Gross general government is the most frequently used indicator in terms of cross-country comparisons. The concepts covers the financial liabilities of the central and sub-national governments. While it takes into account social security funds, it does not include the liabilities of financial or non-financial government-owned enterprises. It also fails to account for government assets. Net general government debt, for instance, nets out the general government’s financial liabilities and assets (with the exception of shares, equity and derivatives). Consolidating the assets and liabilities of both the general government sector and the central bank, one arrives at ”net financial worth of the consolidated government and central bank sector”. One could go further and take into account non-financial assets owned by the government (e.g. buildings, land) to arrive at “net worth.” Last but not least, one could add the assets and liabilities of government-owned companies as well as government equity holdings of partly privatised enterprises into the mix to arrive the broader public sector’s net worth. If nothing else, the broader concepts suggest that in terms of stock (if not necessarily, flows), the financial position of many advanced economy governments are not as bad as the general government debt concept might suggest – especially in the case of Japan.
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| Sourc: Public International Finance |