Net lending/borrowing is one of only
two balancing items in the SNA where the reference to "net"
is not in juxtaposition to "gross" : in other words it is not
in reference to lending net of depreciation. If it is positive it is described as net
lending and if negative, as net borrowing. It reflects the amount of financial assets that
are available for lending or needed for borrowing to finance all expenditures - current,
gross capital formation, non-produced non-financial assets, and capital transfers - in
excess of disposable income. Its importance as an economic concept is best illustrated by
the fact that it forms one of the two Maastricht excessive deficit criteria (with an
additional adjustment to reflect net streams of interest payments resulting from swaps
arrangements and forward rate agreements) used by the European Commission to assess the
soundness and sustainability of public finances.
Net lending or borrowing can be
measured identically as the balancing item in either the capital or financial
It can therefore be derived as
saving less acquisitions plus disposals of non-produced non-financial assets plus
capital transfers receivable minus gross capital formation minus capital transfers
Or it can be derived as the
difference between net acquisition of financial assets and net incurrence of
liabilities. Financial assets (and liabilities) include: Monetary gold, Special
Drawing Rights, Currency and Deposits, Securities, Shares and other equity, Insurance
Technical Reserves (including net equity of households in pension funds, see Indicator 5, Indicator 7
Indicator 8) and Other accounts receivable and payable
(such as trade credits and advances for work in progress or to be undertaken).
Although it can be derived via either
approach it is important to note that, in practice, achieving this equivalence is one of
the most difficult tasks in compiling national accounts.
Another important point worth making
in this context concerns contingencies. Many types of contractual financial
arrangements do not give rise to unconditional requirements either to make payments or to
provide other objects of value. These "contingencies" are not
recorded as financial assets in the SNA. If an event occurs (and a feature of
contingencies is that they may not), for example, transactions in financial assets related
to the realisation of the contingency, the transactions are recorded in the accounts in
the usual way. A simple example of a contingency is an overdraft facility on a bank
account. The existence of the facility does not of itself create a financial asset (of the
bank) and liability (of the account holder). But any borrowing that subsequently occurs in
relation to the facility will.
Generally the comparability of
statistics on net lending and net borrowing is good, especially for EU countries. That
said, the difficulty that many countries face in reconciling the two approaches to
measurement gives some indication of the care needed. Comparability, or rather the care
needed when interpreting cross-country data, is perhaps a bigger issue at the sectoral
level. Again, this is not fundamentally a question of conceptual differences but real
differences in the types of institutions included within institutional sectors: for
example in some countries hospitals are outside of the general government sector - see
also Indicator 16.
Eurostat (2002), ESA95 Manual on Government Deficit and Debt, European
Lequiller, F. and D. Blades
(2007), Understanding National Accounts, OECD
OECD (2000), System of National Accounts, 1993 - Glossary, OECD
UN, OECD, IMF and Eurostat
(eds.) (1993), System of National Accounts 1993,
United Nations, Geneva, http://unstats.un.org/unsd/sna1993.
|Indicator in PDF
|9.1. Net lending/net borrowing by institutional
|9.1 Net lending/net borrowing by institutional