a
service not goods

Special purpose entities are to be classified
as separate institutional units in the economy
in which they are incorporated — residence
principles in BPM5 for SPEs to be clarified.
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Key Changes: (5) Currency Unions

An appendix on currency and other economic
unions will be introduced
 A currency
union and its economic territory
to be defined
 The
currency union central bank to be
recognized as an institutional unit
 Various
aspects of recording that are
special to currency unions to be described.
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Other Changes:
(6) Conceptual Framework

There are a number of other proposed
changes. These include:
 The
concept of “change of ownership” is
modified to “change in economic
ownership”
 The
residence of households to be based
on “predominant center of economic
interest.”
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Other Changes: (7) Persons

Cross-border movements of personal effects
during migration not to be recorded as a
transaction but a reclassification.

A new concept of personal transfers to be
introduced replacing “workers remittances”
comprises
all transfers in cash or in kind
made or received by resident households
to or from other nonresident households.
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Other Changes: (8) Direct Investment



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
Within direct investment, the 10 percent level for
establishing a direct investment relationship to be
maintained
Direct investment positions, transactions, and income to
be recorded on a gross basis rather than netting off
reverse investment
Valuation of positions at market value to be preferred
and given greater emphasize
Permanent debt between affiliated financial institutions to
be excluded, like for other debt between these
institutions
Already work is underway to update the OECD
Benchmark Definition of Direct Investment based on
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these and the other outcomes on direct investment.
Other Changes: (9) Instruments

Like for direct investment, earnings of mutual
funds to include reinvested earnings.

Employee stock options to be included in the
category, “financial derivatives and employee
stock options”

Foreign currency indexed linked debt with both
principal and coupons indexed to a foreign
currency to be classified and treated as being
denominated in that foreign currency.
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Other Changes: Instruments (cont’d)

Loans continue to be valued at nominal value
in the position data, with a memorandum item
for the creditor showing the likely realizable
value

So called standardized guarantees to be
treated in the same way as insurance, and
 guarantees
that meet the definition of
financial derivatives to be treated as such.
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Other Changes:
(10) Debt Concessionality

No change in the recording in the standard
components, but
 supplementary
information showing the benefits
arising from concessional debt as one-off
transfers at the point of loan origination
 this
is equal to the difference between the
nominal value of the debt and its present value
using a relevant market discount rate.
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Next Steps

First draft due for completion in February 2007, and core chapters
would be posted on the IMF external website for public comment

Following public comments, an updated version of the complete
Manual will be presented to the October 2007 BOPCOM meeting
(following BOPCOM comments, this version would be posted on the
IMF external website, and be promoted in regional seminars during
the first half of 2008).

A final version would be prepared for BOPCOM’s approval in
October 2008, and then be posted as the final version, subject to
editing, by end2008.

Process being coordinated with the revision of 1993 SNA.
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