Cash Flow Forecasting and Liquidity Management Strategies During Pandemic Crisis
Explore insights on liquidity management, cash flow forecasting, and challenges in public finance management amidst the pandemic crisis in Russia. Learn about key strategies to ensure payments continuity and enhance operational liquidity for fiscal sustainability.
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Liquidity management and cash flow forecasting under the pandemic crisis .Semenova - Head, Federal Budget Execution Support Directorate Treasury of Russia Moscow, June 2021 www.roskazna.ru
Public Finance Management: Key Challenges in 2020 Reduced budget receipts in the budget system of the Russian Federation both in terms of revenues and sources of fiscal deficit financing Increased budget payments in the budget system of the Russian Federation (additional budget commitments) in order to: support citizens, SMEs, some categories of health care personnel, selected sectors of economy ensure health care provision implement prevention measures contain unemployment growth develop future technologies and ICT A dramatic cash deficit in the context of pandemic crisis 2
Payments continuity in the context of a liquidity crisis The objective to fulfil commitments in an unconditional and timely manner RESPONSES review the investment policy and composition increase instant and operational liquidity* increase minimal account balance (not needed in case the first two measures are implemented) *Instant liquidity a cash source to provide cash to the TSA by 10 a.m. of the working day following the day when the need for such cash emerged (e.g., demand accounts, credit lines) Operational liquidity a cash source to provide cash to the TSA during the working day following the day when the need for such cash emerged (e.g., overnight REPO, currency SWAP) 3
Changes in the investment policy and its composition in 2020,, by cash management instrument Revised duration of placement, selected instruments Changes in cash balances composition (w/o specific Government decisions, budget credits) From 1/1/20 to 3/31/20 From 4/1/20 to 9/30/20 From 10/1/20 Instruments term 150 bln 7 %) 300 bln. (12 %) 7 days X V V 600 bln. (19 %) 14 days V V V 21 days X V V 785 bln. (30 %) 510 bln. (16 %) 995 bln. (44 %) Deposits 35 days V V V 91 days V V X 150 bln. (6 %) 182 days V X X 1,200 bln. (39 %) 676 bln. (26 %) 509 bln. (23 %) 7 days V V V 112 . (5 %) 235 bln. (9 %) 14 days X V V 590 bln. (19 %) 386 bln. (17 %) 241 bln. (9 %) V V V 35 REPO 100 bln. (3 %) 192 bln. (8 %) 91 days V V X 100 bln. (4%) 121 bln. (4 %) 01.04.2020 01.07.2020 01.10.2020 Demand deposit 7 days 182 days V X X overnight 7 14 35 91 182 4
Transformation of the accounts since January 1, 2021. Bank of Russia Treasury of Russia Treasury of Russia, financial bodies, State Extrabudgetary Funds Treasury Single Account Federal budget Regional budgets Local budgets Extrabudgetary funds Revenues accounting and allocation Funds of legal persons -non-participants of the budget process Funds held in temporary possession Individual accounts created for budget process participants, budget and autonomous entities, legal persons non-participants of the budget process Bank accounts over 44 thou. accounts Treasury accounts 5
Scope of forecasting in the new context since January 1, 2021 before January1,2021 FBSA TSA Federal level Regional level Federal level Municipal level Municipal budget money Federal budget money Regional budget money Funds in temporary possession Federal budget money Other accounts Other legal entities Funds in temporary possession Funds in temporary possession Funds in temporary possession BI/AI SEBF BI/AI BI/AI BI/AI Other legal entities Other legal entities Other legal entities SEBF RSEBF 6
Increase in cash balances on accounts with the Treasury of Russia in 2021 (bln rubles) 11,000 9,816.9 10,000 9,000 7,259.2 8,000 7,000 5,862.0 INCREASE 6,000 5,000 4,000 4,530.6 3,000 2,000 1,000 0 Total funds of the federal budget, including held temporarily Total TPS funds ( ) 7
Managing TSA cash balances in 2021 (bln rubles) 6,500 6,000 5,500 6,434.3 5,000 4,500 3,092.0 4,000 3,500 3,000 2,500 2,000 2,728.6 1,500 1,000 1,267.2 500 0 01.02.2021 01.03.2021 01.04.2021 11.01.2021 01.05.2021 Total in placement (TSA+FBSA w/o excess oil and gas revenues) TSA ( + ) 8
Future Tasks Design (develop) a new forecasting model and improve the quality of forecasts Improve targeting algorithms and reduce volatility of TSA balance Absorb additional liquidity Diversify TSA cash management instruments 9
