Bhutan: Technical Assistance Report—Royal Monetary Authority—Steps Towards a Liquidity Forecasting and Management Framework

IMF Staff Country Reports, April 30, 2019

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Bhutan: Technical Assistance Report—Royal Monetary Authority—Steps Towards a Liquidity Forecasting and Management Framework

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Bibliographic details

• Published: April 30, 2019
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9781498312417.002

Overview

• Purpose: Advocate for establishing a liquidity forecasting framework to enable the Royal Monetary Authority of Bhutan (RMA) to fulfil its legal mandate to formulate and implement monetary policy in ways better aligned with current central bank practices.
• Date: April 30, 2019
• Report type: Technical Assistance report (IMF Staff Country Reports)

Key findings

• Structural liquidity position:
  • The structural liquidity surplus is mainly due to foreign reserves accumulation.
  • The structural liquidity surplus has been broadly stable in the absence of RMA intervention.
• Market conditions and motivations:
  • Volatility of autonomous factors justifies more active liquidity management.
  • Fragmentation of the money market reinforces the need for a coherent liquidity management framework.
• Transmission:
  • Developing RMA’s liquidity forecasting and management capacity would benefit monetary policy transmission.

Constraints and gaps identified

• Several constraints and gaps were identified that need to be addressed to support the effectiveness of a liquidity forecasting framework, including issues related to:
  • Processing of the Government’s financial transactions.
  • Management of Government cash balances.
  • Market fragmentation and limited interbank market functioning implied by the report’s assessment.

Recommendations (mission’s proposals)

• Streamline the processing of the Government’s financial transactions and cash balances to support the liquidity forecasting framework.
• Take ambitious steps toward setting up a liquidity management framework, given the volatility of autonomous factors and money market fragmentation.
• Build RMA capacity for liquidity forecasting and liquidity management to improve monetary policy implementation and transmission.

Subject and keywords (as reported)

• Subject areas: Asset and liability management, Banking, Financial markets, Fiscal accounting and reporting, Liquidity, Liquidity forecasting, Liquidity management, Money markets, Public financial management (PFM)
• Keywords include: aggregate liquidity condition, aggregate liquidity situation, autonomous factor, commercial bank, CR, excess reserves, interbank market, ISCR, Liquidity, liquidity condition, liquidity-providing facility, RMA authorities, RMA function, RMA staff, RMA's liquidity forecasting

Bhutan: Technical Assistance Report—Royal Monetary Authority—Steps Towards a Liquidity Forecasting and Management Framework (April 30, 2019).

Content in this bundle

• Preface — SARTTAC mission to Thimphu
  • Preface — SARTTAC mission to Thimphu (Markdown version)
  • Preface — SARTTAC mission to Thimphu (PDF)