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Managing the federal government's cash balances: A technical note




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.

Suggested Citation

  • Daryl Merrett & Serge Boisvert & Philippe Côté, 1995. "Managing the federal government's cash balances: A technical note," Bank of Canada Review, Bank of Canada, vol. 1995(Spring), pages 55-69.
  • Handle: RePEc:bca:bcarev:v:1995:y:1995:i:spring95:p:55-69

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    References listed on IDEAS

    1. Pierre Duguay & Stephen Poloz, 1994. "The Role of Economic Projections in Canadian Monetary Policy Formulation," Canadian Public Policy, University of Toronto Press, vol. 20(2), pages 189-199, June.
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    Cited by:

    1. Eugene Lundrigan & Sari Toll, 1998. "The overnight market in Canada," Bank of Canada Review, Bank of Canada, vol. 1997(Winter), pages 27-42.

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    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt


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