1. I-Cash and Debt Management: Interaction, Coordination and Integration
Group 1
Topics:
I-Cash and Debt Management: Interaction, Coordination and Integration
II-Existing challenges and ways to overcome them
Members of the group:
Albania, Croatia, Georgia, Hungary,
Macedonia, Moldova and Turkey
Presented by: Mimoza Pilkati
Chisinau
October 12, 2017

2. 1.Does the cash management function interact with the financial market?
Directly
Indirectly through the Central Bank
Indirectly through Debt Mngment Unit
Not at all Comments
Albania
T separated from D +
CB is fiscal agent of government. It’s centralized electronic payments system with CB in-between commercial bank.The SWAP (spot and forward) instrument is used by CB’s advises.The deposit instrument is limited in time and in value according to CB definitions.Debt Department (D) is involved in the securities auctions organized by CB.
Croatia
Treasury (T) forecasting and TSA management (mng) take place for execution of the budget from which get information on situation of deficit/surplus. Legislation gives possibility to invest in CB, Comm B or in sovereign securities.T controls directly banks or through money market where banks address for long liquidity.If it’s a surplus in line with the forecast is placed short term deposit in bank, if deficit, D get financing (Blumberg platform).T-bills issue every week. In 1996 year CM go directly to foreign market, also for surplus.Mutual daily coordination between T and D for exchange rate (negative exchange rate).D analyze the movement, rate, cost, advise T for placement,CB is a fiscal agent of Government (G)
Georgia
MoF is fiscal agent of country, deals with CB not with the participant of market. T use T-bills, certificate of deposit, set collateral, ring up commercial banks to transfer interest amounts, for excessive liquidity, have comprehensive discussion with leaders of the bank. D is separated from T. There is no need for short term borrowing. It is active cash mng. In 2015 WB has help for Debt Mng Strategy.
Hungary
T in charge of budget execution and deal only with CB for cash mng purposes, local branches deal with CommB. REPO and short term funding are done by CB, which is a fiscal agent of government. T doesn’t invest the balance of TSA, hold it where it is.
Macedonia
All needs and processes are done by T in coordination with CB. To coverage the needs T communicate with D. Not excessive liquidity. TSA operates in CB, which have to discuss with CommB. Market instruments are meeted by D to conduct the volume.
Moldova
D is responsible to interact with primary dealers, CommB, for auction calendar, instruments,situation of financial market. CB is a fiscal agent of government, but not relevant one.Liquidity mng interact for operations activities and fees.
Turkey
It’s complicated to answer.T functions: TSAmng+budget execution. Also in 2008 (financial crisis) was involved in short term market instruments in real terms by legislation-deal directly to the market, CommB conducting daily active cash mng. D interacts directly with primary dealers.

3. 2.Are T-bills (other instruments) used for cash smoothing in-year as well as deficit financing?
Yes (most of the time)
Only occasionally
No Comments
Albania +
Securities consists in T-bills and Bonds (until 10 years), which are used for cash smoothing deficit financing by auctions calendar which is revised in quarterly basis.
Croatia
Use short term T-bills when it’s in short liquidity position. Every Tuesday is a publication on internet for the amended auctions calendar. Coordinate the needs for liquidity together with the forecast, not to accumulate excessive liquidity.
Georgia
Usually have years maturity of Bonds. The case was 2007 year-12 auctions with 6 months maturity of T-bills for cash smoothing, also dialog between T-D-CB to contribute in market and to build the money market. CB owns securities, moving CB papers. T plays its role in small market and consolidation.
Hungary
T-bills is used officially for cash smoothing
Macedonia
Between a-b.
Moldova
Use for cash smoothing, also when we have issues of financing use T-bills. When our domestic sources are short we use external markets (budget support, etc.) and vice-versa from domestic market, revenues etc.
Turkey
Smoothing not one day to another day, but within the year. Purpose of financing is to average maturity of debt composition, share in total portfolios. Also occasionally, smoothing the redemption profile.

4. 3.Are there coordination structures in place between the debt and cash management functions?
Formal (a formally-established committee)
Informal (bilateral contact between officials)
Do they include the Central Bank?
Comments
Albania +
First Committee “Debt strategy revised” consists in top management of MoF and CB. Second Committee “Debt & Cash Mng” has chairmen deputy minister and the members are T, D, Macro, Budget Dept, it’s technical one.
Croatia
Establish a Committee by the minister Order where are members high officials and from T, D, Macro etc.CB meets once per month to discuss financial plans, ways how to financing the deficit.
Georgia
No formal Committee. T is independent unit from MoF. Head of Debt inform T for debt requirements. Auction calendar to be agreed T-CB. D use Blumberg to hold auctions. Close relations but not formally.
Hungary
T-public body under MoF with very strong connection with CB, D-a company owned by state, no communication.
Macedonia
There is a cooperation MoF (T) – CB between highest level. Also there is a Committee ordered by deputy minister. Informal contact between T-D, meeting once per week for cash issues (short-medium terms), technical level. Not compulsory.
Moldova
Closed collaboration but informal.memorandum between CB-MoF. There is a Committee to discus cash-debt mng issues and monitoring the policies.
Turkey
Complicated picture. Monthly meeting MoF-CB for fiscal-monetary policy, between officials (T-Middle Office) is technical one. Every day meet (T-D are in the same floor) in coffee/restaurant, closed integrated with CB (calling at night). There is not a Committee including CB.

5. + 4. Are the debt and cash managers able to share resources? Albania
Systems
Skills
Comments
Yes (e.g. integrated database)
No (e.g. several systems, different interfaces)
Yes (e.g. specialized expertise concentrated in one unit)
No (spread across more than one unit)
Albania +
T database (AGFIS) separated from D (DeMFAS), from Tax Budget (MTBP), Procurement, etc. AGFIS interface with is in process the SECO project for DeMFAS interface. T-gets expertise from CB as fiscal agent of government.
Croatia
Integrated between systems not formally established. D has own system where are included all data of instruments. T system has directly access through IT systems, but nor analysis these instruments. T has all information on specific periods of maturities for forecast and cash mng purposes. D is user of T system for payments of debt services transactions. D has expertise, but doesn’t share skills, also depend by T interests.
Georgia
Not integrated systems. D has own system. D is separated and has specialized expertise.
Hungary
The same with Croatia. There is a data warehouse where all agencies entry the data, but no interface between systems. Skills spread in different bodies. T buy some papers, D sell these papers.
Macedonia
No direct communication between IT systems. There is a data warehouse where T-put its data and D also separated. Double records should be eliminated. D is user of T system for payments of debt services transactions. D has expertise.
Moldova
There are different systems, not integrated: T-system, DeMFAS etc.
D is separated department and has expertise.
Turkey
T system includes many modules and D is user of T system for payments of debt services transactions. Skills spread 80% across the D and 20% -T, which has function for regulation of instruments under scope of TSA.

6. + II-Existing challenges for moving to more active cash management
Albania
Croatia
Georgia
Hungary
Macedonia
Moldova
Turkey
1.Lack of good forecasts +
2.Lack of coordination within the Ministry
3.Inadequate money market
4.Policy differences with the central bank
5.A constraining legislative or regulatory framework
6.The organizational arrangements
7.Commitment and understanding from top management
8.Resource constraints

7. II-The ways to overcome challenges
1 – Lack of good forecasts
1.1- The issue for timely and accurate information can be solved by
using IT systems and automatizing the processes:
To avoid the mistakes of human resources.
To shift to science basis of forecasting by using models and most recent techniques that respect the standards (people needed to be convinced for any changes, to be trained for implementation of the standards etc.),.
To further strength the financial discipline.
To get very latest, most complete data, proactively delivered anywhere, on any device, when it can be used immediately to maximize the value of information (real time access to detailed data) for better decisions and actions.
To get physical and logical security of data from non-authorized intervention.

8. II-The ways to overcome challenges
1.2- Moving from “cash rationing” to “cash management”, protect expenditures plan from cash flow volatility.
1.3- Roll over forecasting in daily basis if it is possible (historical data and other stakeholders’ data).
1.4- Update daily forecasted data with actual data by daily information from banking system (reconciliation process to avoid mistakes, identifying other available assets etc.).
1.5- Daily communication between all stakeholders to reflect all changes in forecast timely

9. II-The ways to overcome challenges
2-Lack of coordination within the ministry
-Assignment of responsibilities and deadlines for completing tasks by regulations, action plans etc. and reporting daily to superior.
-Establishing the Coordinating Committee with participation of all involved parties.
-Following the previous argument for automated processes, the integration of the multi-platform data bases establishing an interface will help the coordination between responsible structures for cash and debt management within ministry.
3-Inadequate money market:
-More active borrowing and lending in money market. At the beginning use interbank market with REPO.
-Developing the policies for the use of government surpluses
-Lower average cash buffer to be harmonized with other policies
-Central Bank’s real role as fiscal agent of government, driving a dialog with market dealers and participants.
-TSA balance at the end of the day = zero (if daily balance is possible to be updated three times a day)
-The use of a wide range of instruments (by Sweden practice) as following:

10. Cash management Debt management Bonds → placements, rarely
Covered mortgage bonds
T-bills
Commercial papers → substitute to T-bills
Repos
Reverse repos
Tri party repos
Central bank certificates
Deposits
Debt management
Bonds → core funding
Nominal bonds
Inflation linked bonds
Foreign currency bonds
T-bills
Commercial papers → substitute to T-bills
Repos (market commitment)
Derivatives (portfolio adjustments)

11. II-The ways to overcome challenges
4-Policy differences with the Central Bank
Amendment of both parts’ legislation by international standards with technical assistance as the third non-native party to harmonize all policies. Memorandum of understanding
5-A constraining legislative or regulatory framework
Mitigate or avoid risks in relevant areas where are applied the constraining legislative or regulatory framework. These factors are not in our hands, but lets go ahead with small steps in right direction.
6-The organizational arrangements
It is depended by the level of development of all involved parties, so it’s needed the gradual evolution of their systems. Treasury has to be participant in banking systems like other commercial banks to carry out its transactions.
7-Commitment and understanding from top management
Have to convince them, assure them for the necessary of the changes which results in more active cash management by holding a conversation with top management, presented them relevant topics (training) in the meeting organized with all involved parties.
8-Resource constraints
To get possibilities for budget support, donations and other financing.

12. Group 1-Presentation Abbreviations: T-Treasury D-Debt Department
TSA-Treasury Single Account
MoF-Ministry of Finance
CB-Central Bank
CommB-Commercial Bank
Mng-Management