In 2022, while working on a Chart of Accounts, I became closely involved with the practical application of GFSM 2014. That experience changed somewhat the way I viewed Government Finance Statistics. One may say that it is easy to see GFS primarily as a statistical reporting framework, which is used to classify government transactions and produce fiscal statistics after budget execution has taken place. However, from a PFM perspective, this tends to place GFS toward the end of the process. Yet a well-designed Chart of Accounts shows how closely GFS is connected with what happens much earlier.

The way transactions are classified affects how governments record expenditure and revenue, consolidate fiscal information and move from individual accounting entries to fiscal reports. The quality of GFS statistics therefore depends heavily on the quality and structure of the underlying PFM systems. The relationship works in the other direction as well. GFS provides a common structure for understanding the fiscal position of government. Its distinction between revenue, expense, nonfinancial assets, financial assets and liabilities provides information relevant to fiscal analysis and fiscal decision-making, rather than serving statistical reporting alone.

Policy lending is a useful example. When government provides a loan to a public corporation, it normally acquires a financial asset rather than recording an expense. The statistical classification is relatively straightforward. The PFM implications are less so. Understanding the transaction requires looking beyond its classification. Why is government providing financing? What is the financial position of the corporation and the likelihood of repayment? What fiscal risks arise from the transaction? How does the loan affect government's financing requirements and balance sheet? These questions link an individual transaction to policy objectives, fiscal risk and public financial management.

And this is where I see an important value of GFS for PFM. GFS does not tell policymakers whether providing the loan is the right policy decision. It does provide a structured way to identify the economic nature of the transaction and connect flows with stocks, assets and liabilities.

The ongoing update of GFSM 2014 reflects this broader connection. A discussion note titled “GFS within Fiscal Analysis and Policymaking,” (https://www.imf.org/-/media/files/data/statistics/gfsm/global-consultations/discussion-note-231-gfs-in-fiscal-analysis-policymaking-consultation-march2026.pdf) explores the role of GFS in fiscal analysis and policymaking, including its links with core PFM functions such as budgeting, accounting, reporting, forecasting and fiscal risk management.

This raises a broader question for PFM practitioners: should GFS remain primarily an international statistical reporting framework in our day-to-day work, or should its concepts play a more direct role in budgeting, fiscal analysis, fiscal risk management and policy decisions?

My experience with the Chart of Accounts points toward the second view. Closer links between budget classification, accounting, financial reporting and fiscal statistics make it easier to follow the economic substance of government decisions, from the original transaction to their effect on the broader fiscal position.

For me, this is where GFS has value for PFM. It provides a consistent fiscal language connecting individual government transactions with the wider fiscal picture.

This time it is Mario Draghi who explains us the fine distinction between monetary and fiscal dominance. ‘The distinction is in the purpose’ he said when referring to Quantitative Easing operations.

He gave his Karl Brunner Distinguished Lecture, 1st October 2026, organised by the Swiss Central Bank. Go to minute 29:13 of the video available at at https://www.snb.ch/en/services-events/digital-services/research-tv/researchtv-2026-10-01 .

All the lecture is worth watching to revisit the turbulent times of 2008-2015 and, I would say, the ones ahead of use as Europeans.

We start the new week with another gem, not so hidden tough, as it is a current concern for monetary policies of Central Banks. Kristalina Georgieva, IMF Managing Director, used it during her speech at the Bank for International Settlements on September 7th 2026.

Risk of Fiscal Dominance in monetary policies: ‘I chose to use my recent remarks at Jackson Hole to warn about the risk of fiscal dominance. When public debt is high, history has taught us that fears of lower-than-optimal policy rates or future monetization may lurk in the background, pushing bond yields and inflation expectations upward. And, with many central banks now making losses from a mix of low yields on legacy assets and high interest expenses on bank reserves, the challenge for central banks is even greater.

With high debt and fears of fiscal dominance conspiring to increase the risk of inflation expectations moving upward, central banks will need to respond forcefully to future shocks to protect independence, preserve credibility, and deliver on their price stability mandate’

Memorandum item: I asked AI about the three types of dominance that can impact the Central Bank Independence, and the following table was generated:
   
Type of Dominance              What constraints the Central Bank?                                              Primary consequence

Monetary Dominance (ideal)    None: the Central Bank freely prioritizes its price stability mandate    Controlled inflation and credible monetary policy

Fiscal Dominance                    High Government debt level and large deficit                                    Central Banks keeps rates artificially low
                                                                                                                                                         to prevent Government default

Financial Dominance               Fragile banks, banking sector vulnerability or systemic debt               Central Banks hesitate to raise rates out of fear
                                                                                                                                                        of triggering a banking crisis

In recent weeks the interest rate hikes decided by the Federal Reserve, the ECB and the Bank of Japan seem a concerted effort to mitigate the risk of fiscal dominance advocated by some Government’s officials. The Bank of England held the rates but it should be noticed that their levels are currently higher or similar to the ones set by the other Central Banks.

For the fourth ‘hidden gem’ we temporarily move away from the IMF Fiscal Transparency Code, to present a well-known McKinsey jargon, that of hockey stick forecast applied in our case to MTEF projections.

Hockey stick forecast: (https://www.linkedin.com/pulse/how-investors-can-spot-company-whose-hockey-stick-growth-sven-smit/ ) ‘One of the most common artifacts of the corporate strategy process is the so-called hockey stick plan, showing a line that sails upward on the graph to account for upfront investment.

The projections tend to be overly aggressive in the longer term, but they give boards, analysts and investors confidence that the company is poised for a glorious future. Over the years, however, unrealized hockey sticks string together and turn into an ugly phenomenon we’ve dubbed the hairy back.’

This can be extended in PFM to overoptimistic forecasts by the MoF for the outer years of MTEF. This phenomenon occurs when new programmes, often financed by donors, are planned either beyond the implementation capabilities of Government agencies and/or over the spending framework allowed by legislation. In the latter case fiscal rules require fiscal constraints in annual budget planning, forcing the MoF to push unrealistic programme expenditures in the MTEF outer years.

Memorandum item:  In Albania the rolling three-year MTEFs in the period 2014-2019 showed the ‘hockey sticks’ trend. The sticks indicated that the medium-term forecast beyond the budget year is not financially sustainable and  the Albania was falling back to a de-facto one-year planning and budgeting.

The attached table (click once on the pic) is the visual representation of what McKensey calls ‘hockey stick dreams and airy back results’.

The second ‘hidden gem’ in the IMF Fiscal Transparency Code (2018) is related to PFM accounting practice used for fiscal reconciliation

Fiscal reports should include reconciliations between alternative measures of summary fiscal aggregates (page 38 under the principle of Internal Consistency):
-   Fiscal balance with net financing (linking the ‘above-the-line’ to the ‘below-the-line’)
-   The stock of debt issued with the stock of debt held by counterparties
-   Net financing with the change in the stock of government debt

Where countries are producing accrual accounts, operating, cash flow, and balance sheet statements make these reconciliations easy to produce. If countries are operating on a cash basis without financial statements, the reconciliations need to be integrated with and/or informed by data produced by the central bank.

Memorandum items
'Most countries have cash-based budgets, while financial statements and fiscal statistics are increasingly being prepared on an accrual basis. These differences could lead to large discrepancies among various reports. For example, arrears may be reported in accrual terms in debt management reports but ignored in cash accounting’.

A reported fiscal deficit “above-the-line” that is smaller than the net financing (below-the-line) may indicate that there are many off-budget operations.

Any discrepancies between the government’s debt liabilities and private-sector debt holdings may indicate misreporting of public debt figure'.