Question

In which situations is it appropriate for a government to invest public funds? Describe the rationale and strategies involved for each of these situations.

Answer 1

In which situations is it appropriate for a government to invest public funds? Describe the rationale and strategies involved for each of these situations.

Government can invest public funds, but there are certain steps as to be followed by them before investing such public funds, those are usually recommended by Government Finance officers Association, and those are as stated below and can be considered as strategic approach and rationale approach for each of these situations,

• Government should review all the necessary laws, and regulations, they should abide by federal, state, local laws, practices and maintain entire compliance,
• Government should implement investment policy, such will include key guidelines and various information to be maintained or obeyed, and what should be consequences, further they should determine investment portfolio management Team and take support from External consultant
• They should determine which particular funds to be invested, those could include like operating funds, pension funds, asset funds, etc, they should create proper cash flow forecast , and understand the requirements for cash flow preparation, and the associated forecast,
• They should create an Investment leadership team, those investment leadership team will work on implementing strategic support, and identify appropriate and responsible people to manage such program, such leadership team could be senior official of governing body and could be from Finance, administration etc,
• They should deploy better risk management practices and ensure to achieve high return on each investment, Government should define the risk tolerance and risk taking capability, so which will help them to decide for investing public funds,