Aim High to Achieve High
Cash Management Framework and its Integration with Debt Management
Professional Development Seminar on Debt Management December 10, 2008 Sailendra Pattanayak and Brian Olden, FAD
Overview
Definitions of Cash Management Outline of a modern cash management framework Cash rationing vs. cash management Benefits of an efficient cash management system Prerequisites for effective cash management
Banking and payment arrangements Cash forecasting Institutional framework
Managing cash balances-the basic requirements Issues surrounding integration of cash and debt management
Discussion on appropriate institutional framework
Some definitions of cash management
The strategy and associated processes for managing cost-effectively the government’s short-term cash flows and cash balances, both within government, and between government and other sectors.
(Williams 2004)
Having the right money in the right place at the right time to meet the government’s obligations in the most cost-effective way.
(Storkey 2001)
Cash management framework
Banks
y Pa m s nt e
Spending units
s ue en ev R
Treasury system
Debt management
Central bank
Monetary policy
Cash manager
Financial markets dev. Short-term Investments
Short-term Borrowings
Main building blocks for cash management
Control over receipts and expenditures.
Forecasting cash requirements.
Managing government cash balances – surpluses/deficits.
Cash rationing
(misnomer cash budgeting)
Last resort liquidity management
Limits ability to commit until sufficient funds are available (delays implementation)
No forward cash planning Disruptive to programs, vendors High corruption potential
Need transparent ex ante rules Public procedure
Likely to undermine budget priorities
Benefits of efficient cash management
Ensure obligations can be met as they fall due Minimize idle balances and associated costs
Conduct cost-effective borrowing operations
Professional Development Seminar on Debt Management December 10, 2008 Sailendra Pattanayak and Brian Olden, FAD
Overview
Definitions of Cash Management Outline of a modern cash management framework Cash rationing vs. cash management Benefits of an efficient cash management system Prerequisites for effective cash management
Banking and payment arrangements Cash forecasting Institutional framework
Managing cash balances-the basic requirements Issues surrounding integration of cash and debt management
Discussion on appropriate institutional framework
Some definitions of cash management
The strategy and associated processes for managing cost-effectively the government’s short-term cash flows and cash balances, both within government, and between government and other sectors.
(Williams 2004)
Having the right money in the right place at the right time to meet the government’s obligations in the most cost-effective way.
(Storkey 2001)
Cash management framework
Banks
y Pa m s nt e
Spending units
s ue en ev R
Treasury system
Debt management
Central bank
Monetary policy
Cash manager
Financial markets dev. Short-term Investments
Short-term Borrowings
Main building blocks for cash management
Control over receipts and expenditures.
Forecasting cash requirements.
Managing government cash balances – surpluses/deficits.
Cash rationing
(misnomer cash budgeting)
Last resort liquidity management
Limits ability to commit until sufficient funds are available (delays implementation)
No forward cash planning Disruptive to programs, vendors High corruption potential
Need transparent ex ante rules Public procedure
Likely to undermine budget priorities
Benefits of efficient cash management
Ensure obligations can be met as they fall due Minimize idle balances and associated costs
Conduct cost-effective borrowing operations