## How to Set Up A Cash Buffer: A Practical Guide to Developing and Implementing a Cash Buffer Policy

_IMF How To Notes, December 21, 2020_

## Source details

**Canonical URL:** [How to Set Up A Cash Buffer: A Practical Guide to Developing and Implementing a Cash Buffer Policy](https://www.imf.org/en/publications/fiscal-affairs-department-how-to-notes/issues/2020/12/21/how-to-set-up-a-cash-buffer-a-practical-guide-to-developing-and-implementing-a-cash-buffer-49955)

## Other formats

- [Markdown version](/en/publications/fiscal-affairs-department-how-to-notes/issues/2020/12/21/how-to-set-up-a-cash-buffer-a-practical-guide-to-developing-and-implementing-a-cash-buffer-49955/index.md)
- [Structured JSON version](/en/publications/fiscal-affairs-department-how-to-notes/issues/2020/12/21/how-to-set-up-a-cash-buffer-a-practical-guide-to-developing-and-implementing-a-cash-buffer-49955/index.json)
- [Bundle manifest](/en/publications/fiscal-affairs-department-how-to-notes/issues/2020/12/21/how-to-set-up-a-cash-buffer-a-practical-guide-to-developing-and-implementing-a-cash-buffer-49955/bundle-manifest.json)

## Bibliographic details
- Authors: Yasemin Hurcan, Emre Balibek, Fatoş Koç
- Published: December 21, 2020
- Series: IMF How To Notes
- DOI: https://doi.org/10.5089/9781513563848.061

---

### Role and rationale for a cash buffer
- Maintains liquidity in government bank accounts during budget execution when there is considerable cash flow volatility and timing mismatches concerning revenue collections and expenditures, debt inflows, and debt service.
- From a debt management perspective, holding an appropriate level of cash balance serves to mitigate funding risk.
- Effective cash balance management is especially critical when there is heightened uncertainty about the magnitude and timing of cash flows, exemplified by the coronavirus disease (COVID-19) pandemic.

### Practical approaches to developing a cash buffer policy
- Discusses the role of the cash buffer for managing cash balances.
- Offers practical approaches to developing a policy framework that balance:
  - Risk mitigation objectives.
  - The cost of carry (opportunity cost of holding cash).

### Key findings and themes
- Cash balance management aims to address timing mismatches and ensure availability of liquidity.
- A cash buffer is both a cash management and a debt management tool.
- The policy framework should explicitly consider trade-offs between reducing funding risk and the cost of holding cash.

### Publication and metadata (as stated in the source)
- Authors: Yasemin Hurcan, Emre Balibek, Fatoş Koç
- Date: December 21, 2020
- Pages: 31
- Volume: 2020
- Issue: 004
- Series: How-To Note No. 2020/004
- DOI: https://doi.org/10.5089/9781513563848.061
- Stock No: HTNEA2020004
- ISBN: 9781513563848
- ISSN: 2522-7912
- Citation preview (format: Chicago): Yasemin Hurcan, Emre Balibek, and Fatoş Koç. "How to Set Up A Cash Buffer: A Practical Guide to Developing and Implementing a Cash Buffer Policy", IMF How To Notes 2020, 004 (2020), accessed 6/25/2026, https://doi.org/10.5089/9781513563848.061

*International Monetary Fund — How To Note No. 2020/004*

---

## Content in this bundle

- **How to Set Up a Cash Buffer: A Practical Guide to Developing and Implementing a Cash Buffer Policy**
  - [How to Set Up a Cash Buffer: A Practical Guide to Developing and Implementing a Cash Buffer Policy (Markdown version)](/-/media/files/publications/howtonotes/2020/english/htnea2020004.pdf.md){rel="alternate" type="text/markdown"}
  - [How to Set Up a Cash Buffer: A Practical Guide to Developing and Implementing a Cash Buffer Policy (PDF)](/-/media/files/publications/howtonotes/2020/english/htnea2020004.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/fiscal-affairs-department-how-to-notes/issues/2020/12/21/how-to-set-up-a-cash-buffer-a-practical-guide-to-developing-and-implementing-a-cash-buffer-49955_