Annex 1. Central Government Cash Balances at the Central Bank (Percent of GDP)1

article image
article image

IMF’s Monetary and Financial Statistics. Select countries with cash balances over 1 percent of GDP at the end of 2018. Figures depict year-end balances. Several governments also hold cash balances at commercial banks, which are not captured in the figure.

Annex 2. Template for a Cash Buffer Target for Debt Management

article image

Annex 3. Template for a Cash Buffer Target for Cash Management

article image

References

  • Agência de Gestão da Tesouraria e da Dívida Pública (IGCP). 2014. “Government Debt and Cash Management Annual Report 2014.” IGCP, Lisbon.

    • Search Google Scholar
    • Export Citation
  • Agência de Gestão da Tesouraria e da Dívida Pública (IGCP). 2017. “Government Debt and Cash Management Annual Report 2017.” IGCP, Lisbon.

    • Search Google Scholar
    • Export Citation
  • Association for Financial Markets in Europe (AFME). 2017. European Primary Dealers Handbook. Updated Q3 2017. Brussels, Frankfurt, London: AFME.

    • Search Google Scholar
    • Export Citation
  • Canada Department of Finance. 2018. Debt Management Report 2017–18. Ottawa: Government of Canada.

  • Cruz, P., and F. Koc. 2018. “The Liquidity Buffer Practices of Public Debt Managers in OECD Countries.” OECD Working Papers on Sovereign Borrowing and Public Debt Management, No. 9, OECD Publishing, Paris. http://dx.doi.org/10.1787/3b468966-en.

    • Search Google Scholar
    • Export Citation
  • Denmark Central Bank. 2019. “Danish Government Borrowing and Debt 2018.” Report, Danmarks Nationalbank, Copenhagen, January. http://www.nationalbanken.dk/en/governmentdebt/publications/Pages/Danish-government-borrowing-and-debt-2018.aspx.

    • Search Google Scholar
    • Export Citation
  • Denmark Central Bank. 2020. “The Danish Government Has a Good Starting Point to Finance the Expenses Related to Corona.” Analysis No. 6, Danmarks Nationalbank, Copenhagen, April.

    • Search Google Scholar
    • Export Citation
  • Fainboim, I., Saxena, S., and Williams, M. 2020. “How to Develop a Framework for the Investment of Temporary Government Cash Surpluses’. International Monetary Fund, Washington DC.

    • Search Google Scholar
    • Export Citation
  • Greece Public Debt Management Agency. 2019. “Funding Strategy for 2020”. Athens, Greece, December. http://www.pdma.gr/en/component/content/article/17-investor-relations-library/2675-funding-strategy-for-2020?Itemid=197

    • Search Google Scholar
    • Export Citation
  • Guscina A., S. Malik, and M. Papaioannou. 2017. “Assessing Loss of Market Access: Conceptual and Operational Issues.” Working Paper No. 17/246, International Monetary Fund, Washington, DC. https://www.imf.org/en/Publications/WP/Issues/2017/11/15/Assessing-Loss-of-Market-Access-Conceptual-and-Operational-Issues-45347.

    • Crossref
    • Search Google Scholar
    • Export Citation
  • Hungary Government Debt Management Agency. 2020. “Revised Debt Management Outlook.” April. https://akk.hu/akk-publications/publications, Budapest.

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund (IMF). 2018. Fiscal Monitor: Managing Public Wealth. Washington DC, October.

  • Jonasson, T., and M. Papaioannou. 2018. “A Primer on Managing Sovereign Debt-Portfolio Risks.” IMF Working Paper 18/74, International Monetary Fund, Washington, DC. https://www.imf.org/en/Publications/WP/Issues/2018/04/06/A-Primer-on-Managing-Sovereign-Debt-Portfolio-Risks-45746.

    • Crossref
    • Search Google Scholar
    • Export Citation
  • Pattanayak, S., and I. Fainboim. 2011. “Treasury Single Account: An Essential Tool for Government Cash Management.” IMF Technical Notes andManuals, International Monetary Fund, Washington DC. https://www.imf.org/external/pubs/ft/tnm/2011/tnm1104.pdf.

    • Search Google Scholar
    • Export Citation
  • Pessoa, M., and M. Williams. 2012. “Government Cash Management: Relationship between the Treasury and the Central Bank.” IMF Technical Notes and Manual, International Monetary Fund, Washington, DC. https://www.imf.org/external/pubs/ft/tnm/2012/tnm1202.pdf.

    • Search Google Scholar
    • Export Citation
  • Réz, A. 2018. “Public Cash Management in Hungary: The Role of the Government Debt Management Agency.” Presentation at PEMPAL Treasury Community of Practice Cash Management Thematic Group Meeting, Vienna, November. https://www.pempal.org/events/tcop-cash-management-thematic-group-meeting_eng.

    • Search Google Scholar
    • Export Citation
  • Swedish National Debt Office. 2020. “Debt Office Is Well-Prepared for Financing Crisis Package.” Press release, March 16. Stockholm.

    • Search Google Scholar
    • Export Citation
  • Uruguay Ministry of Economy and Finance. 2020. “Uruguay Sovereign Debt Report,” Montevideo, May.

  • US Department of the Treasury. 2015. “Quarterly Refunding Statement of Acting Assistant Secretary for Financial Markets Seth B. Carpenter,” June 5, Washington DC. https://www.treasury.gov/resource-center/data-chart-center/quarterly-refunding/Pages/Official-Remarks.aspx.

    • Search Google Scholar
    • Export Citation
  • US Department of the Treasury. 2020. “Treasury Presentation to the Treasury Funding Advisory Committee.” Fiscal Year 2020, Q3 Report. August, Washington DC.

    • Search Google Scholar
    • Export Citation
  • Williams, M. 2010. “Government Cash Management: Its Interaction with Other Financial Policies.” IMF Technical Notes and Manual, International Monetary Fund, Washington, DC, https://www.imf.org/external/pubs/ft/tnm/2010/tnm1013.pdf.

    • Search Google Scholar
    • Export Citation
  • Williams, M. 2016. “Targeting the Cash Balance: The Cash Buffer.” Presentation at PEMPAL Treasury Community of Practice Cash Management Thematic Group Meeting, March 2016, Ankara. https://www.pempal.org/sites/pempal/files/event/attachments/pempal-mike_williams_targeting_the_cash_balance_mar16.pptx.

    • Search Google Scholar
    • Export Citation
  • World Bank Group. 2014. “The Target Cash Buffer: Government Bond Market Peer Group Survey Analysis.” Capital Markets and Corporate Governance Service Line Finance & Markets Global Practice, August. http://pubdocs.worldbank.org/en/361801442253296095/FS-Gemloc-PGD-May-6-2014-Survey-Analysis.pdf.

    • Search Google Scholar
    • Export Citation

Yasemin Hürcan and Emre Balıbek are Senior Economists in the IMF’s Fiscal Affairs Department. Fatoş Koç is a Senior Policy Analyst in the OECD. This note has benefited from comments from Richard Allen, Wouter Bossu, Jana Bricco, Torben Steen Hansen, Jason Harris, John Hooley, Ken Kashiwase, Eteri Kvintradze, Nir Klein, Paolo Mauro, Sailendra Pattanayak, Guilherme Pedras, Mia Pineda, Chris-tiane Roehler, Edgardo Ruggiero, Sandeep Saxena, Karla Vasquez, and Mike Williams. The authors are also grateful to Patrick Francis Ryan for his statistical support.

1

In this note, “cash” refers to cash on hand in the government’s accounts and its highly liquid assets (for example, money market assets). Credit lines, contingent funding arrangements, and overdraft facilities are not considered as cash; they are complementary to the cash buffer, as discussed in later sections.

2

Pattanayak and Fainboim (2011) define the TSA as “unifed structure of government bank accounts enabling consolidation and optimum utilization of government cash resources” (Page 2).

3

Cash buffer policies are shaped and driven by the explicit decision on a certain targeted level of cash balance and on actions to maintain that target balance. The target buffer level often refers to a lower bound for the government’s cash balances. The decision on the cash buffer target is in the form of a performance benchmark or a strategic target that guides debt and cash management operations, which is determined internally or by the ministry of finance/treasury after consultation with the cash and debt managers.

5

The figure is for comparison purposes. Countries do not generally apply a target on cash balances as a percent of GDP.,

6

A 2017 survey on liquidity buffer practices among the OECD countries revealed that the Debt Management Units of 21 countries have modified their practices in the past five years. Furthermore, majority of these countries have reported the changes made in response to changes in funding needs, financial market conditions and access to market financing (Cruz and Koc 2018).

7

Budget credibility is a broader macro-fiscal policy framework problem, and the remedies to a noncredible budget are often beyond the control of cash managers.

8

A new IMF and World Bank Guidance Note, forthcoming in 2021 (on Developing Government Local Currency Bond Markets) provides a general framework for bond market development.

9

For example, a prolonged outage in the electronic trading platform due to a combination of hardware and software failures resulted in the postponement of a treasury auction in the UK in April 2015.

10

Primary Dealers are financial intermediaries appointed by the government to perform certain specialized functions in the government securities market.

11

“Sinking funds” refer to payments made by the borrower on a regular basis to a special account to set aside the necessary funds for the redemption of its long-term debt.

12

In Brazil, the central bank remunerates the buffer at the same rate as its portfolio of government securities, thereby offsetting the borrowing cost (to the extent that the portfolio composition of the bank’s holdings reflects the composition of government debt).

13

The formulation here assumes that debt service creates an inherent demand for the new instruments to be issued; thus a percentage of the debt can be rolled over.

14

Figure 3.2 depicts a reconstructed cash balance on the basis of cumulative net cash flows, excluding borrowing and repayment. The balance starts with a magnitude of 0 at a certain date, changed cumulatively with the net magnitude of revenues and primary expenditures.

15

For a discussion on investment policy considerations for cash buffers, see Fainboim, Saxena, and Williams (2020).

16

See International Monetary Fund (2018) for a general discussion of public sector balance sheet management.

17

Annex 2 of Budget 2011, Debt Management Strategy for 2011–12, https://www.budget.gc.ca/2011/plan/anx2-eng.html.

18

Pessoa and Williams (2012) look at the interaction between treasury cash management and monetary policy operations within the wider context of the respective economic responsibilities of the ministry of finance and the central bank, while focusing on institutional arrangements for an effective relationship.

19

For a fuller guide on investment policy considerations for cash buffers, see Fainboim, Saxena, and Williams (2020).

20

Williams (2010) discusses how cash management interacts with other government policies, the need for a close coordination or integration between debt and cash management, the potential benefits of that coordination or integration to financial market development, and the implications for monetary

How to Set Up A Cash Buffer: A Practical Guide to Developing and Implementing a Cash Buffer Policy
Author: Yasemin Hurcan, Mr. Emre Balibek, and Fatoş Koç