Cash and debt management

Cash and debt management are closely interconnected within the government and are crucial for the efficient execution of the government’s budget. In Aruba, these functions are carried out by a unit within the Department of Finance, namely the Treasury.

The typical division between the Cash Management Unit (CMU) and Debt Management Office (DMO) does not exist in Aruba. These functions are combined within a single unit that ensures the government always has sufficient liquidity to meet its obligations on time and in full.

With efficiency in mind, the government has deliberately chosen for an integrated organizational structure, allowing for optimal coordination between cash and debt management. This approach promotes synergy, reduces duplication of tasks, and contributes to streamlined decision-making and execution.

The Government of Aruba has access to various financial instruments, which can be divided into short-term and long-term resources. The instruments for regular working capital management as well as the domestic money market are relatively limited, which requires dynamic coordination with the domestic financial sector.

Glossary

  • Short-term resources: Liquid or easily liquidable financial instruments used for cash management with a term not exceeding 12 months.
  • Long-term resources: Financial instruments used for debt management with a term longer than 12 months.
  • Debt Management Office (DMO): The DMO is responsible for managing the government debt. Central to debt management are long-term instruments such as government bonds and bank loans. The Government of Aruba has a 20-year planning horizon for the use of such instruments.
  • Cash Management Unit (CMU): The CMU is responsible for managing short-term financing for liquidity shortages (also known as working capital). The planning horizon is no longer than one year.
  • Maturity schedule: The risks associated with a relatively high debt-ratio are mitigated through optimal distribution of loan repayment obligations. By strategically spreading loan repayments, the capacity to meet repayment commitments is strengthened, and thereby controlling the refinancing risk. The maturity schedule is the instrument used by the Department of Finance to prevent a concentration of repayments in any single year.
  • Debt composition: The composition of the debt reflects dynamic changes in the market and the strategic direction of debt management. This component shows how the Department of Finance proactively responds to both local and international economic conditions, geopolitical developments, and interest rate developments. By carefully monitoring and integrating these factors into debt management, the government aims to achieve an optimal, cost-efficient, and risk-conscious debt structure.
  • Debt development: The evolution of national debt over the years. It reflects the dynamic relationship between debt policy and debt management - between the decision to use debt as a financing instrument for budget execution and, on the other hand, the timing of issuance, the capital market, and the instruments to be used.

Debt statistics per quarter