Cash and Debt Management:
20 Years of Organizational Transformations
Xavier Rame
Fiscal Affairs Department
6th Annual Seminar
International Association of Treasury Services
“State Accounting Reform and Cash Management”
Hammamet, November 16, 2012
Acknowledgement
• This presentation is based on a chapter
authored by John Gardner and Brian Olden in
the forthcoming IMF book “Public Financial
Management and its Emerging Architecture”,
edited by Marco Cangiano, Teresa Curristine
and Michel Lazare, to be published on April
2013.
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20 years of changes in governments’ financial
assets and liabilities management
Government
banking
arrangements
and payment
systems
Availability of
information to
improve
government cash
planning
Development of
active cash
management
What has
changed ?
Increased
borrowing levels
and exposure to
financial markets
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Sum of All Countries Public Domestic
Debt Securities
45000
40000
35000
25000
20000
15000
10000
5000
Source: Bank for International Settlements
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
0
1993
US$ Billions
30000
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Cash and debt management:
2 separate functions…
Cash management
• Relatively short-term horizon
• Objectives: Finance expected cash shortages and use
expected cash surpluses efficiently within defined risk
parameters
Debt management
• Medium to long-term horizon
• Objectives: Meet government financing needs and its
payment obligations at the lowest possible cost over the
medium to long run, consistent with a prudent degree of risk
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… Facing specific challenges …
Cash Management
Challenges
Debt Management
Challenges
• Full government
coverage
• Buffer levels
• Managing credit
risks
• Reducing
fragmentation of
debt portfolios
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… which have to coordinate their
actions
Debt
management
focused on
the liability
side of the
balance sheet
Cash
management
carried out by
other
governmental
units or
Central Bank
Sub-optimal
outcomes:
uncoordinated
operations or
objectives pursued
not necessarily in line
with fiscal policy
objectives
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Reasons for a Strengthened Coordination of
Cash Management and Debt Management
Manage government’s
financial resources as a
portfolio
• Ensure consistency of signals sent to the market regarding
the government’s financial management strategy
• Optimize the management of assets and liabilities
Take debt issuance decisions in
the context of the
government’s overall cash
flows
• Improve information flow and coordination of strategic
debt issuance decisions to ensure that they are made with
full knowledge of the government’s net cash flow position
Consolidate scarce
professional skills
Integrate information systems
and transaction processing
procedures
• Design specific approaches to attract and retain the
appropriate set of skills
• Streamline the use of IT systems and back-office facilities
and procedures
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A trend toward the integration of the 2
functions in Debt Management Offices (DMOs)
Creation
of DMO
DMO in charge
of cash
management
DMO in charge
of government
financial
portfolio
Fragmentation of
debt portfolios
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Lessons Learned from Country Experiences: an
Evolution to Address a More Complex Environment
DMOs typically established with debt management as
primary focus
Inclusion and integration of cash management
Transfer of other functions to debt manager as expertise
and specialization needs increase and Government
financing operations become ever more complex
Current financial crisis has increased profile of public
debt and asset management offices as competition for
capital in international markets intensifies
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Central Government Debt Management
Institutional Arrangements
The “Independent DMO” Model
High degree of delegated authority
Comprehensive legal framework regulating
their operations
Ability to recruit and retain staff outside the
civil service constraints
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Lessons learned regarding institutional
models
Parameters to consider in setting the
DMO’s level of independence
Willingness of the parliament/government to delegate debt
management authority to professional debt managers
Existence of adequate monitoring, control and audit systems to
ensure agent is pursuing the strategic objectives of the principal
Capacity of Mof to develop and deliver strategic guidelines to the
DMO to meet these objectives
Systems in place to enable integration of debt and cash
management with other areas of public financial management
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Lessons learned regarding institutional
models
Institutional setting not as important as
organizational structure, roles and responsibilities
If these conditions not met a DMO within
the Mof/Treasury may be the most
appropriate solution
• Allows capacity development in a controlled
environment and ensures linkages with other
reforms in the PFM area
• Develops capacity in the MoF
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Examples of Central Government Debt
Management Institutional Arrangements
Separate and independent
DMO
Separate DMO as agency of
Mof
Sweden
Ireland
Germany
Hungary
Portugal
New Zealand
Australia
Belgium
Nigeria
UK
Netherlands
DMO within Treasury or
Mof
US
China
Japan
Canada (shared with
BoC)
Chile
France
Russia
Spain
Italy
Mexico
Brazil
Turkey
Korea
Thailand
Indonesia
Colombia
Argentina
DMO within CB
Denmark
India
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Challenges for cash and debt management in
developing countries and emerging markets
Accuracy of
cash planning
Access to
capital
markets
Complexity of
setting a TSA
Resistance to
change
Capacities
Legal
framework
Challenges
Integration
with the
overall PFM
system
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