Guidelines for central government debt management in 2020
Today the Government adopted guidelines for the Debt Office’s management of the central government debt. The foreign currency exposure of the central government debt is to be unchanged pending the Debt Office’s analysis of the strategic foreign currency exposure of the central government debt.
The steering of term to maturity of the krona debt and the foreign currency debt are merged in a combined maturity target for the central government debt. The steering of the composition of the krona debt is kept unchanged.
Guidelines for 2020 – The composition of the central government debt is to be steered towards:
- Unchanged foreign currency exposure
- Inflation-linked krona debt: 20 per cent (over the long term)
- The nominal krona debt is to make up the remaining share
- The term to maturity of the central government debt is to be steered towards 3.5–6 years.
The Government considers that the reduction of the foreign currency exposure of the central government debt should stop pending the Debt Office’s analysis of the strategic foreign currency exposure of the central government debt. One reason for doing so is that this analysis may show that there is reason to review the previous focus on reducing this exposure at the previously stated rate. In 2015 the Government decided to gradually reduce the foreign currency exposure over the next few years, and since then the foreign currency debt has been halved. The risk in retaining the present foreign currency exposure is assessed as very limited. On account of developments in financial markets in recent years, it is appropriate to analyse the strategic distribution of the central government debt with respect to foreign currency exposure.
To refine its steering Government has gradually adjusted term-to-maturity steering in its guideline’s decisions in recent years. To clarify the overall level of risk and provide a better overview of the interest rate refixing risk in the debt, a further adjustment is made and a combined maturity target for the central government debt is introduced in the guidelines for 2020–2023. Term to maturity is one of several factors that affect the expected cost and risk in the central government debt.
The Government sees no reason to alter the steering of the composition of the krona debt. With the present guidelines the stock of inflation-linked bonds will decrease substantially, and the Debt Office’s analysis shows no distinct systematic differences in cost. The Government therefore considers that the share of inflation-linked bonds should be unchanged.
The objective of central government debt policy is for the central government debt to be managed so as to minimise the cost of the debt over the long-term, while taking account of the risk in its management. The debt has to be managed within the framework of monetary policy requirements.
Responsibility for the objective is divided between the Government and the Debt Office. The Government steers the overall level of risk in its annual guidelines’ decisions, while the Debt Office is responsible for conducting borrowing and management within the framework of the guidelines and in accordance with the objective. This basis for this decision includes the National Debt Office’s proposed guidelines.
Achievement of the objective is reported to the Riksdag (Swedish Parliament) in a government communication every other year. The next evaluation will be presented to the Riksdag by 25 April 2020.
Press Secretary to the Minister for Financial Markets and Housing, Per Bolund
Phone (switchboard) +46 8 405 10 00
Mobile +46 73 078 52 24
email to Frida Färlin
Deputy Head of Division/Ministry of Finance
Phone +46 8 405 36 34
email to Johanna Demander, via senior registry clerk