Cash Management and Treasury Operations
Chapter 8.
CASH MANAGEMENT AND THE TREASURY FUNCTION1
A.
THE TREASURY FUNCTION
Governments need to ensure both efficient implementation of their budgets and good management of their financial resources. Spending agencies must be provided with the funds needed to implement the budget in a timely manner, and the cost of government borrowing must be minimized. Sound management of financial assets and liabilities is also required.
Financial management within the government includes various activities: formulation of fiscal policy; budget preparation; budget execution; management of financial operations; accounting; and auditing and evaluation. Within this broad financial management function, the Treasury function is to achieve the set of specific objectives mentioned above. It covers the following activities:2 • • • • • •
Cash management;
Management of government bank accounts;
Financial planning and forecasting of cash flows;
Public debt management;
Administration of foreign grants and counterpart funds from international aid;
Financial assets management.
1
The government’s strategy to manage its moneys to maximize financial return s a critical part of overall cash management. The accent of this chapter, however, is on control of cash flows and on the efficiency of payments’ arrangements, in keeping with the expenditure focus of this entire book. 2 Cf, Teresa Ter-Minassian, Pedro P. Parente, and Pedro Martinez-Mendez, "Setting up a Treasury in economies in transition," IMF, 1995.
2
To carry out these activities, organizational arrangements and distribution of responsibilities vary considerably according to countries. In some countries, the Treasury Department focuses only on cash and debt management functions (which are reviewed in this section). In a few countries, debt management is performed by an autonomous agency. In other countries, the Treasury Department performs budget execution controls (which are reviewed in
CASH MANAGEMENT AND THE TREASURY FUNCTION1
A.
THE TREASURY FUNCTION
Governments need to ensure both efficient implementation of their budgets and good management of their financial resources. Spending agencies must be provided with the funds needed to implement the budget in a timely manner, and the cost of government borrowing must be minimized. Sound management of financial assets and liabilities is also required.
Financial management within the government includes various activities: formulation of fiscal policy; budget preparation; budget execution; management of financial operations; accounting; and auditing and evaluation. Within this broad financial management function, the Treasury function is to achieve the set of specific objectives mentioned above. It covers the following activities:2 • • • • • •
Cash management;
Management of government bank accounts;
Financial planning and forecasting of cash flows;
Public debt management;
Administration of foreign grants and counterpart funds from international aid;
Financial assets management.
1
The government’s strategy to manage its moneys to maximize financial return s a critical part of overall cash management. The accent of this chapter, however, is on control of cash flows and on the efficiency of payments’ arrangements, in keeping with the expenditure focus of this entire book. 2 Cf, Teresa Ter-Minassian, Pedro P. Parente, and Pedro Martinez-Mendez, "Setting up a Treasury in economies in transition," IMF, 1995.
2
To carry out these activities, organizational arrangements and distribution of responsibilities vary considerably according to countries. In some countries, the Treasury Department focuses only on cash and debt management functions (which are reviewed in this section). In a few countries, debt management is performed by an autonomous agency. In other countries, the Treasury Department performs budget execution controls (which are reviewed in