Guidelines for central government debt management in 2018
Today the Government adopted guidelines for the management of the central government debt. The maturity of the debt is extended slightly, which reduces the risk at a low cost. The steering of the composition of the debt is left unchanged.
"The cost advantage of short-term borrowing has continued to decrease. This is the reason why we are extended the maturity of the central government debt further;" says Minister for Financial Markets and Consumer Affairs Per Bolund.
Maturity is one of several factors that affect the expected cost of and risk in the central government debt. The analyses behind the guideline decisions made in recent years show that the cost advantage of short-term borrowing has decreased. This is why the maturity of the part of the central government debt that consists of nominal borrowing in Swedish kronor is being extended by 0.3 years for the third successive year. No changes are made to the maturity of the parts of the central government debt that consist of inflation-linked krona debt and foreign-currency debt. The steering of the composition of the central government debt is also left unchanged.
The present volume benchmark of SEK 70 billion for instruments with more than twelve years to maturity is removed and replaced by a maturity interval for the whole of the nominal krona debt. At present the maturity of the nominal krona debt is steered by a maturity interval for instruments with less than twelve years to maturity and by a volume benchmark for instruments with more than twelve years to maturity. Forms of wording about how to calculate the cost of the central government debt are also entered in the guidelines. This is to make it simpler to follow up the overall objective for the management of the central government debt.
Summary of the guidelines for 2018
The maturity (in terms of duration) of the three types of debt is to be steered towards:
- Foreign currency debt: 0‒1 years
- Inflation-linked krona debt: 6‒9 years old
- Nominal krona debt: 4.3‒5.5 years old.
The composition of the central government debt is to be steered towards:
- Foreign currency debt: Reduction of up to SEK 30 billion per year
- Inflation-linked krona debt: 20 per cent (in the long term)
- The nominal krona debt is to make up the remaining share.
The objective of central government debt policy is to manage the central government debt so as to minimise the long-term cost of the debt while taking account of the risk in its management. The debt is to be managed within the framework of monetary policy requirements.
Responsibility for attaining the objective is divided between the Government and the Debt Office. The Government steers the overall level of risk in its annual guideline decisions, while the Debt Office is responsible for borrowing and management being conducted within the framework of the guidelines and in accordance with the objective. This basis for the decision includes the National Debt Office's proposed guidelines. The Riksbank is also given the opportunity to comment on the Debt Office's proposed guidelines.
A report on the effectiveness of the management of the debt is made to the Riksdag (Swedish Parliament) every other year in the form of a government communication. The next evaluation will be presented to the Riksdag in April 2018.