1 Tamás Pál Török Head of Division - PowerPoint Presentation

1. 1Tamás Pál TörökHead of DivisionCash management – Liquidity forecast

2. The Treasury SystemTreasury and ÁKK carry out the central management tasks related to the financial management and financing of the budget’s implementation. The Treasuryparticipates in the liquidity management of the Treasury Single Account by agreement with ÁKK, forecasts the evolution of the aggregate balance of the expenditures and revenues of the accounts managed, to which the daily debt management data is coming from ÁKK.The Treasury is entitled to provide cash management services, including the management of accounts and the execution of cashless payment transactions,to create money electronically,to carry out investment service activities in respect of debt securities issued by the State to use remote access payment instruments.2

3. Treasury Single Account 1.3It was set up when the Treasury was established.HUF account, kept by the Hungarian National Bank.Money circulation of the budget is executed through this account, incomes are arriving to this account, and expenditures are paid from here.Benefits of TSA:ensures effective control over budget funds;provides faster and more complete information;reduces financing needs;enables more efficient debt management options;improves the quality of fiscal data.

4. Treasury Single Account 2.4In Hungary, the TSA covers:accounts of central budget institutions and chapters;social security funds and separate government funds;accounts linked to centrally managed appropriations;finance related accounts;accounts of regional development councils;accounts of county governments and their offices;accounts of public foundations;accounts of state-owned non-profit companies;accounts of other organizations defined in the law on public finances. Altogether nearly 10,000 accounts  

5. Treasury Single Account 3.5TSA does not cover:accounts of local governments and their institutions;state-owned companies, businesses;individuals.  The entity responsible for liquidity management:ÁKK;Treasury contributes:preparing forecasts;running government securities sales points.

6. Liquidity managementThe Treasury continuously monitors revenue developments to be able to fulfil payments. Treasury requires liquidity plans and financing plans on monthly basis. In some cases specified in Government's decree, the Treasury may advance the coverage of certain expenditures from the TSA. Prepayments may be made without any charges and interest.6

7. Liquidity forecasts7Treasury is responsible for:Providing an estimate of expected revenue and expenditure:Daily plan,Three months in advance, Forecast Source:Facts, historical data,Financing plans, forecasts from larger institutions (based on legal obligation, or on agreement),Pre-notification of large-scale payments

8. Structure of liquidity forecasts8Financing NeedsFinancing sourceBalance of the revenue and expenditure of the central budgetBalance of Social Security funds, credit needsBalance of Separate Government Funds Advances (EU funded agricultural subsidies, VAT advance on the development of the expressway network, year-end advances)Debt serviceGovernment securities issuanceBorrowingEuropean Union accountsIncomes of other account holders

9. Release of fundsYTD/Year-to-date allotmentOperating budget of governmental bodies.Performance proportioned allotmentCumulative budget of governmental bodies, chapter-managed estimates.Modification of scheduleInstitutions with temporary liquidity problems, chapter-managed estimates.with different time-frame replacementwith non-different time-frame replacementAppropriations increases without amendmentExceeded appropriations9

10. PaymentsSubmission of transfer ordersPaper-basedElectronicPrior notification of big lump sum paymentsTransfers in excess of HUF 1,000 million to be announced at least 3 days in advanceDouble cover testLiquidity coverage testAppropriation line item testIdentification of performanceSingle Column headings established under the order number (ERA) and government ID are used to identify the transfer lines.10

11. Accounts management>12k accounts managed1.85 mn transaction monthly11

12. Banking arrangementsTreasury Single Account (TSA) at Central Bank of Hungary provision of funds for operations (performance or monthly basis): gross expenditure – own income = net expenditure (budgetary contribution)liquidity managementvia TSA (central government)municipalities can hold bank accounts at commercial banksrolling cash-flow plan (T+2 months)data exchange to prepare overnight operationsnew Accounts Management System (from 2020)other related fields12

13. Liquidity forecastingDaily forecasts for three monthsSources:a large amount announcementsBottom-up information: institutional reports, commitments, financing plansTop-down information: planning on basis of last years and main informationLiquidity Board13

14. Liquidity forecastingOthers:Continuous information exchange with Central Bank, MoF, Tax Authority and other large entitiesProblems: Large fluctuation of cash balance within a monthLot of disbursements at the beginning of month (wages, family allowance, pension, disbursement of VAT, etc.Incomes: in the second half of monthDifficult to plan some types of incomes (e.g.: payments from European Commission Efficiency:91.7 % accuracy in 2017863 bn HUF TSA average balance in 201761 billion HUF average deflection14

15. TSA balance and daily forecastYear 201715

16. Liquidity forecasting difficulties16Items difficult to plan with:Schedule of EU revenues;Institutional expenditure - in particular accumulation expenditure (Treasury does not have detailed commitment data);Money transfers of organizations outside the treasury circle (e.g. non-profit corporations, local governments).The Treasury does not have an integrated IT system that would support the preparation of forecasts (purchase of an IFMIS system in process).

17. Others17The Treasury provides the estimated day-to-day position of TSA for overnight repo bonds every day.On the basis of the Treasury's daily forecasts, ÁKK not only adjusts the timing of financing, but also manages cyclical cycles within a month, primarily with repo operations.At present, the Treasury is also managing the currency management and cash flow of the central government subsystem through the euro and dollar nostro accounts managed by the central bank. However, there is no active liquidity management on these accounts. 

18. Thank you for your attention!18