Treasury Cash Balance, Treasury Cash Deficit and Government Net Borrowing from Central Bank

Abstract

Although much attention has been given to it in popular discussion, Treasury cash balance itself is not a good indicator of the Treasury financial position. Since cash balance is maintained mainly for transaction purpose, and since deposit with the Bank of Thailand, which is the bulk of the total cash balance, does not earn any interest income, it is only logical that the overall cash balance be kept to a minimum level. A persistently large amount of balance reflects an inefficient fund management rather than sound Treasury financial position. The concept of Treasury cash deficit and the means of financing such deficit (especially borrowings from the Central Bank) are more appropriate for the purpose of analyzing government financial position and impact of government operations on money creation.