15 November 2012

Sweden: Guidelines for central government debt management in 2013

The Swedish government is maintaining a stronger focus on keeping risks down in the management of the debt. This is being done by supplementing the guidelines so that they state explicitly that the Debt Office is to take account of refinancing risks in the management of the central government debt.

The Government's forecast points to a declining central government debt. However, there is still great uncertainty about international economic developments. In addition, the long-term benchmark for the outstanding volume of instruments in nominal krona debt with maturities of more than twelve years is raised from SEK 60 to 70 billion.

"Sweden's central government finances are strong from both a historical and an international perspective. This is reflected in the historically low interest rates for Swedish government securities. Strong public finances and low costs for the central government debt create the scope for important long-term investments for jobs and growth", says Minister for Financial Markets Peter Norman.

The development of central government debt and an international comparison

At the start of 2012 the unconsolidated central government debt was SEK 1,158 billion. The debt is expected to fall to SEK 928 billion at the end of 2016. This means that as a proportion of GDP the debt will fall from 33 to 21 per cent.

Comparisons of the public indebtedness of EU countries use general government consolidated gross debt (the Maastricht debt). For Sweden, the Maastricht debt as a proportion of GDP was greatest in 1996 when this proportion was 73.3 per cent. Since then, this debt ratio has been almost halved to reach 38.4 per cent at the end of 2011. For the EU as a whole, the corresponding debt ratio was 82.5 per cent at the end of 2011, when it was 87.2 per cent for the euro area.

The overall objective of debt policy is to minimise the long-term cost of the central government debt while taking account of the risk in its management. The debt is to be managed within the framework of monetary policy requirements. The Government primarily steers the expected cost and risk of the central government debt by adopting guidelines for the composition and maturity of the debt. The Government adopts these guidelines following a proposal from the Debt Office. The Debt Office is responsible for the operational management of the central government debt within these guidelines. Central government borrowing and debt management are evaluated every second year in a government communication to the Riksdag (Swedish Parliament).

Guidelines for the composition of the central government debt:

• Foreign currency debt: 15 per cent
• Index-linked debt: 25 per cent
• Nominal krona debt: 60 per cent (residual)

Guidelines for maturities for the central government debt:

• Foreign currency debt: Interest rate refixing period of 0.125 years
• Index-linked debt: Interest rate refixing period of 7-10 years
• Nominal krona debt: - instruments with a maturity of up to 12 years: Interest rate refixing period of 2.7-3.2 years - instruments with a maturity of more than 12 years: Benchmark value SEK 70 billion

Full report

© Ministry of Finance, Sweden