2026 Perspectives for the Public Sector

Mark Zdunek Liquidity and Investments Product Solutions Dustin Ling Public Sector, Global Strategic Stewardship in Uncertain Geopolitical and Economic Times: Maximizing Liquidity and Impact in the Public and Philanthropic Sectors T he global economic landscape is undergoing a profound transformation, characterized by persistent inflationary pressures, shifting monetary policies, and an intricate web of geopolitical and tariff-related uncertainties. This dynamic environment presents both challenges and opportunities for diverse organizations, ranging from public sector entities managing funds and safeguarding missions to for-profit enterprises seeking competitive advantage and optimized yields. Although their objectives may differ, a unifying imperative exists: the need to uphold safety and soundness, strategically optimize investment performance, and embrace automation at a time when efficiency has become a transformational theme. Navigating the Shifting Liquidity and Risk Landscape The era of abundant liquidity, ushered in during the pandemic, has given way to quantitative tightening and higher interest rates. Central banks, in their efforts to combat inflation, have fundamentally altered the cost of capital and the dynamics of investment. Now, as interest rates begin to decrease globally, treasurers must adapt quickly to this evolving environment. For all entities, this has translated into heightened scrutiny of treasury management. Political tensions and tariffs further contribute to volatility, disrupting supply chains and investment flows, and necessitating robust risk assessment and diversified strategies. Traditional approaches may prove insufficient in this climate. Greater emphasis is being placed on managing counterparty risk and ensuring sufficient liquidity, even as investment performance remains a critical driver. Regulatory changes, such as newmoney market fund (MMF) requirements involving higher liquidity buffers and potential fees, underscore the importance of adaptability in investment vehicle selection. Citi Perspectives for the Public Sector 13