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Topics: I - Cash and Debt Management: Interaction, Coordination and Integration

This presentation explores the interaction between cash management and the financial market, the use of T-bills for cash smoothing and deficit financing, and the coordination structures between debt and cash management functions. It also discusses the challenges and ways to overcome them in moving towards more active cash management. Presented by Mimoza Pilkati in Chisinau on October 12, 2017.

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Topics: I - Cash and Debt Management: Interaction, Coordination and Integration

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  1. Group 1 • Topics: • I-Cash and Debt Management: Interaction, Coordination and Integration • II-Existing challenges and ways to overcome them • Members of the group: • Albania, Croatia, Georgia, Hungary, • Macedonia, Moldova and Turkey Presented by: Mimoza Pilkati • Chisinau • October 12, 2017

  2. 1.Does the cash management function interact with the financial market?

  3. 2.Are T-bills (other instruments) used for cash smoothing in-year as well as deficit financing?

  4. 3.Are there coordination structures in place between the debt and cash management functions?

  5. 4. Are the debt and cash managers able to share resources?

  6. II-Existing challenges for moving to more active cash management

  7. II-The ways to overcome challenges 1– Lack of good forecasts 1.1- The issue for timely and accurate information can be solved by using IT systems and automatizing the processes: To avoid the mistakes of human resources. To shift to science basis of forecasting by using models and most recent techniques that respect the standards (people needed to be convinced for any changes, to be trained for implementation of the standards etc.),. To further strength the financial discipline. To get very latest, most complete data, proactively delivered anywhere, on any device, when it can be used immediately to maximize the value of information (real time access to detailed data) for better decisions and actions. To get physical and logical security of data from non-authorized intervention.

  8. II-The ways to overcome challenges 1.2- Moving from “cash rationing” to “cash management”, protect expenditures plan from cash flow volatility. 1.3- Roll over forecasting in daily basis if it is possible (historical data and other stakeholders’ data). 1.4-Update daily forecasted data with actual data by daily information from banking system (reconciliation process to avoid mistakes, identifying other available assets etc.). 1.5- Daily communication between all stakeholders to reflect all changes in forecast timely

  9. II-The ways to overcome challenges 2-Lack of coordination within the ministry -Assignment of responsibilities and deadlines for completing tasks by regulations, action plans etc. and reporting daily to superior. -Establishing the Coordinating Committee with participation of all involved parties. -Following the previous argument for automated processes, the integration of the multi-platform data bases establishing an interface will help the coordination between responsible structures for cash and debt management within ministry. 3-Inadequate money market: -More active borrowing and lending in money market. At the beginning use interbank market with REPO. -Developing the policies for the use of government surpluses -Lower average cash buffer to be harmonized with other policies -Central Bank’s real role as fiscal agent of government, driving a dialog with market dealers and participants. -TSA balance at the end of the day = zero (if daily balance is possible to be updated three times a day) -The use of a wide range of instruments (by Sweden practice) as following:

  10. II-The ways to overcome challenges 4-Policy differences with the Central Bank Amendment of both parts’ legislation by international standards with technical assistance as the third non-native party to harmonize all policies. Memorandum of understanding 5-A constraining legislative or regulatory framework Mitigate or avoid risks in relevant areas where are applied the constraining legislative or regulatory framework. These factors are not in our hands, but lets go ahead with small steps in right direction. 6-The organizational arrangements It is depended by the level of development of all involved parties, so it’s needed the gradual evolution of their systems. Treasury has to be participant in banking systems like other commercial banks to carry out its transactions. 7-Commitment and understanding from top management Have to convince them, assure them for the necessary of the changes which results in more active cash management by holding a conversation with top management, presented them relevant topics (training) in the meeting organized with all involved parties. 8-Resource constraints To get possibilities for budget support, donations and other financing.

  11. Group 1-Presentation Abbreviations: • T-Treasury • D-Debt Department • TSA-Treasury Single Account • MoF-Ministry of Finance • CB-Central Bank • CommB-Commercial Bank • Mng-Management

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