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The assessment by both regional work programs and the Bank/Fund joint Public Debt Management and Market Development (Debt TA) program revealed that weak government cash management is a serious problem in most of our client countries.
Results of the Debt TA assessment indicate that weak government cash management is a major impediment to public debt management and debt market development. In addition, the uncertainty and volatility in government’s cash position translates into uncertain and volatile reserve positions of the banking system. Poor government cash management also causes major difficulties in the implementation of monetary policy by the central bank.
In many developing countries, government cash management is misperceived as synonymous to budget execution, accounting control, or debt management, instead of as a practice that aims to cost-effectively manage government cash positions, including their risks.
They often neglect the significant adverse impact of inadequate government cash management and the advantages associated with effective government cash management. While there is much literature on debt management, little is specifically about government cash management.
This paper aims to provide some research and analysis on government cash management practice in selected developed countries and recommend a capacity-building framework for developing countries.
It starts with a discussion of the definition and objectives of government cash management. It then presents the common features of an effective government cash management system by analyzing the practice in countries with effective government cash management.
Following the benchmarking, the paper discusses the importance of cash management, analyzes the common government cash management issues in developing countries, and offers some solutions to those common problems.
It also recommends a government cash management capacity-building framework for developing countries.
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