IMF & other international standard setters examining government accounting for mineral wealth: Goa Foundation

Since 2016, the Goa Foundation & The Future We Need have advocated the correction of a crucial anomaly in the way governments account for the oil, gas & mineral wealth they control and dispose of through miners. In Goa and across the world, mineral sale proceeds (e.g., royalty) are incorrectly treated as revenue and spent as part of the budget. The extraction, however, is actually leading to depletion of the mineral wealth, cheating future generations of access when their turn arises, as the minerals are finite in quantity and are not renewable. Further, the mineral wealth is being sold for less than its actual worth

We are happy to announce that three key international standards setting bodies — including the International Monetary Fund (IMF) — have started work on resolving this issue as part of the process to update their accounting standards. Since 2016, the Goa Foundation has been advocating for change with these bodies.

The Problem: Accounting creates poor incentives

In many countries, governments own sub-soil minerals. India’s National Mineral Policy 2019 has declared: “Natural resources, including minerals, are a shared inheritance where the state is the trustee on behalf of the people to ensure that future generations receive the benefit of inheritance.” The primary objective of an owner or trustee is to maintain intact the capital (represented by the shared mineral inheritance).

The extraction of oil, gas and minerals is effectively the sale of the minerals, with royalties and other proceeds being the consideration paid in exchange for the mineral wealth extracted. Unfortunately, governments everywhere treat the mineral sale proceeds as revenue or income, a crucial error which hides the real transaction — a sale of inherited wealth or assets.

This results in governments selling minerals at prices significantly lower than what they are worth, driven by lobbying, political donations and corruption. For example, it is estimated, based on the annual reports of Vedanta, that over the eight years 2004-2012, the state of Goa lost more than 95% of the value of its minerals — after accounting for extraction costs and a reasonable profit for the extractor ( In effect, the people and future generations of Goa have sold mineral wealth worth ₹100 for ₹5, a loss of ₹95.

This plunder of public wealth is effectively a hidden per-head tax which made a few extractors and their cronies super-rich. Naturally, the extractors are keen to extract as quickly as possible and move on. Trees, tigers, tribals, environmental activists are labeled as anti-development or anti-national.

Worse still, the trifles received by the government are treated as “revenue” and happily spent, leaving neither the minerals nor their value for future generations to inherit. This is hardly sustainable development!

Rulers love revenue, it helps them stay in power. If ₹5 is received from mining, doubling mining would result in ₹10 of “revenue”. Citizens perceive more mining = more government revenue = good. The plunder & outright spending of public wealth is hidden. More mining under such conditions would make a bad situation significantly worse.

If the accounting were proper, everyone would see that inherited mineral wealth of ₹100 is being sold. Alternative questions come up naturally. Why is inherited being sold? Why now? Can we avoid a loss? How will we save the mineral wealth or its sale proceeds for future generations?

Who can fix this?

The single most important standard is the Government Finance Statistics Manual 2014 (GFSM) of the International Monetary Fund (IMF).

The System of National Accounts 2008 (SNA) by UN Statistics is used for reporting national income statistics like GDP and NNI. The broad conceptual framework of the SNA is used by the IMF for the GFSM.

The International Public Sector Accounting Standards Board (IPSASB) sets accounting standards for the public sector – these parallel in some ways the International Financial Reporting Standards (IFRS) that are designed for the private sector.

There are equivalent standards in India. The Government Accounting Standards Advisory Board (GASAB), under the aegis of the CAG, is the main standard setting body for government and national accounting.

Advocacy timeline

In 2016, Goa Foundation sent the note “Mitigating the Resource Curse by Improved Governmental Accounting” to IMF, IPSASB, UN Stat and others globally, as well as India’s GASAB and various officers in concerned ministries. IPSASB responded promptly to inform that accounting for natural resources would be added as a potential project in their 2018 consultations for their Work Plan 2019-23. We got indirect feedback from the IMF as well. In response, Goa Foundation sent “Government Accounting and the Resource Curse: Response to FAQs” to the same set of entities in 2017.

In 2018, Goa Foundation responded to IPSASB’s consultation. Our advocacy was supported by a wide variety of civil society agencies, including David Leiser (President, IAAP — Economic Psychology Division)Bob Traa (retired from the IMF), Publish What You Pay — UKSamata India, the Peaceful Society, the Natural Resource Governance InstituteOpen Oil, and The Future We Need.

This effort was successful. IPSASB placed a New Standard on Natural Resources at the top of their priority list for their Work Plan 2019-23, noting “From a public interest perspective, this is an important issue, particularly in jurisdictions with resource-based and resource rich economies because the recognition and measurement of these assets impact their management and the benefits derived by citizens from their extraction.” Work commenced in 2019. A Consultation Paper is being drafted, which will be issued after their March 2022 meeting.

In 2018, a third letter was sent to the IMF connecting the accounting error to opening up protected areas in the US for “revenue” towards tax cuts for the rich. In response, the head of IMF’s Government Finance Statistics invited The Goa Foundation to meet. Rahul Basu travelled to Washington DC and met with staff from a range of departments of the IMF. From the meeting, it became clear that the UN System of National Accounts would need to be corrected and the IMF GFSM would follow after.

The earlier advocacy notes culminated in publication of “Minerals are a Shared Inheritance: Accounting for the Resource Curse”, a research paper by Rahul Basu and Scott Pegg. It was  published in Elsevier journal, “The Extractives Industries and Society,” in 2020.

In 2020, the Advisory Expert Group (AEG) to the Inter-Secretariat Working Group on National Accounts (ISWGNA) on the UN System of National Accounts created task forces to look at specific issues. We were in touch with members of the Wellbeing and Sustainability Task Force, and provided inputs to the draft guidance note on Accounting for Economic Ownership and Depletion of Natural Resources. A public consultation was concluded earlier this year.

Finally, earlier this year, IMF has deputed experts on Government Finance Statistics to join the Wellbeing and Sustainability Task Force in the context of the updating the GFSM 2014. Accounting for Economic Ownership and Depletion of Natural Resources is one of the issues on the GFSM priority list.

Rahul Basu remarked: “We are thrilled that this issue is now on the agenda of all three important standards setters, IMF, IPSASB and UN Statistics. This is a necessary and most difficult first step. Of course, changing international standards is a long process and may not result in all we advocate for. And getting the changes adopted and implemented is still harder. But the ball is rolling and that is a huge win.

Claude Alvares, Director of the Goa Foundation, noted: The time spent in international advocacy has produced results which, once they become part and parcel of the routine accounting standards run by institutions across the globe, will lead to a wholly different, sustainable, conservationist approach to disposal of mineral wealth and assets. In principle minerals are owned by the people of each state, but presently they are badly managed, leading to serious losses, inequity, and senseless depletion at the expense of coming generations. The owners of the ore – the citizens of the state – get almost nothing. In fact, due to the environmental degradation caused by primitive extraction methods, welfare is in fact being replaced by ill-fare, leading to social unrest across the planet in all mining areas. Such an industrial model of extraction violates Article 39 of the Constitution of India.


The Goa Foundation is the most well known of Goa’s environmental action groups. Founded in 1986 by a group of Goan environmentalists each fighting his or her own individual environmental battles, the organization today commands the respect of judiciary, government and the general public for persisting with its environment agenda for more than three decades. The work of the Foundation spans different areas and fields, all related in some way or another with the conservation of Goa’s natural environment

The Future We Need is a global movement to make intergenerational equity foundational for civilization, starting with minerals. Ethical Government Accounting is our global campaign to change three critical standards for government accounting, statistics and disclosure to treat mining as the sale of our shared inheritance. The basic rationale is that since minerals are not recognized as assets, governments are highly incentivized to enter into arrangement to sell them without concern about the value received, because the mineral sale proceeds are treated as “windfall revenue”, which the governments can spend. Proper accounting would disclose that in most cases, the mineral sale proceeds are lower than the value of the minerals (the “Resource Rent”) and consequently the real transaction is a fire-sale of the family silver. This cheats present and future generations of their inheritance and drives the resource curse as well as makes our economies unsustainable. This is unethical.


Claude Alvares

Director, Goa Foundation


Rahul Basu

Member, The Future We Need



Is Goa an exception? Is this a national or global issue?

There is growing empirical evidence of large losses in mining from around the world (

There is also growing evidence from the IMF that many governments of resource rich nations, including the six Gulf Coordination Council countries, UK and Norway, face declining public sector net worth, i.e., their governments are becoming poorer ( This indicates unsustainable mining.

Links to the standards setters websites

IPSASB: Project on Natural Resources

UN Statistics: Consultation on Accounting for the Economic Ownership and Depletion of Natural Resources.

UN Statistics also produces the System of Environmental-Economic Accounting (UN-SEEA) which is used for green accounting.

IMF: Update to the Government Finance Statistics Manual 2014


Is this connected to green accounting?

Green accounting is the term given to national accounts which take into account the value of nature. The rationale is that the national accounts under the UN SNA standard treats nature as free, leading to rapid exploitation. In response, the UN System of Enviromental Economic Accounting (UN-SEEA) was developed as satellite accounts, and add-on to the national accounts.

The reason for green accounting is similar to our proposal and has inspired our work. In our case, our focus is on the government or public sector accounts, as they are the owner / trustee of the mineral resources. Further, we have concentrated on mineral resources, as they have clear financial values and do not regenerate. IPSASB found that there is almost no guidance in accounting standards across the world for owners of mineral and natural resources.

For national income accounting, since the consequences of this error are so significant, we have targeted a change to the main statistics (UN SNA) so that it impacts the reported GDP. In fact, seen properly, the national goal should be Net National Income (NNI), not GDP. Both these aspects have been included in the UN Stat guidance note.

If the error is corrected, what could change?

Since minerals are a shared inheritance held in trust for the people and future generations, our foremost duty is to maintain the value of our children’s inheritance by avoiding theft, loss, waste or consumption. Leaving the minerals undisturbed fulfills our duty.

Goa Foundation Benchmark for Public Finance: If we extract and sell our mineral wealth, The Goa Foundation has proposed a passive benchmark for evaluating fiscal performance with the shared mineral inheritance. It suggests that since capital maintenance is the first objective, losses must be avoided when selling the mineral wealth and the entire sale proceeds must be invested in a new “non-wasting” asset, specifically a Future Generations Fund (FGF) passively invested overseas in a global portfolio of low-cost index funds to earn the global market rate of return. The benchmark also proposes that after making good any losses including reinvesting for inflation, the real income of the FGF be distributed equally to all as owners.

Achieving Zero Loss while managing wealth suggests the application of best practices from the financial sector, including Zero Loss as a legal goal, a high security mineral supply chain, fit and proper person tests and integrity due diligence on all participants in the mineral supply chain, and whistleblower rewards and protection.

Setting a global judicial precedent, in 2014 the Supreme Court ordered the creation of a Goa Iron Ore Permanent Fund, which already has a corpus of around Rs.500 crore — Goa Foundation vs UOI & Ors., WP (civil) 435 of 2012, judgment on April 21, 2014 ( The Supreme Court is yet to decide on the use or investment of the fund corpus as well as what distributions can take place, if any.

For the economy (a) this is sustainable – capital has been maintained, (b) the savings rate would rise making available more long term domestic capital, (c) it diversifies risk while likely improving returns – it is nearly impossible to outperform the market rate of return, (d) the dividend is in effect a Universal Basic Income, (e) lower inequality leads to higher economic performance, and (f) as budgets no longer have easy mining money, public investment and tax administration will become more effective and efficient. This is a six fold economic boost.

Principles of Fair Mining: The Goa Foundation Benchmark can be communicated in five simple principles:

1)        Natural resources, including minerals, are owned by the state as a trustee on behalf of the people and especially future generations (Public Trust Doctrine/Public Domain).

2)        As we have inherited the minerals, we must ensure future generations inherit either the minerals or their full value (Inter-generational Equity Principle).

3)        If we extract and sell our mineral wealth, we must ensure Zero Loss, i.e., we must capture the full economic rent (sale price minus cost of extraction and a reasonable profit for the extractor). Any loss is a loss to all of us and all future generations.

4)        The entire mineral sale proceeds must be saved in a Future Generations Fund, with the state as trustee for the people and especially future generations.

5)        Distribute only the real income of the fund only as a Citizens’ Dividend, equally to all as a right of ownership.

These principles of fair mining are fully Constitutional, promoting justice, liberty, equality, and fraternity. They are moral, ethical, fair, right and sustainable. The reduction in losses would limit corruption, crony capitalism and growing inequality. They fulfill our duties to our future generations.