Higher tax income reduces the borrowing requirement
The forecast for this year's borrowing requirement is being adjusted downwards by SEK 21 billion and now amounts to SEK 10 billion. The main explanation is that larger tax income from companies is expected than previously. We have probably underestimated company profits for 2004 and 2005 in our previous forecasts. Value-added tax in-payments are also expected to increase. Other explanations are higher customs income, reduced disbursements from authorities and lower lending to authorities.
The borrowing requirement for 2006 is expected to be SEK 26 billion, which is an improvement of SEK 15 billion compared with the June forecast. In this case too, the improvement is mainly explained by higher tax income from companies. Customs income is also expected to increase.
Despite a relatively good upswing next year, the borrowing requirement is expected to increase by SEK 16 billion compared with this year. This is because expenditure is increasing at a faster rate than tax income, among other things, due to tax cuts in connection with the final phase of the income tax reform and the investment in job creation. The central government debt is estimated to total around 49 per cent of GDP at the end of 2005 and to approximately 48 per cent at the end of 2006.
Increase of the issue volume postponed
The previously advertised increase of the issue volume in nominal government bonds to SEK 3 billion at the end of the year is being postponed to June 2006. The reason is that we have adjusted the forecast of the net borrowing requirement downwards compared with the previous forecast. The issue volume is therefore being left unchanged at SEK 2 billion per auction. In all, bond borrowing is expected to total SEK 56 billion this year.
The issues of nominal government bonds have been allocated evenly during 2005 between the two, five and ten-year loans. In 2006, the issues will be allocated so that half are made in the ten-year bond. Only a few issues will be made of the two and fifteen-year maturities respectively while the rest will be made in the five-year segment.
T-bill borrowing is largely unchanged in 2005 compared with 2004, which is a downward adjustment compared with the previous forecast. During 2006, funding with T-bills is expected to increase by SEK 31 billion compared with 2005.
We estimate that we will make interest-rate swaps during 2006 for approximately SEK 45 billion, which is an increase of SEK 5 billion compared with 2005.
In the inflation-linked bond market, we expect to continue to issue inflation-linked bonds at an annual pace of SEK 15 billion. The use of flexible issue volumes at auctions is being abandoned and we will in future comply with a predetermined internal issue timetable to a greater extent than before.
The foreign currency debt is being amortised at an annual pace of SEK 25 billion. In 2005 and 2006, foreign currency borrowing is estimated to total SEK 28 and 30 billion respectively.
For additional information please contact: Tord Arvidsson, +46-8 613 47 53, on the borrowing requirement.
Thomas Olofsson, +46 8 613 47 82, on funding.
See attached link to the report:
