Workshop Discusses Linkages between Cash and Debt Management

Effective cash management entails that cash is available when it is needed (right amount, right place and right time) to facilitate the implementation of the budget. On the other hand, the objective of public debt management is to meet government obligation in the most cost effective way by meeting cash deficits. In an effort to foster effective cash and debt management practices, the IMF Fiscal Department together with the Monetary and Capital Market Department, conducted a pilot training on Cash and Debt Management from 14 to 18 May at the IMF Africa Training Institute in Ebene, Mauritius. The activity was aimed to expound on the interactions between the two areas and to foster coordination between the debt and cash management functions within the Ministries of Finance.

In her opening remarks, Director of the African Training Institute, Ms. Effie Psalida noted that the debt management landscape had evolved tremendously in recent years, with public debt rising rapidly and a lot of countries transitioning from accessing concessional funding to more commercial sources. These developments require governments to adopt different approaches of managing public debt environment to ensure long term debt sustainability.

The workshop delivered through lectures and country presentations focused on fundamental features of government cash management, including establishing treasury single accounts, cash forecasting, timely information sharing, creation and benefits of cash buffers as well as adequate infrastructure i.e. proper accounts and payment systems), principles of public debt management  including the objectives of debt management, importance of transparency of accountability, institutional framework for effective debt management (including preconditions for establishing a Debt Management Office), strategy formulation as well as formulating a borrowing plan and issuance calendar. Furthermore, the training provided a summary on fiscal risk management by highlighting the types of fiscal risks that governments faces as well as the ways to quantify and manage them through sovereign assets and liabilities management framework (SALM). Examples of tools available include financial risk models, contingent claims approach and intuitive risk based management approach.

The country presentations highlighted the challenges that countries face in the area of cash management, with most countries currently experiencing deficits and budget credibility issues. The MEFMI countries that were represented in the workshop are practising cash rationing and not cash management. Cash rationing looks at what is available (current revenues) and what to prioritise based of the current receipts. There is no prior planning on the use of resources. This reflects capacity gaps in governments for effective cash management calling for the need for intervention in this particular area by technical assistance providers.

A total of 21 participants from 12 countries attended the training, namely: Comoros, Botswana, Angola, Lesotho, Swaziland, South Africa, Seychelles, Madagascar, Mauritius, Zambia, Zimbabwe and Mozambique. These were drawn from the debt management and budget office in the Ministries of Finance. Ms Josephine Tito represented MEFMI in the activity.

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