How Public Assets Makes Countries Stronger

a post by Seyed Reza Yousefi (an Economist at the IMF’s Fiscal Affairs Department) posted on the Public Finance Management Blog



We all know about government debt. It is widely reported and a key issue in formulating public policy. And we understand that high debt makes countries vulnerable, leading to higher interest charges on this debt. For these reasons, government debt is a key focus in macroeconomic analysis.

But what about government assets? If government were a corporation your analysis would certainly include them. Yet the standard view of public finance does not. What if we were to change that? What would taking account of government assets mean for countries’ resilience in downturns? And if countries with more assets are less vulnerable, would this show up in the interest rate they pay on their debt?

A new IMF working paper addresses these questions. As the point of departure, it looks at the general government balance sheet. This means it analyzes government assets in addition to liabilities. The paper shows the different ways balance sheet information enriches the picture and allows one to look at the source of changes in assets and liabilities. For example, do they come from the sale or acquisition of a building or the contracting of a new loan? Or are they caused by changes in the value of existing infrastructure or oil reserves?

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Infrastructure: why it is under provided and badly managed

an article by Dieter Helm (New College, Oxford, UK) and Colin Mayer (Saïd Business School, Oxford, UK) published in Oxford Review of Economic Policy Volume 32 Number 3 (2016

Abstract

The paper records the substantial deficiencies that exist in the design and implementation of infrastructure programmes around the world. It points to three sources of failure.

The first is a failure to recognize the systems nature of infrastructure and the implication of this for the appropriate tools of analysis that should be employed in infrastructure assessments.

The second is a preoccupation with income and expenditure flows rather than balance sheets in reporting public- as well as private-sector infrastructure accounts. This has had profound and in many cases perverse implications for the ownership, funding, and operation of infrastructure.

The third is inadequate governance of infrastructure programmes to overcome the significant commitment problems that afflict both private- and public-sector providers of infrastructure.

The paper describes a set of responses that recognize the systems nature of infrastructure, the importance of balance sheets, and the need for commitment mechanisms in the private and public sectors to promote the efficient provision of infrastructure.

JEL classification: H54

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