Cash flows on domestic borrowing: Cabinet to approve 10-year CM&TSA policy on June 3

The federal cabinet is to approve a ten year (2019-29) policy on Cash Management and Treasury Single Account (CM&TSA), aimed at neutralizing impact of government''s cash flows on domestic borrowing, sources close to Prime Minister Advisor on Finance told
The staff level agreement with the International Monetary Fund and the subsequent press release uploaded on the IMF website dated 12 May 2019 stipulates that "the modernization of the public finance management framework will increase transparency and spending efficiency." In an IMF working paper S Pattanayak and Fainboim Yaker summarize their findings as follows: "A treasury single account (TSA) is an essential tool for consolidating and managing governments'' cash resources, thus minimizing borrowing costs. In countries with fragmented government banking arrangements, the establishment of a TSA should receive priority in the public financial management reform agenda."
The policy cleared by the Prime Minister''s Advisor on Finance, Economic Affairs and Revenue, Dr Abdul Hafeez Shaikh will be approved on June 3, 2019 by the cabinet to be presided over by Prime Minister Imran Khan will all aspects of cash management.
According to sources, managing federal government cash/ treasury and debt in a sustained manner is a major intervention required to improve public financial management. For this purpose, Cash Management and Treasury Single Account (CM&TSA) Policy 2019-29 has been formulated. The policy aims at ensuring availability of cash to meet obligations, economizing the cash within the government, saving on borrowing costs and reducing risks. Moreover, it focuses on management of government''s short term cash flows for efficient and better debt management in line with the monetary policy with the help of modern technology and practices.
Briefly, the policy objectives are as follows: (i) to ensure availability of cash when it is required; (ii) to manage cash balance in the government bank accounts effectively by (a) minimizing borrowing costs; (b) borrowing to cover expected cash shortfalls, and avoid "idle " balances; and (c) investing during periods of surplus.
The purpose of policy is also to neutralize impact of the government''s cash flows on domestic banking sector by ensuring that there are no large and unexpected changes in liquidity in the banking system and overall monetary policy (including monetary growth and inflation targets etc) is not undermined.
The objective of cash management policy will be achieved through cash forecasting framework and establishment of treasury single account. The policy also outlines specific actions to be taken by various stakeholders.
The sources further stated that Federal Board of Revenue (FBR) State Bank of Pakistan (SBP) and Privatisation Commission have been consulted after which the policy has been improved by incorporating their views. Auditor General of Pakistan, Controller General of Accounts and Central Directorate of National Savings were also consulted and their views are also incorporated in the policy.
The Chairman, Task Force on Austerity and Restructuring of Government, has also endorsed the policy. Finance Division has proposed the federal cabinet to approve Cash Management and Treasury Single Account Policy 2019-29, in terms of Rule 16(1)(j) of Rules of Business, 1973.