2026 Perspectives for the Public Sector

Liquidity Objectives and Strategies for Public Sector Segments Segment Key Objectives and Constraints Emerging Strategies Central Banks • Wider lens to manage liquidity for the entire financial system, implement monetary policy to ensure financial stability • Preserve price stability, manage FX reserves, buffer shocks • Need for ready access to cash or high liquidity assets • May also act as agent to the government in placements and payments • Diversification of liquidity tools: Greater use of outright reverse repos and varying maturity open market operations. Central Banks have expanded use of reverse repo agreements tomanage liquidity better 2 • Manage reserve requirements and regulatory tweaks: Central Banks have lowered secondary reserve requirements to free up liquidity for banks 3 • FX/cross-border regulation to reduce unmanaged outflows and stabilize domestic currency liquidity, such as tightening regulation of cross-border local currency financing 4 Development Banks • Liquidity management to support long-termmandates, such as economic growth, infrastructure, and sustainability goals • Balance investment in long-term, illiquid projects with short-term obligations and unexpected financial stresses • Often required to maintain high liquidity for lending windows, counterparty obligations or credit ratings preservation • Diversification of funding resources to mitigate reliance on any single source • Matching the maturity of assets (long-term loans) with the maturity of liability (funding resources) to minimize liquidity mismatch risk • Holding liquid assets to maintain a buffer of high- quality, liquid assets; such as cash, bank deposits, short-term government bonds to meet near-term obligations or unexpected events • Targeted liquidity release tied to development goals: deploy liquidity freed through reserve requirement cuts to support housing or infrastructure projects 5 • Risk and stress testing of liquidity to guard against external shocks Pension Funds • Manage liquidity to meet future and timely present benefit payments to retirees, while maximizing returns on its long-term investments • Long time horizons with periodic liquidity needs (payouts, liabilities) • Expectation to deliver and maximize stable returns • Regulatory or political constraints around asset allocations and liquidity • Strategy depends on fund’s maturity; mature funds with more retirees and outflows need higher liquidity than younger funds with greater inflows • Strategic asset allocation by holding a diversified portfolio with varying degrees of liquidity ranging from cash and bonds to private equity and real estate • Creating liquidity buffers such as specific cash reserves or a “liquidity bank account” to cover expected benefit payments for a set period • Use of semi liquid or open-ended alternative funds to facilitate use of redemption windows for part of alternative and illiquid exposure and ensure greater optionality 6 2 https://www.straitstimes.com/business/chinas-central-bank-launches-new-policy-tool-to-manage-liquidity 3 https://www.channelnewsasia.com/business/indonesia-central-bank-give-nearly-5-billion-flexibility-banks-manage-liquidity-5153181 4 https://www.reuters.com/sustainability/boards-policy-regulation/china-central-bank-better-regulate-cross-border-yuan-financing-between-banks-2025-09-12/ 5 https://www.channelnewsasia.com/business/bank-indonesia-says-liquidity-measure-will-support-government-housing-goal-4932516 6 https://www.theasset .com/article/53520/rising-demand-for-semi-liquid-open-ended-funds-for-alternatives 16 Strategic Stewardship in Uncertain Geopolitical and Economic Times