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Sovereign Asset and Liabilities Management

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Advice for emerging market sovereigns on transforming excessive capital inflows into a superior sovereign balance sheet structure  

Traditionally, large capital inflows are viewed as a macroeconomic management headache for emerging markets yet we would argue that current conditions provide a once in a lifetime opportunity to restructure the consolidated (central bank and treasury) sovereign balance sheet. Taking an integrated approach to sovereign balance sheet management will reveal gains from coordinated management of assets and liabilities while—if properly structured—clarify and strengthen the independence of both the central bank and treasury. Having seen this issue from both the Ministry of Finance or Treasury point of view and the Central Bank point of view, we can provide unique insights into ameliorating coordination conflicts that most advisors who come with a bias toward one side or the other simply cannot. We have provided advice on this issue on a bilateral basis in both Asia and Latin America and to regional groupings of clients through seminar formats.