Debt valuation by the Government of Malta

Abstract

Purpose: The purpose of this study is to investigate the two different methodologies of valuing government debt, that is, according to IPSAS and ESA. Moreover it will analyse the effect IPSAS implementation may have on accounting and reporting government debt at a national level. Design: The objectives of this study were met through a qualitative research methodology involving semi-structure interviews with officials from the Treasury Department and the National Statistics Office. A snowballing technique was used which resulted in more interviews with different officials, namely at the Economic Policy Department and at the Central Bank of Malta. Findings: From the study it was discovered that in ESA 2010 there are two methodologies applicable to debt reporting. These are at nominal value and market value. Differently, it was discovered that once IPSAS will be adopted, the methodology that will be used will be similar to the value which the Treasury Department is currently utilising. The methodology used for IPSAS financial instruments will be the nominal value. Conclusions: The adoption of IPSAS for financial instruments will result in a change to the way the DMO calculates and reports debt. However, it appears that these changes will not be as drastic as it was expected. The implementation of those standards is still a long way to go so it would be best if some time is given so that perhaps the changes will become clearer. Value: The adoption of IPSAS will be beneficial for all the stakeholders of the government financial reports. Moreover it will improve national reporting of debt. There will be a new accounting system (CFMS) which will be able to calculate debt based on the accruals basis.