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Public finances are under pressure. The demand for more and better public services is leading to increased government spending. Ageing populations are accelerating the growth in healthcare and social security budgets, whilst geopolitical tensions are prompting governments to boost defence expenditures.[1] At the same time, government spending on mitigating and adapting to climate change needs to increase significantly, if countries are to reach their UN Paris Agreement emissions reduction commitments.[2]

However, around the world, political leaders are generally reluctant to impose tax increases, so spending pressures lead to fiscal deficits, which in turn grow already elevated debt levels and weaken government balance sheets.[3] Elevated levels of debt, combined with increased interest rates, are producing unsustainable debt servicing costs for many countries. In some low-income countries, as much as 25 per cent of revenues are spent on debt interest payments.[4]

The Public Sector Financial Accountability Index forecasts that the percentage of central governments reporting on an accrual basis will increase from about 1 in 4 (24%) in 2018 to over 70% by the end of this decade. If the global transition is successful, many more governments will have access to new accrual-based information – including their own balance sheet – to improve accountability and financial decision-making. This improved information, if embedded in decision-making processes, can yield substantial benefits and reduce fiscal stress, as described in a recent book: Public Net Worth: Accounting, Government and Democracy[5].

Research by the IMF[6] over recent years confirms these benefits. It also validates the conceptual framework which underpins the IMF’s government financial statistics, which since 2001 have adopted a balance sheet framework[7]. Similarly, the research validates the important work of the International Public Sector Accounting Standards (IPSAS) Board to develop accrual-based IPSASs.

Among the many benefits, including a more complete and realistic view of fiscal risks, this IMF research shows that a strong balance sheet is associated with a lower cost of capital and a more rapid recovery from economic shocks. It also identifies the potentially significant revenue gains from the better utilization of public sector assets, especially commercial assets, reducing the need to increase taxes. More recently, the balance sheet perspective has become a more central part of the IMF’s annual country report process[8], playing a key role in the assessment of a country’s economic and financial performance.

It is important that the transition to accrual is more than a compliance exercise, and that the reform leads to the production of decision-useful information. The slow progress, globally, in bringing public sector financial management into the 20th century, never mind the 21st, is inconsistent with what we now know about government financial performance. Individual country experience, most notably in New Zealand (where for over three decades the government steadily increased the strength of its balance sheet[9]), has long demonstrated the benefits of an accrual-based financial management system underpinning a balance sheet approach to decision-making.

Despite the clear benefits of adopting accrual accounting, several key factors hinder its widespread implementation. One issue is the lack of political commitment, often stemming from a limited understanding of the importance of robust financial management and reporting. This means that financial management reforms do not receive the attention they deserve on policy agendas. Additionally, there may be politicians who are resistant to the increased accountability that accrual accounting brings because it may expose inefficiencies, under-utilized assets and poor financial practices more generally.

Even for some economic and finance staff working in governments, the benefits of accrual accounting are not always widely understood. This gap in knowledge impedes the effective implementation of necessary financial reforms, as accrual accounting lacks advocates within the public sector. The status quo is therefore maintained as familiarity with cash accounting means it is simpler to continue operating on this basis.

To address the issues delaying the adoption of accrual accounting and balance sheet management, coordinated action from various international and national bodies is essential. International financial institutions (IFIs) like the IMF, World Bank, and OECD should continue, indeed increase, their advocacy of and support for the implementation of accrual accounting through technical assistance, funding, and policy guidance, as well as including incentivization in concessional loan agreements. By setting international standards and providing best practice frameworks, they can help countries transition smoothly and effectively.

Supreme audit institutions (SAIs) also have a pivotal role in this process. They must enhance their oversight capabilities by adopting accrual accounting themselves, demonstrating its benefits and establishing a culture of accountability. SAIs should work closely with governments to provide training, resources, and frameworks for proper implementation and monitoring. Their audits can serve as benchmarks and drive improvements in public financial management.

The accounting and economic professions need to step up their efforts in education and advocacy. Professional bodies should offer specialized training and CPD to improve the economic and financial literacy of their members in the public sector, focusing on the benefits and practices of accrual accounting. They should also engage in public awareness campaigns to foster a broader understanding and acceptance among policymakers and the general public.

Governments are at the heart of the issue and they must prioritize the adoption of accrual accounting – as the lack of decision-useful information is their problem and they must take action to solve it. This involves committing to long-term political and financial support for the transition to accrual accounting. Governments should establish dedicated task forces to oversee the implementation process, ensure inter-departmental coordination, and engage with professional and international bodies for guidance and support. By embracing these reforms, governments can enhance transparency, accountability, and fiscal sustainability, ultimately leading to better financial management and public trust, as well as helping to reduce the fiscal stress that so many jurisdictions are facing.


[1] Between 2022 and 2023 military expenditure rose by almost 7 per cent globally:

[3] Global public debt in 2023 was 9 percentage points higher than before the pandemic:

[4] Holland, A and Pazarbasioglu C, IMF Blog: How to Ease Rising External Debt-Service Pressures in Low-Income Countries:

[5] Ball, Ian et al, Public Net Worth: Accounting, Government and Democracy, Palgrave Macmillan, 2023.

[6] E.g. IMF, Fiscal Monitor, October 2018; IMF WP 19/170, Public Sector Balance Sheet Strength and the Macro Economy; IMF 19/81, Indonesia’s Public Wealth: A balance sheet approach to fiscal policy analysis.

[7] IMF, Government Finance Statistics Manual, 2001

[8] IMF Country Report No. 24/14, Kenya: Selected Issues

[9] This financial buffer was eroded in fighting Covid, but is subsequently recovering.

Ian Ball
Ian Ball

Adjunct Professor

Ian Ball is an Adjunct Professor at the Wellington School of Business and Government at Victoria University of Wellington, New Zealand. He is a former CEO of the International Federation of Accountants (IFAC) (2002-2013), and was the Director of Financial Management Policy and Central Financial Controller at the New Zealand Treasury (1997-2004). He was a principal architect of the New Zealand Government’s financial management reform process, making New Zealand the first government to introduce modern accrual accounting integrated with the budget and appropriation processes. He also initiated and lead the development of the International Public Sector Accounting Standards (IPSAS) while Chair of IFAC’s Public Sector Committee (1995-2000).

Alex Metcalfe standing, arms crossed
Alex Metcalfe

Head of Public Sector Policy, ACCA

Alex leads ACCA’s global public sector strategy – driving the organisation’s public sector brand building, qualification development, and fostering communities of good practice. Alex represents ACCA with key contacts across the global public sector landscape, including with senior government officials and international organisations, where he shares good practices and insights on public financial management.

Prior to ACCA, he worked across central, provincial and local government in the UK and Canadian civil service, including as a senior economist - specialising in tax policy - at the Ontario Ministry of Finance. He has published material across a breadth of public sector topics, including infrastructure finance, financial reporting, public procurement, fiscal policy, immigration and skills, and adult social care.

Alex is a Fellow of the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA), member of the public sector committees of the Confederation of Asian and Pacific Accountants (CAPA) and Accountancy Europe, and sits on the editorial board for the academic book series Public Service Accounting and Accountability.

He studied at Oxford, Cambridge and Queen's universities.

Mark Johnson the Senior Subject Manager - Public Sector at ACCA
Mark Johnson

Senior Subject Manager - Public Sector

Mark leads ACCA’s global public sector research as part of the Policy and Insights team, focusing on current issues affecting finance professionals working in the public sector across different countries. He has previously authored reports on public sector  sustainability reporting and assurance, jointly published by ACCA, IFAC and the INTOSAI Development Initiative, as well as  green budgeting and the evolving role of senior finance leadership in the public sector. Mark has a MA in Public Administration and Public Policy and a MSc in Public Financial Management. He is a qualified Chartered Public Finance Accountant and previously worked in local government in England.