Cash Management

November 20, 2009

Is This Your Rainy Day?—Cash Management in Small Resource Dependent Economies

Posted by Tej Prakash 

Rain
Small economies where resource revenues are a significant part of the budget often face volatile inflows due to fluctuations in production, demand, and price. Hence, if the budget is based on a particular reference price for the resource, actual revenues will often over- or under-perform based on the actual resource price. In case of underperformance, the country then faces, the choice of continuing the smooth implementation of the budget, if price movements are only seen as temporary, or adjusting expenditure downward. The question is, are there approaches to insulating the budget from such unpredictable cash flows?

Continue reading "Is This Your Rainy Day?—Cash Management in Small Resource Dependent Economies" »

September 30, 2009

A New IMF Fiscal Affairs Department's Publication: the Technical Notes and Manuals

Posted by Michel Lazare and Richard Allen.

TechMan1

The IMF has just launched a new series called: Technical Notes and Manuals.The first three issues have been authored by the IMF's Fiscal Affairs Department.

They deal with:

  1. A Basic Model of Performance-Based Budgeting by Marc Robinson and Duncan Last  Download FAD Technical Manual 1
  2. Transition to Accrual Accounting by by Abdul Khan and Stephen Mayes                     Download FAD Technical Manual 2
  3. Modernizing Cash Management by Ian Lienert                                                              Download FAD Technical Manual 3

Earlier versions of these Technical Notes and Manuals were previously issued as part of a series of technical notes on our PFM blog.

Future issues will include topics in revenue administration, tax and expenditure
policy, and public financial management. Other IMF departments may also contribute notes to these series.

These notes and manuals aim at raising awareness among practitioners,
officials and academics of contemporary fiscal topics; and improving the dissemination of
FAD's TA advice. In particular, they will allow us to disseminate to a broader audience the advice now included in our TA reports, or provided through other advisory services.

November 21, 2008

World Bank—Sovereign Debt Management Forum (October 27-29, 2008)

Tree Posted by Brian Olden

The World Bank hosted the Fourth Sovereign Debt Management Forum between October 27–29, 2008 in its Washington, D.C. headquarters. Despite the ongoing turmoil in world financial markets, the event was well attended, with representatives from over 55 advanced OECD, emerging, and low-income countries (LICs), as well as representatives from international institutions, including the IMF and the EU.

The forum was very timely, given the current market turmoil, and naturally much of the discussion centered around the impact of the crises on economies, in general, and on debt management operations, in particular.  Much of the focus was on what the role of debt managers will be in helping to mitigate the effects of the crises on economies in the short and medium-term.

Continue reading "World Bank—Sovereign Debt Management Forum (October 27-29, 2008)" »

October 15, 2008

Senior Officials from African Countries Discuss Cash Management Issues in a Workshop Organized by IMF AFRITAC East

Cashgovcheque_1

Posted by Sailendra Pattanayak



AFRITAC East, the regional technical assistance center of the IMF in east Africa, in collaboration with the Africa Capacity Building Foundation, conducted a workshop on cash management reforms, at the Kenya School of Monetary Studies in Nairobi from September 22–26, 2008. It was attended by 31 mid- and senior-level officials - including Heads of Departments of Treasury, Fiscal Policy Units, Macroeconomic Management Units, Financial Controllers, Senior Economists, Principal Finance and Accounting Officers, and Budget Officers - from 9 countries (Ethiopia, Kenya, Lesotho, Malawi, Mozambique, Namibia, Rwanda, Uganda, and Zanzibar). The workshop was facilitated by AFRITAC East advisors and staff from the IMF Headquarters. It was inaugurated by the Permanent Secretary to the Treasury of the Ministry of Finance of Kenya, and closed by the AFRITAC East Center Coordinator.

During the last few years, AFRITAC East has provided technical assistance aimed at developing and strengthening cash management systems in its member countries. Diagnostic studies have been conducted in all AFRITAC East countries, and provided the basis for formulation of cash management reform strategies and action plans, which are being implemented by several countries. AFRITAC East continues to provide technical assistance on the implementation of these strategies.

Continue reading "Senior Officials from African Countries Discuss Cash Management Issues in a Workshop Organized by IMF AFRITAC East" »

August 20, 2008

IMF’s 8th Debt Managers Forum--Warsaw--July 14-15, 2008

Nbp

Posted by Brian Olden



The IMF’s Debt Managers Forum, sponsored by the Fund’s Monetary and Capital Markets Department took place in Warsaw on July 14- 15 2008. The National Bank of Poland and the Polish Ministry of Finance acted as co-hosts of the conference (and did an excellent job by the way). The Deputy Managing Director of the Fund, Mr. Murilo Portugal, also attended and chaired the opening session. The conference was well attended by participants from 30 emerging and mature market economies as well as some private sector representatives.

The opening session focused on the global economic and financial market outlook. Consensus opinion from both private and public sector representatives was that claims advanced by some commentators that Emerging Market Countries (EMCs) were decoupling from advanced economies were, greatly exaggerated and that problems in advanced economy financial markets, coupled with the rising trend in inflation, posed considerable risks to the stability of most EMCs.

Continue reading "IMF’s 8th Debt Managers Forum--Warsaw--July 14-15, 2008" »

July 08, 2008

New EU-Supported Financial Information Management System Public Finance in Serbia

Posted by Michel Lazare


Here is a YouTube video presenting the key features of a new financial management information system introduced in Serbia with the support of the EU-European Reconstruction Agency.


July 01, 2008

Bill Dorotinsky on Public Financial Management Reform -- Trends and Challenges (Video 3)

Posted by Michel Lazare

You liked Bill Dorotinsky's post of June 27 "Public Financial Management Reform -- Trends and Challenges"?

Well, you'll then love the video of this presentation delivered at the ICGFM meeting. Here is the third part of this YouTube video; parts 1 and 2 appear in other posts published today.

Bill Dorotinsky on Public Financial Management Reform -- Trends and Challenges ( Video 2)

Posted by Michel Lazare

You liked Bill Dorotinsky's post of June 27 "Public Financial Management Reform -- Trends and Challenges"?

Well, you'll then love the video of this presentation delivered at the ICGFM meeting. Here is the second part of this YouTube video; parts 1 and 3 appear in other posts published today.

Bill Dorotinsky on Public Financial Management Reform -- Trends and Challenges (Video 1)

Posted by Michel Lazare

You liked Bill Dorotinsky's post of June 27 "Public Financial Management Reform -- Trends and Challenges"?

Well, you'll then love the video of this presentation delivered at the ICGFM meeting. Here is the first part of this YouTube video; parts 2 and 3 appear in other posts published today.

June 27, 2008

Public Financial Management Reform -- Trends and Challenges

Posted by Bill Dorotinsky

J0430643 On June 18, 2008, I spoke on Public Financial Management Reform: Trends at the the International Consortium on Government Financial Management (ICGFM) monthly speaker series in Washington, D.C.

I took the opportunity to share my personal views on current trends and challenges in public financial management (PFM) reform, drawing on my experience across the globe and multiple institutions. (As I noted, these are not the views of the IMF, or any other institutions with which I have been associated.)

The presentation covered three broad areas:

  1. Common PFM reform recommendations, seen across all donors, consultants, etc.
  2. Information on what reforms countries have been implementing in recent years
  3. Challenges ahead for improving PFM

The PowerPoint can be downloaded here Download public_financial_reform_trends_icgfm_June_2008.ppt

The ICGFM Blog also posted a summary and video of the presentation on their Blog (CLICK HERE).

Continue reading "Public Financial Management Reform -- Trends and Challenges" »

May 02, 2008

Exchanging experiences and learning from others: PEM PAL approach

Posted by Urska Zrinski, CEF PEMPAL Secretariat

Header01_6 PEM PAL, the Public Expenditure Management - Peer-Assisted Learning (PEM-PAL) network, is a network of public expenditure management professionals from countries in Central and Eastern Europe (CEE), and Central Asia. The initiative, which was conceptualized in 2005 by the World Bank and the United Kingdom’s Department for International Development, represents an effort to develop capacity and share reform experiences among countries in CEE and Central Asia. At the beginning of 2008, the PEM PAL secretariat has been moved from the World Bank’s headquarters in Washington DC to the Center of Excellence in Finance, Slovenia, thus bringing the network closer to the region. (See a January 25, 2008 blog post for more on the Center.)

Continue reading "Exchanging experiences and learning from others: PEM PAL approach" »

April 23, 2008

Post-conflict PFM -- USAID Paper Summary of Lessons

Posted by Bill Dorotinsky

71070 Public financial management (PFM) has moved onto center-stage in country macroeconomic management, development planning, and international development fora, as has a focus on fragile and post-conflict states. The intersection of these fields has itself become a very current topic, particularly with respect to what specific areas of PFM to address in the short-run and how to sequence reform and capacity-building interventions.

A November 2007, USAID-funded paper, Building Fiscal Infrastructure in Post-Conflict Societies, prepared by Dr. Mark Gallagher, DAI, is worth a read. The paper is a summary of seven country case studies (Afghanistan, Angola, Bosnia and Herzegovina, El Salvador, Guatemala, Kosovo, and Liberia) and some general lessons he draws from them.

Continue reading "Post-conflict PFM -- USAID Paper Summary of Lessons" »

March 31, 2008

Poverty Reduction Budget Support -- A DFID Policy Paper

Howaidsspent Posted by Michel Lazare

Further to our March 17 post: Is Providing Budget Support to Developing Countries Effective? -- Evaluation of DFID's Direct Budget Support by UK's National Audit Office, which discussed NAO's assessment of effectiveness of budget support, it is important to note that the UK's Department for International Development (DFID) has recently published a policy paper on budget support.

This paper updates DFID's previous policy (dating back to 2004). It draws on the conclusions of a May 2006 multi-donor Joint Evaluation of General Budget Support -- which provided new evidence about the effectiveness of general budget support -- and on the implications of the 2005 Paris Declaration on aid effectiveness.

It "reaffirms DFID's commitment's to using budget support -- alongside other aid instruments -- where it is appropriate to deliver aid to partner governments to reduce poverty. "

Continue reading "Poverty Reduction Budget Support -- A DFID Policy Paper" »

March 19, 2008

Cash management -- IMF Technical Guidance Note

Posted by Ian Lienert

J0433118 Do you manage your own cash well? Can you always pay your bills on time? Do you borrow unnecessarily? Do you have balances in bank accounts that are not receiving the best interest rate? Just as individuals are concerned about managing their cash well, so are governments. In practice, however, not all governments manage cash well. Some countries have unremunerated balances in thousands of bank accounts, yet at the same, they are borrowing from domestic or external creditors at market interest rates. Commercial banks and other purchasers of government bonds are very happy with such arrangements.

A new IMF FAD Technical Guidance Note on Cash Management, prepared by Ian Lienert of the Fiscal Affairs Department, explores how countries can improve their cash management practices and eliminate some of the inefficiencies in current practices. [Download cash_management_guidance_note__lienert_.pdf ]

Continue reading "Cash management -- IMF Technical Guidance Note" »

March 10, 2008

Extrabudgetary Funds -- Removing the 'Extra' and Minimizing the Risks

Posted by Bill Dorotinsky

J0411794 Extra-budgetary funds (EBFs) are a large and persistent issue in developed and developing countries. An October 26, 2007, blog post highlighted the magnitude of such funds, offered a taxonomy of EBFs, and suggested some questions for evaluating them. This post offers a similar perspective, drawing on a draft World Bank policy note prepared for the Polish authorities in 2001.

Public finance professionals generally oppose creation or continuation of 'extra-budgetary funds' because they undermine comprehensive budgeting, fragment financial reporting and cash management, and frequently there are transparency, oversight, and accountability concerns for the EBF's directly. But there are principles that, if followed, can minimize the risks from EBF’s, effectively removing their ‘extra-budgetary’ character.

Continue reading "Extrabudgetary Funds -- Removing the 'Extra' and Minimizing the Risks" »

March 05, 2008

The Pile of Books on the “Resource Curse” Just Keep Growing !!!

So, why we should read “Escaping the Resource Curse”?

Posted by Teresa Dabán

Resource_curse Devising policies and institutions for the prevention of the “resource curse”—a term used to describe the surprisingly negative outcomes of resource-rich countries—has been the object of an extensive literature. One of the most recent contributions is Escaping the Resource Curse, a book edited by Macartan Humphreys, Jeffrey D. Sachs, and Joseph E. Stiglitz under the auspices of the Initiative for Policy Dialogue at the University of Columbia. The book reviews the main challenges posed by the management of resource revenues and proposes some interesting ways to address them.

To strengthen resource revenue management, for instance, the book proposes creating innovative budgetary  bodies and management arrangements that would operate in “parallel” to the existing ones. This post definitely recommends reading Escaping the Resource Curse, but argues that the benefits of creating such additional bodies and arrangements need to be carefully weighed against the risk of undermining and alienating existing budgetary institutions and discouraging reform efforts, especially in low-income countries, weakening governance and fragmenting already weak public finance systems.

Continue reading "The Pile of Books on the “Resource Curse” Just Keep Growing !!! " »

February 25, 2008

Automating financial management systems -- it's not just the hardware

Posted by Bill Dorotinsky

Cover_28_thumb As donors and governments spend enormous sums of money on automating financial management information systems in countries around the world, a great deal of attention is paid to the hardware and computer software. Debates over off-the-shelf or customized software, getting the right hardware, and setting up the right procurement arrangements, would fill volumes. But some recent cases illus rate the importance of paying attention to the 'soft' systems that surround the automated system -- the human systems that both serve and are served by the FMIS, the rules and controls embedded in and surrounding the systems.

On February 17, 2007, the Ugandan Daily Monitor broke a story ("Exposed: money racket in government") on an alleged scam being run from the Ministry of Finance and Ministry of Public Works, where fictitious suppliers where created in the computerized database, and payments were made to these suppliers for fictitious goods and services delivered. The article describes some of the means used to skirt what controls did exist, and but also illustrated that there were other controls missing.

A continent away, in Washington, D.C., a similar story unfolded in the District of Columbia tax office, where sham corporations were recorded in the automated information system, and tax refunds approved for these corporations. In some cases, the properties did not even exist, indicating absence of automated data-matching with property records or tax records to help control for such abuses. (See , for example, the November 14, 2007, Washington Post article, "D.C. Tax Scam Could Total $32 million".)

Continue reading "Automating financial management systems -- it's not just the hardware" »

January 08, 2008

Update on: Public Cash Management and the Subprime Loan Crisis: Be Aware of Financial Investment Risks

Posted by Michel Lazare

Last week, PFM Blog published a post on "Public Cash Management and the Subprime Loan Crisis: Be Aware of Financial Investment Risks."

Since then, PFM Blog learned that limits on cash withdrawals from the Florida investment pool will soon be somewhat relaxed.

The Palm Beach Post reported that "local government officials across Florida were told [on January 3] that by the end of [January] they can expect to freely remove up to 21 percent of their balance from the state-run investment pool that is either frozen or subject to withdrawal penalties."

See the full Palm Beach Post article for further details.

January 04, 2008

Public Cash Management and the Subprime Loan Crisis: Be Aware of Financial Investment Risks

Posted by Michel Lazare

Risk Effective cash management is one of the basic pillars of sound public financial management. The essence of effective cash management is conservation of cash. This includes minimizing idle cash balances by: (a) keeping on the government's account only the working cash balances needed to face day-to-day routine expenditures and the cash needed to face immediate financial obligations; (b) investing the remaining cash on liquid and interest-earning financial assets.

So far, so good. But, like any other financial investment, investing cash may present risks. A January 1, 2008, article in the New York Times provides a good illustration of the potential risks involved: municipalities in Florida have become victims of the subprime loan crisis.

Continue reading "Public Cash Management and the Subprime Loan Crisis: Be Aware of Financial Investment Risks" »

December 12, 2007

Automating Public Financial Management Systems for Results

Posted by Bill Dorotinsky

Over the past few decades, governments and development agencies alike have invested enormous financial and human resources into automating public financial management (PFM) systems, and often the results have been less than hoped. Governments have had difficulty implementing systems, and not achieved desired functionality. And development partners have invested large sums of money, only to find systems delayed in implementation, having limited impact, and often with real challenges to the sustainability of the systems. On December 2-4, 2007, the International Consortium of Governmental Financial Management (ICGFM) held a two-day workshop entitled "Use of Financial Management Information Systems (FMIS) to Improve Financial Management and Accountability in the Public Sector".  While the conference title and topic might cause eyes to glaze over with visions of technical issues, the conference was a useful glimpse into current thinking on PFM system automation, and full of practical advice to those concerned with PFM system automation.

Conference presentations from government authorities, international organizations, and consultants covered topics such as how FMIS fits within the over-all PFM reform agenda, planning for FMIS development, FMIS design components, IT alternatives, project management, procurement, and capacity building. The conference program and all the presentations made are available on-line at the ICGFM website under Winter Conference.

Continue reading "Automating Public Financial Management Systems for Results" »

November 30, 2007

7th IMF Debt Management Forum

Posted by Brian Olden

Debt The 7th IMF Debt Managers Forum, hosted by the IMF’s Monetary and Capital Markets Department, was held in the IMF’s HQ building in Washington D.C. between November 5th and 6th. This two day event was attended by leading public debt managers from advanced and emerging market economies, participants from the financial markets, including leading investment banks and hedge funds and other international financial institutions. 

Many interesting topics were discussed including the effects of the recent credit crunch on sovereign debt management and issuance strategies, trends in the composition of public debt portfolios, use of derivatives to assist in the implementation of debt management strategies, asset and liability management strategies and the issue of sub-national and public enterprise debt management.

The involvement of private sector financial market participants was useful as they were able to provide some commentary on the credit crises and their take on how this would affect , issuance spreads for sovereign issuers over the short to medium-term. Most of the participants were relatively optimistic about the prospects for emerging markets but perhaps less so about the more advanced economies. The most interesting message from the Forum was the view that, for once, this was a crisis that had originated in the advanced economies and that the affect on emerging markets was proving much less severe than has been the case in other international financial crises of recent years.  Lack of exposure of domestic financial institutions to the sub-prime mortgage market and the improvement in the fiscal management of emerging markets has insulated these economies from the worst effects and this has been reflected in the relatively mild reaction of investors to EM sovereign debt as evidenced by the relatively mild widening of spreads in binds issued by these countries. 

The attached note highlights the main areas of discussion in more detail. [Download highlight_7th_imf_debt_forum_2007.DOC]

November 26, 2007

PFM Reforms and Public Expenditure Efficiency: Key PFM Reforms Playing a Role in Effectively Controlling Public Expenditure

Banca_ditalia Posted by Michel Lazare

There are seven key institutional arrangements for budgeting that play a key role in effectively controlling public expenditures in OECD countries.

This is at least the view presented in 2005 by Jon Blondal (the then Acting Head of the Budgeting and Management Division of the OECD) on the occasion of the 7th Banca d'Italia Workshop on Public Finance. In Jon Blöndal's view, there are three major determinants of the fiscal outcomes of OECD member countries: (1) the general performance of the economy (which is the main driver), (2) the political commitment to fiscal discipline, and (3) the institutional arrangements for budgeting. The presence of the two first factors being insufficient to experience a successful fiscal outcome.

Continue reading "PFM Reforms and Public Expenditure Efficiency: Key PFM Reforms Playing a Role in Effectively Controlling Public Expenditure" »

October 29, 2007

Expenditure Commitment Controls, the essence of fiscal discipline – IMF Technical Guidance Note

Posted by Dimitar Radev and Pokar Khemani

Money Fiscal discipline, one of the key objectives of good public financial management (PFM), requires a well developed expenditure control framework, including at the commitment level, to prevent accumulation of payment arrears. A July 2006 IMF FAD Technical Guidance Note, "Commitment Controls," by FAD staff members Dimitar Radev and Pokar Khemani, provides technical advice on a number of areas related to commitment controls, including objectives, preconditions for successful implementation, and institutional design. These guidelines are intended to apply primarily to IMF operational work and technical assistance but have also implications for the relevant government departments and agencies within national, provincial/state and local jurisdictions.

Continue reading "Expenditure Commitment Controls, the essence of fiscal discipline – IMF Technical Guidance Note" »

October 11, 2007

Public Investment: Good Project Management is an Issue of ...Capital Importance

"Unexpected changes to payment schedules related to capital projects can create significant difficulties for finance officers responsible for cash management" remarks Steven R. Kreklow (*) in his short article ("Capital Project Cash Flow Management") of the August 2007 issue of the Government Finance Review, the membership magazine of the US-based Government Finance Officers Association.

This adverse impact on cash management and more generally budget execution can be mitigated by good budget and project management techniques described in Steven R. Krelow's article.

Continue reading "Public Investment: Good Project Management is an Issue of ...Capital Importance" »

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