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Sailendra Pattanayak, Racheeda Boukezia, Yasemin Hurcan, and Ramon Hurtado
Fiscal institutional capacity in most fragile states (FS) and several low-income developing countries (LIDCs) is much lower than in other countries. Governments in these countries face several cash management challenges because they often lack credible budgets, have smaller and less diversified revenue bases, have limited access to financial markets, and rely largely on donors to fund a large portion of their budgets. Available public funds in these countries often remain dispersed outside the control of the ministry of finance. In the absence of a good cash forecasting function, these countries typically resort to cash rationing to meet their priority spending needs, often in an ad hoc manner, which can adversely affect budget execution and achievement of fiscal policy targets. This note sets out the key objectives and building blocks of a cash management function in FS and LIDCs. It suggests several measures to progressively build cash management capacity in three interrelated areas: consolidating cash resources, forecasting cash flows, and managing cash balances with sound institutional setups.
Sailendra Pattanayak, Racheeda Boukezia, Yasemin Hurcan, and Ramon Hurtado

Buffer to Meet Any Unforeseen Demands for Cash Managing the Relationship between the Ministry of Finance and the Central Bank Establishing an Institutional Mechanism for Cash Management Decisions VI. Developing a Sequenced Strategy for Cash Management Reforms Conducting a Diagnostic to Understand the Context and Institutional Weaknesses Identifying Reform Priorities and Developing a Sequenced Reform Strategy Annex 1. Illustrative List of Functions of a Cash Management Unit (CMU) References Boxes 1. Factors Inhibiting TSA Reform in Fragile

Sailendra Pattanayak, Racheeda Boukezia, Yasemin Hurcan, and Ramon Hurtado

the implementation. A complete inventory of the governments bank accounts, a well-functioning banking network and technology, and an adequate accounting system will all be lacking in many conflict- or post-conflict countries. In the absence of adequate infrastructure, the reform should be carefully sequenced. For example, closure of MDAs’ bank accounts before introducing a functional nation-wide payment system increased the use of physical cash for government payments in Somalia. Box 1. Factors Inhibiting TSA Reform in Fragile States and Low-Income Developing