Treasury Management for Governments

Managing Cash Balances

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. Putting Idle Cash Balances to Use 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?

Communicating with the market

Markets work better when they are not surprised. What can you say to the market about your debt plans? What can be learned by listening to market views?

Debt and risk management

Debt and potential debt carry risks for the state. How can these risks be identified and mitigated? What are the challenges of contingent liabilities?

Accessible balances - the Treasury Account

Treasury funds should be identifiable continuously. Where are the government's funds? Are they accessible? Are they known in full each day? How does the Treasury Single Account accomplish this?

Legal Basis of Debt

How is State authority to issue debt established? Governments should provide a sound legal framework for sovereign debt issuance and management. This framework should establish who is able to borrow, invest, and undertake financial transactions on behalf of the state. It should be supported by grants of appropriate authority to those who issue, manage, and administer the sovereign debt.

PRAXIS noun 1. The practical application of any branch of learning. (philosophy) 2. The synthesis of theory and practice, without presuming the primacy of either. 3. Custom or established practice. 4. An example or form of exercise, or a collection of such examples, for practice. pl. praxes, from Ancient Greek πρᾶξις (prâksis, “action, activity, practice”)

Aristotle held that there were three basic activities of man: theoria, poiesis and praxis. There corresponded to these kinds of activity three types of knowledge: theoretical, to which the end goal was truth; poietical, to which the end goal was production; and practical, to which the end goal was action. Aristotle further divided practical knowledge into ethics, economics and politics. He also distinguished between eupraxia (εὐπραξία, "good praxis") and dyspraxia (δυσπραξία, "bad praxis, misfortune").

Auction Management

There are many ways to structure auctions. What are the advantages and risks of single-price or multi-price auctions? What other options are there?

Debt Strategies

If debt imposes a future obligation on the government, then there are risks that accompany each debt issuance. Governments should develop clear goals for sovereign debt management and should separate the responsibility for debt management policy from monetary policy. Sovereign debt management responsibilities should be centralized as much as possible. A sound risk monitoring and control environment should exist in the debt management unit. What are these risks and can they be minimized in some way through proper debt issuance policies?

Forecasting cash balances

How much cash can the treasury expect to have on any given day? Cash forecasting is the process of collecting, collating, or creating estimates of cash flows and consolidating these information items into a summary picture in advance of accounting reports of actual values. The forecasts of components of the total cash flow may be drawn from the work of various operating units or sources or they may be created from a single, central office with access to the requisite data. More generally, financial management of the state’s resources requires the use of forecasts and projections in all areas. What are the methodological problems? Is this simply a major econometric issue? What can treasury staff do on their own?

Cash Transaction Management

Payments and receipts depend upon a financial transaction network. What are the tools used in such a network? Can the treasury improve its efficiency through a better selection of tools? How can networks be analyzed?

Distributing Debt

Are auctions the only way to issue debt? What are the advantages and risks of using auctions? of syndication? of subscription?

Managing Banking Relationships

Banks are useful agents in managing transactions. Why should a government invest in building a proprietary network for cash transactions when it can lease the newest technology from commercial sources?