Posted by Suhas Joshi[1]
PFM capacity in the Caribbean was recently given a boost by the delivery of a regional Seminar on Cash and Debt Management and Commitment Control. The event was held in St. Lucia under the aegis of the IMF’s Financial Management in the Caribbean Program (FMCP). The FMCP is a technical assistance program, funded by Canada, and focuses on some heavily-indebted Caribbean countries. The program supports reforms and capacity building in budget and treasury management through legal and institutional modernization, using a range of advisory and capacity building tools. Its focus is on countries in the ECCU[2] that are supported by IMF programs, such as Grenada, Dominica, St. Vincent & the Grenadines, and St. Kitts & Nevis. But the program also covers other fiscally vulnerable countries in the region, such as Barbados and Belize. In addition to addressing the specific needs of these countries, the FMCP utilizes regional approaches where there is a benefit to be gained from collaboration.
This first FMCP Regional Seminar was held in St. Lucia from 29 May to 2 June 2017, and was inaugurated by the Minister of Finance of St. Lucia. The Minister pointed out the importance of building fiscal capacity in the region, especially given the high level of indebtedness. Sessions were delivered by the FMCP PFM Regional Advisor, the IMFs Regional Debt Advisor, and two other experts. Details of the program can be found here.
The seminar was targeted at cash managers from the participating countries. Topics discussed included the objectives of modern treasury and cash management, the relationship between cash management and the broader PFM framework, the chart of accounts, integrated cash flow management frameworks, the treasury single account (TSA), the relationship between the treasury and the central bank, and the control of commitments. Sessions were also held on linkages between cash and debt management, cash flow forecasting, and financing the budget gap, all areas of significant concern to the participating countries. Representatives advocated the establishment of a working group to continue the dialog on these topics.
The participants raised some concerns about the implications of the topics discussed at the seminar for their day-to-day work. These concerns included the ability of staff to discharge basic accounting responsibilities, and to manage fiscal risks, especially risks related to investments made by government. Participants also noted that some national treasuries lacked sufficient political influence and authority to discharge their roles and responsibilities efficiently and effectively.
One major issue that exercised all participants was the role played by the commercial banks in the region in providing banking services to government. The lack of formal agreements that define both the quality of these services and the charges for providing them leads to nebulous and, at times, excessive charges by the banks. Often these charges are neither clear nor obviously reasonable. Another issue is the absence of efficient reconciliation of the accounts held by the commercial banks and the data held by the treasury and the central bank or the ECCB. These issues highlight the need for concerted action by the countries of the region to improve and clarify their relationship with the commercial banks. The FMCP is now working with some of the countries to address these concerns.
[1] Suhas Joshi is the IMF’s Regional PFM Advisor for the FMCP.
[2] East Caribbean Currency Union countries include St. Lucia, St. Vincent and the Grenadines, Grenada, Antigua and Barbuda, Dominica, Montserrat, St. Kitts and Nevis, and Anguilla. Other countries participating in the FMCP are Barbados and Belize.
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