Treasury Management for Governments

How much cash does a treasury need on any given day?  How might one determine the floor and the ceiling - as well as the target - for a daily cash balance?  The answer determines whether there is a risk of running out of cash or of over-borrowing.  What should be done about cash the treasury does not need over any period?  Is it earning interest?  Can it be used to reduce outstanding debt?  Does the central bank have an interest in the answer to these?

Lienert:  Modernizing Cash Management, IMF, October 2009. 

Available at https://www.imf.org/external/pubs/ft/tnm/2009/tnm0903.pdf  or here:

To Read Further ... 

Cash Management and the Treasury Single Account

Cash management analytics.  [FG 4E]

Organizing for cash management.  What skills are needed by the cash management team?  What relationships are needed among the various parties of the fiscal team?  [FG 4C]

The components of a cash management program.  [FG 4B]

Managing cash targets

The principle of cash management.  What outcomes are expected when a cash management program is implemented?  What are the key principles that underlie a cash management program?  [FG 4A.]

A cash management program.

What is a prudent level of cash to keep in the TSA beyond known, immediate needs?   Volatility of the cash forecast and of the government operations - both receipts and disbursements - will come into play.  It seems unwise, however, to simply apply a Normal distribution (bell curve) method to setting safe levels.  

Praxis: Cash -  Managing cash flows and balances

What can the treasury do with surplus funds?  The treasury may take the lead in investment of surplus funds.  The treasury has the advantage of a good forecast of future cash balances that may highlight how much money is available and for how long.  When short-term funds are available the treasury should invest those funds within the guidelines established by a predefined investment policy.  Two possible uses of surplus funds might be to place excess balances back in the economy by collateralized bank deposits or to use cash balances to reduce outstanding short-term debt.