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Effective Cash Management for Transition Economies: Overcoming Challenges and Maximizing Returns

Learn about effective cash management practices, key features, challenges faced by transition economies, and the importance of sequencing reforms. Improve cash planning, coordination, and access to financial markets for maximum returns.

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Effective Cash Management for Transition Economies: Overcoming Challenges and Maximizing Returns

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  1. Cash management Key issues and approaches Based on FAD PFM guidance note under preparation http://www.cef-see.org/intro_imf06.htm

  2. Outline of presentation • Cash management objectives • Key features effective cash management • Challenges for transition economies • Sequencing http://www.cef-see.org/intro_imf06.htm

  3. Objectives • Ensure that adequate cash is available, even under fiscal shocks • Minimize net borrowing costs • Maximize returns on temporary surpluses • Effective coordination with debt management strategy, fiscal and monetary policy http://www.cef-see.org/intro_imf06.htm

  4. Effective cash management • Political and administrative recognition • Appropriate institutional arrangements • Treasury single account • Accurate cash planning and forecasting • Coverage clearly defined • Realistic revenue projections http://www.cef-see.org/intro_imf06.htm

  5. Effective cash management • Adequate transaction processing and accounting framework • Information sharing between the agencies involved • Integration of debt and cash management • Modern banking, payment and settlement systems • Access to financial markets http://www.cef-see.org/intro_imf06.htm

  6. Challenges • Multiple bank accounts • Fragmentation of balances • Inefficient payment modes • Cash payments still used • Inadequate cash planning • Unreliable forecasting • Focus on expenditure control • Un-coordinated cash and debt management http://www.cef-see.org/intro_imf06.htm

  7. Challenges • Incomplete cash flow information • Weak back-office functions • Arrears undermines credibility • Human capacity constraints • Inadequate infrastructure • Financial markets • Banking systems • Information technology http://www.cef-see.org/intro_imf06.htm

  8. Sequencing of reforms • Improve basics • Institutional support, realistic budget, TSA, reliable accounting • Cash planning • CM unit and committee, information exchange, skills, monthly plans • Basic cash management • Weekly plan, speed up/smooth payments, periodic placements • Active cash management • Daily plan, active placements http://www.cef-see.org/intro_imf06.htm

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