Cash Management : How Do Countries Perform Sound Practices?
Cash management is simply defined as making the right amount of money available at the right time and the right place to meet the government's obligations in the most cost-effective way. The main features of modern cash management are centrali...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/403731603139041759/Cash-Management-How-do-Countries-Perform-Sound-Practices http://hdl.handle.net/10986/34674 |
| Summary: | Cash management is simply defined as
making the right amount of money available at the right time
and the right place to meet the government's
obligations in the most cost-effective way. The main
features of modern cash management are centralized
government bank accounts and establishment of a Treasury
Single Account, ability to make accurate cash flow
forecasts, use of short-term financing instruments, and
capacity for the investment of excess cash reserves.
Establishing a sound cash management framework with the
mentioned features is beneficial not only to the governments
and public entities, but also to other stakeholders
including the beneficiaries of government payments, banks
and lenders. Given the recent COVID-19 (coronavirus)
pandemic and locked-down measures introduced in many
countries, governments had to deal with unanticipated
revenue decreases, and significantly increased public
expenditures due to fiscal stimulus packages and pandemic
related health expenditures. Therefore, existence of a
well-structured government cash management is now even more
important than before. This paper aims to explore cash flow
forecasting and cash management practices in 24 countries in
various regions, at different income levels and technical
capacity, and alignment to good practices based on the
information provided at the World Bank workshops on Cash
Flow Forecasting and Cash Management held in 2018 and 2019.
The paper also draws on experiences and practices from other
emerging and advanced countries. Cases from different
countries indicate that full implementation of modern cash
management is still a challenge, even though the Treasury
Single Account system is common in most countries and
liquidity buffers were established or increased following
the Global Financial Crisis. Cash flow forecasting is an
area to improve given the accuracy, horizon and frequency of
the projections are frequently limited. Fragmented
institutional structure makes cash management even more
challenging. Country cases also demonstrate that there is a
significant room to strengthen coordination between debt and
cash management and the use of short-term instruments to
cover cash shortages. Investment of cash balances seems to
be a bigger weakness as many countries keep their liquidity
buffers in the Central Bank with no remuneration. |
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