PEMPAL Member Country Survey on Treasury Single Account

PEMPAL Member Country Survey on Treasury Single Account Ankara Turkey March 2016

Background • A TSA is central to effective Treasury Management • This survey will provide insight into the depth of coverage of TSA operations in member countries • A previous survey took place in 2010. There maybe opportunities to compare the results from the two surveys to determine what has changed since 2010, presentation will focus on the “generally accepted • The survey comprised over 30 questions • 12 countries responded to the survey Albania Azerbaijan Belarus Croatia Georgia Kazakhstan Kyrgyz Republic Moldova Montenegro Tajikistan Turkey Ukraine

TSA in place and the Location • All 12 countries indicated that they have a TSA • All 12 also have the TSA at the Central Bank • One country, Belarus indicated that local governments have their TSA account in commercial banks 3

Coverage of the TSA 12 10 8 6 4 2 0 Tax Revenue Non-Tax Revenue Social Fund Health Fund Other Funds Yes Special Means/Extra Budgetary Trust/Deposit Money Donor Financing State Owned Enterprises No • Two countries have some tax and non-tax revenue held outside the TSA • For the various funds (social, health and other) close to 50% were in the TSA and 50% outside of the TSA • Surprisingly, 7 countries indicated donor financing is held in the TSA • One country indicated that some So. E cash operations are included in the TSA 4

How is Money Paid into the TSA? 12 10 8 6 4 2 0 Tax Revenue Non-Tax Revenue Social Fund Directly into TSA Health Fund Zero Balance Accounts Other Funds Special Means/Extra Budgetary Transitory Accounts with some Delay Trust/Deposit Money Donor Financing On Request • In general money is being paid into the TSA on the same day of receipt • There are some anomalies between the responses to this set of questions and the slide on previous slide – a number of countries did not indicate how money was paid into the TSA despite indicating that the funds were held in the TSA – this requires further investigation 5

Are Payments for Funds Made Directly from the TSA? Donor Financing Trust/Deposit Money Special Means/Extra Budgetary Other Funds Health Fund Social Fund Earmarked Non-Tax Revenue Earmarked Tax Revenue 0 1 2 3 Other Account 4 5 6 7 8 Yes • Most payments for all money held in the TSA are paid directly from the TSA • However, a significant number of countries make payments for non revenue fund sources from other accounts • It would be interesting to know whether this involves idol balances on those other accounts before payments are made as this would represent sub-optimal cash management practice 6

Do You Have an Electronic Payment System? • All 12 countries have electronic payments, despite the one no answer • Four countries have both RTGS and another electronic payment system – this is usual with RTGS used for high value payments, and all lower value payments made once or twice a day in large files – this is driven by costs 7

How Countries Access the Payment System Commerical Bank Central Bank Treasury is a direct Party to the Payment System 0 1 2 3 4 5 6 7 • Two countries indicated that they are both party to the payment system and access it through the Central Bank – this is unlikely so those responses have been adjusted to the Central Bank • Five countries are a direct party to the payment system, six through the Central Bank. One country uses both the Central Bank and a commercial bank • Eight countries make all TSA payments electronically. Two countries also still permit cash payment and one country permits payment by cheques. This is the same for both central and subnational governments in all countries 8

Structure of the TSA 8% 42% 50% Single Bank Account Consolidation of a number of sub-accounts Other • Six countries have a TSA which includes sub-accounts, while five have a single account. • One country indicated that it was a correspondent account, this needs further clarification • Either a single account or consolidated set of sub-accounts represent good practice in cash management • The survey also asked questions regarding whether other bank accounts exist. It generally appears that very few additional bank accounts are in existence. One country still has an account for each budget entity, another deposit accounts in commercial banks and a third some donor accounts 9

Central Bank Arrangements 9 8 7 6 5 4 3 2 1 0 Interest is paid on Balances MOU Exists Yes MOU describes Fees to be paid No • An equal number of countries receive interest on cash balances as do not • Eight countries have an Mo. U with the Central Bank. It is assumed that the four other countries do not have an MOU • Of the eight, five specify fees to be paid to the Central Bank, it is assumed the other three do not specify fees. 10

Commercial Bank Arrangements 12 10 8 6 4 2 0 Interest is paid on Balances Contract/MOU Exists MOU describes Fees to be paid Yes Cash is with held by banks No • Seven countries receive interest on cash balances at commercial banks. This suggests more cash is held outside the TSA than earlier reported • Ten countries have a contract, and six of those define fees to be paid to the banks • Two countries allow the banks to withhold cash. One for one day, and another for 3 -7 days. The later arrangement is in lieu of paying fees 11

Forecasting the Cash Balances of the TSA Does not Forecast 8% 8% One Day in Advance 25% One Week in Advance One Month in Advance 50% 8% Other • Five countries forecast the balance of the TSA one week or less in advance • Seven countries forecast the balance one month of more in advance • Good practice is to move towards a three month rolling forecast of daily cash balances 12

Targeting Cash Balance of the TSA and a Cash Buffer • Eight countries target the cash balance of the TSA, four do not • In targeting the balance all eight countries (and one extra) use T-Bills, and one country also uses REPOS • However, the duration of many of the debt instruments mentioned were greater than three months – in general these instruments would not be used for liquidity management • Eight countries also have a Cash Buffer, six of these also target the cash balance. One country has a buffer but does not target the balance, which seems unlikely 13

Summary of Survey Findings • • • TSAs are primarily held at the CB – this is considered the choice of least risk Coverage of the TSA is relatively comprehensive – but almost every country has further opportunities for consolidation In a significant number of instances payments are not made directly from the TSA Further analysis maybe required to determine whether all funds entering and leaving the TSA optimise the cash balance Countries are not always being remunerated for their cash by the CB or commercial banks. In two instances commercial banks are allowed access to the cash float. It would be important to have an objective assessment of the costs verses the benefits of these arrangements Three countries still have cash or cheque payments. These are expensive and higher risk payment options for countries While countries indicated very few additional bank accounts, seven indicated they are remunerated on balances in commercial banks. Further investigation is required to determine whether these are operational accounts or for investment While six countries forecast the daily cash position one month in advance, five forecast one week or less in advance. Good practice recommends moving towards a three month rolling daily forecast Eight countries target the cash balance of the TSA and eight also target a cash buffer. Six countries do both. 14