Publications and Research
Periodicals
Bank of Canada Review
Spring 1995
Index of Working Papers | Index of Technical Reports| Title | Managing the federal government's cash balances: A technical note |
| Author(s) | Daryl Merrett, Serge Boisvert, and Philippe Côté |
| Type | Bank of Canada Review article |
| Date of publication |
Spring 1995 |
| Language | English and French |
| Abstract |
In addition to its primary role as the country's central bank, the Bank of Canada also acts as the federal government's banker and financial adviser. One of the activities associated with this role as fiscal agent is managing the government's Canadian dollar balances. This function is examined in this article.
The main priority is to ensure that the government has sufficient cash to meet its daily needs. This requires careful forecasting and monitoring of the government's daily receipt and expenditure flows, as well as an ongoing borrowing program to refinance maturing debt and to replenish the balances during periods when outflows, on average, exceed inflows. The cost of borrowing to raise cash balances for the government is considerably higher than the interest earned on any balances that are available "on demand." To reduce this net cost, balances in excess of those required for daily needs are invested in "term" deposits that earn a higher rate of interest than that earned on the demand balances. The net cost of holding government balances has also been reduced through the use of cash management bills, which are flexible, short-term borrowing instruments that complement the government's regular weekly issues of 3-, 6- and 12-month treasury bills. |
| Bank topic index |
Debt management |
| JEL classification |
H63 |
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