Treasury Practices in the Public Sector
Global and Regional Perscpective on Challenges and Trends
The public sector treasury function is vital for maintaining and fostering a strong economy by generating employment, promoting growth and stability, and safeguarding the financial system. It is tasked with the efficient management of government resources. Public sector treasuries worldwide, including those in the Middle East, encounter various challenges. Our point of view discusses these issues in detail and provides an overview of our advisory services topics such as treasury strategy, operations, hedge strategies and accounting, Treasury technology and digital assets, automation, risk management, and valuation.
This publication explores the contemporary financial challenges faced by public sector treasuries both globally and in the Middle East. It discusses and highlights the key trends that public sector treasuries can utilise to overcome these challenges:
Challenges and imperatives for Public Sector treasuries
- Cash management & payments
Effective cash management and payments in public sector treasuries are crucial, typically through Central Bank accounts. Prioritizing accounting over cash management leads to inefficiencies. Efficient cash management optimizes funds, reduces borrowing costs, and enhances returns. - Manual processes
Public sector cash and treasury management in most developing countries relies on manual processes, such as processing cheques, manual reconciliations, and reporting. - Inaccurate forecasts
Many countries in the region struggle with accurate daily and monthly cash flow forecasting due to the prevalent use of cash accounting in government entities. This method offers limited insight into financial health, omitting liabilities and long-term finances, thus leading to inaccurate cash flow forecasts. - Expenditure control
Monitoring and controlling expenditure and revenue against budget appropriations is essential, focusing on preventing overspending and reducing financing costs. Government entities typically have limited control over cash management and payments, leading them to maintain multiple accounts at commercial banks for payment scheduling. This results in significant costs due to lost interest on idle balances and high transaction fees. - Adoption of IPSAS accounting standards
Public sector treasuries in the Middle East are transitioning from cash-based to accrual-based accounting, aligning with International Public Sector Accounting Standards (IPSAS).
Imperatives:
Treasury reforms in the Middle East are crucial for government entities, with commitment being the first essential step. Given recent fluctuations in revenues and expenditures, a well-structured treasury with clear responsibilities and efficient cash management is more important than ever.
The Deloitte Middle East Treasury Advisory Services team offers integrated advisory on treasury strategies, operations, hedge strategy and accounting, automation, risk, and valuation. Download the full report to learn more!
