Managing Liquidity in the Treasury Single Account State Treasury Agency Ministry of Finance of the Republic of Azerbaijan Managing Liquidity in the Treasury Single Account

Cash forecasting for the government budget (cash plan) Law on the Budget System, Article 17: “Based on the approved indicators for the next year, the RA Ministry of Finance shall determine quarterly and, as necessary, monthly allocations of budget revenues (between administrators) and expenditures in accordance with the budget classification. The approved indicators of the government budget and allocations of revenues and expenditures are released to budget-financed organizations (chief budget funds administrators and chief revenue administrators) within a month.”

Cash planning process Collecting information from chief budget funds administrators and chief revenue administrators for the next year and next three years. Producing forecasts for cash planning Approving a cash plan Reviewing the execution of the cash plan Deciding on the need for changes Adjusting the cash plan

Structure of a cash plan for government budget Allocation of budget revenues between chief revenue administrators and breakdown of revenues by quarters/months (cash receipts) Allocation of budget expenditures by quarters/months (cash payments) Distribution of the surplus (free monies) or deficit Distribution of financing sources for budget deficit

Objectives and effects of cash planning Forecasting budget receipts and outlays Making sure that budget commitments are met in a timely manner Smoothing TSA balance volatility Efficient cash management Raising additional funds to bridge budget deficits Placing free monies in deposits to generate additional income

Legal framework for the TSA: Azerbaijan Law on the Budget System, Article 19 Cash execution of the government budget shall be performed through the State Treasury. All revenues to and expenditures from the government budget, extra- budgetary contributions and payments, operations of off-budget funds (excluding revenues, operating expenditures, and investment of monies out of the State Petroleum Fund), all borrowing operations under government guarantees to bridge budget deficits, and other government financial operations shall be executed through the State Treasury. TSA balances (free monies) can be managed or transferred for management. The exclusive authority to manage the TSA and withdraw funds from it belongs to the State Treasury. Transfers or withdrawals of money from the TSA without State Treasury’s permission are prohibited.

Liquidity is one of important indicators for TSA Liquidity management areas: Combining all government budget monies and additional funds in the TSA Managing unutilized TSA balances (placing monies in bank deposits) Smoothing TSA balance volatility Reducing the amount of banking operations / replacing them with non-banking operations Foreign currency purchasing/selling operations Providing budget loans to bridge cash gaps Operations with short-term government bonds

Managing unutilized TSA balances (placing money in bank deposits):