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1993 SNA Update Information - AEG recommendations for issue:
Interest at concessional rates

Subissue description
Issue description in [English] | [French] | [Russian] | [Spanish]
Loans with concessional interest rates could be seen as providing a transfer from lender to borrower. Should such transfers be recognized in the SNA? Although there is no clear definition of what is a concessional loan, the guidance in the External Debt Guide suggests features such as an intention to convey a benefit and occurrence in a noncommercial setting (usually government-togovernment). If concessional loans are not recognized in the core accounts, should the concessional amounts be considered as supplementary information where they are significant?
AEG recommendations
Number of AEG recommendations for selected issue:1
  Corresponding meetingDate postedRecommendation
 Jan-Feb 20064/7/2006(a) The AEG was concerned that the proposals presented could potentially run counter to some core national accounting principles. The approach needs to be presented further refined and, as an interim step, debt concessionality should be handled via supplementary items and only concern official-to-official lending.
(b) The AEG was reluctant to make a definitive decision on the preferred option because different options appear to be applicable in different situations. The AEG inclined to prefer option (b) (see following paragraph) until further research is undertaken to set out the characteristics of the different options and the situation(s) in which each may or may not be applicable. In addition, it was noted that option (d) does not provide a comprehensive system of recording. The AEG considered that further research is required.
Option (b): to record concessional debt in nominal value but account for the difference between the market interest rate and the contractual interest rate on the debt as an on-going current transfer. While this option is consistent with nominal valuation of loans, its key weakness is that it uses an interest rate that is likely to be out of line with evolution of market interest rates.
(c) The AEG agreed that debt concessionality should be put on the long-term research agenda.
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