ARMENIA CASH FLOW FORECAST Vienna, Austria 7-9 November, 2018 Arshaluys Margaryan Zhirayr Titizyan

Dedication of Cash Flow Forecasts Functions Cash flow forecasting and cash flow management are integrated into the main functions of Public Debt Management Department of the Ministry of Finance (PDMD), Middle office of PDMD implements cash flow forecasts, and Front office of PDMD fulfils cash flow management functions, In cash flow forecast 4 staff of PDMD are involved, PDMD among other of its activities reports about the cash flow forecasts to the Deputy Minister, as well as to the Minister of Finance.

Treasury Single Account Treasury Single Account (TSA) is well designed. There are no government cash balances in the commercial banking system. The balances in the TSA are substantial; as well as those arising from the state budget, they include balances of local communities, extra budgetary funds, governmental non-commercial organizations and donor-financed projects. The MoF also retains a “stabilization fund”, representing previous accrued but unspent balances. MoF has control only over state budget and stabilisation fund balances But it is able to use funds from other balances without interest for cash management puposes, Earns interest by investing temporary surplus balance only with the CBA

Cash Flow Forecasts Coverage and Time Horizon Cash flow forecasts cover State budget (in detail) and other Treasury single accounts (TSA) cash flows. At the beginning of the fiscal year PDMD prepares quarterly, monthly cash flow forecasts of state budget for up to the end of the fiscal year, At the beginning of each month PDMD prepares also weekly forecasts for the current month, At the end of 2018 PDMD planned to prepare weekly cash flow forecasts for the coming three-month period, In addition, if there is a strain in the state budget implementation processes, PDMD conducts daily cash flow forecasts, The forecasts are rolled forward at the end of each period.

Cash Flow Forecasts Main Data Sources and Tools PDMD prepares quarterly, monthly and weekly profiles for state budget revenue and expenditures largely based on the historical data and taking into account the current state budget implementation features. Some expenditures items (e.g. salaries, debt servicing, debt issuance) are known precisely, PDMD coolaborate with other departments from the Ministry of Finance, with the Central Bank, as well as with State revenue Committee, PDMD organizes a Budget Committee Meetings every Thursday, which is also attended by the CBA. In the past this Committee was chaired by the Deputy Minister and attended also by the Treasury Operational Department, State Revenue Commitee and others. But as the cash position has improved, it is used primarily to exchange information at operational level, For cash forecasts PDMD uses Excel spreadsheets to elaborate its forecast tables, PDMD uses Treasury Client software for data gathering and building database for actual data,

Cash Flow Forecasts Accuracy and Usage Cash flow forecasts are submitted to the Deputy Minister, Minister of Finance, and to the Central Bank in the framework of coordination of Monetary and Fiscal policies. PDMD also invests temporary surplus cash only with the CBA in term deposits, The PDMD’s forecasts performance has been creditable. There are some non- negligible errors, but these are mostly in a helpful direction, PDMD systematically analyses forecast errors, both to give more insights into current flows – which may be relevant in deciding how to respond to errors – and in learning lessons for future forecasts.

Monthly Forecast Errors 2017

Cash Flow Forecasts Challenges Colaboration with State Revenue Committee is not satisfactory, Data gathering difficulties from Communities and Project Implementing Units, Weekly forecasts need to be prolonged from one month time horizon to 3 months (the work is on progress and will be implemented at the end of 2018), Regularely preperaing daily Cash flow forecast.

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