The borrowing requirement in 2003
The Debt Office's forecast of the borrowing requirement in 2003 indicates a deficit in central government payments of SEK 45 billion, which is SEK 18 billion more than in our June forecast. The borrowing requirement during the period June, July, August and September was SEK 10 billion larger than previously estimated. The Debt Office believes that the trend will remain weak for the rest of this year. We anticipate lower tax payments and larger disbursements of refunds for excess tax payments in December.
The Debt Office's forecast of the borrowing requirement in 2003 indicates a deficit in central government payments of SEK 45 billion, which is SEK 18 billion more than in our June forecast. The borrowing requirement during the period June, July, August and September was SEK 10 billion larger than previously estimated. The Debt Office believes that the trend will remain weak for the rest of this year. We anticipate lower tax payments and larger disbursements of refunds for excess tax payments in December.
The borrowing requirement in 2004
During 2004, the deficit will climb to an estimated SEK 56 billion. This is SEK 15 billion more than in our previous forecast. Adjusted for nonrecurring payments, however, the borrowing requirement will be somewhat lower during 2004 than in 2003.
During 2004, the deficit will climb to an estimated SEK 56 billion. This is SEK 15 billion more than in our previous forecast. Adjusted for nonrecurring payments, however, the borrowing requirement will be somewhat lower during 2004 than in 2003.
Funding
The 17-year nominal bond loan that is to be introduced in January 2004 will have the same maturity date as one of the Debt Office's inflation-linked bonds. During 2004 the Debt Office will introduce a new 5-and 10-year benchmark bond loans.
The 17-year nominal bond loan that is to be introduced in January 2004 will have the same maturity date as one of the Debt Office's inflation-linked bonds. During 2004 the Debt Office will introduce a new 5-and 10-year benchmark bond loans.
The Debt Office expects to continue issuing SEK 15 billion worth of inflation-linked bonds per year. The Debt Office is amortising the foreign currency debt at an annual pace of SEK 25 billion during 2003 and anticipates an equally large amortisation during 2004. This implies that foreign currency borrowing will be limited to SEK 20 billion this year and SEK 8 billion during 2004.
We expect to carry out interest rate swaps at an annual pace of about SEK 30 billion, mostly in order to replace borrowing in Treasury bills.
Gains of SEK 4.5 billion in strategic EUR/USD position
Late in 2000, the Debt Office believed that the US dollar was sharply overvalued. At that time, the Board of the Debt Office decided to change the allocation between dollars and euros, respectively, in the foreign currency debt by the equivalent of SEK 24 billion. When the dollar became weaker, the Debt Office was gradually able to realise exchange gains. The Debt Office closed its position in September 2003, and its total gains amounted to SEK 4.5 billion. This means that the central government's interest costs diminished by an equivalent sum.
Late in 2000, the Debt Office believed that the US dollar was sharply overvalued. At that time, the Board of the Debt Office decided to change the allocation between dollars and euros, respectively, in the foreign currency debt by the equivalent of SEK 24 billion. When the dollar became weaker, the Debt Office was gradually able to realise exchange gains. The Debt Office closed its position in September 2003, and its total gains amounted to SEK 4.5 billion. This means that the central government's interest costs diminished by an equivalent sum.
Surplus in the pension system
The official target for savings in the public sector, including the publicly administered pension system, is a surplus of 2 per cent of GDP over a business cycle. According to the Debt Office's forecast, this year the central government budget has a deficit equal to 1.9 per cent of GDP. In other words, public financial savings are limited to the pension system. To ensure stronger central government finances when the strains on the budget increase due to Sweden's ageing population, there are reasons to lower the central government debt. Thomas Franzén, Director General of the Swedish National Debt Office, remarks that a target of balanced central government finances over a business cycle would increase safety margins.
The official target for savings in the public sector, including the publicly administered pension system, is a surplus of 2 per cent of GDP over a business cycle. According to the Debt Office's forecast, this year the central government budget has a deficit equal to 1.9 per cent of GDP. In other words, public financial savings are limited to the pension system. To ensure stronger central government finances when the strains on the budget increase due to Sweden's ageing population, there are reasons to lower the central government debt. Thomas Franzén, Director General of the Swedish National Debt Office, remarks that a target of balanced central government finances over a business cycle would increase safety margins.
The Swedish National Debt Office is holding a press conference today, October 22, at 10.30 a.m. at Norrlandsgatan 15, Stockholm. The Debt Office's report Central Government - Forecast and analysis, 2003:3 is also available.
For further information, please contact:
Thomas Franzén, Director General, telephone +46 8-613 4651
Charlotte Lundberg, Head of Debt Management, +46 8-613 4647
Gunnar Forsling, Senior Economist , +46 8-613 4535