Our first forecast for 2007 shows a surplus of SEK 6 billion. Despite the surplus in central government finances, the issue volume of nominal bonds is increasing and will be raised to SEK 3 billion in March 2006.
Tax revenue continues to increase in 2006
We expect the sharp improvement in central government finances that took place in 2005 to continue in 2006. Compared with our previous forecast, we have, in particular, revised tax revenue upwards. At the end of 2005, tax revenue was considerably higher than most analysts had predicted and this trend has continued in early 2006. Among other things this indicates that we have once again underestimated corporate taxes. We also estimate greater tax revenue from household capital gains in 2006. An improved labour market will also lead to increased consumption, benefiting central government finances in 2006 and 2007.
In 2007, we believe that the pace of increase of corporate taxes and other capital taxes will be lower. The budget balance will therefore remain at a surplus of SEK 6 billion.
The central government debt is estimated to total SEK 1,270 billion at the end of 2006 and SEK 1,264 billion at the end of 2007.
Increased issue volume in government bonds
Despite a reduction in the borrowing requirement, the issue volume in nominal government bonds is increasing as previously planned to SEK 3 billion per auction. This increase is being carried out on 22 March 2006.
During 2005, the duration of the nominal debt in krona was reduced in accordance with the government's decision. Bond borrowing was therefore less than the amount that corresponded to the medium-term borrowing requirement.
In all, bond borrowing is expected to be SEK 64 billion this year.
In 2006 and 2007, the issues will be allocated in such a way that just over half will be made in the ten-year bond. We expect to make a few issues in the two-year and fifteen-year maturities respectively and the rest in the five-year segment.
T-bill borrowing is being reduced in 2006 compared with last year. This is a downward adjustment compared with the previous forecast.
We expect to make interest rate swaps in the range of SEK 30 billion per year. This is a reduction of SEK 15 billion compared with 2005.
Smaller inflation-linked bond loans and SEK 10 billion in foreign currency amortisation in 2006.
The Debt Office is reducing borrowing in inflation-linked bonds from SEK 12 billion last year to SEK 5-10 billion in 2006.
The Debt Office is amortising the foreign currency debt at an annual pace of SEK 10 billion. Foreign currency borrowing is expected to amount to SEK 49 billion in 2006. Approximately SEK 25 billion will be borrowed by issuing bonds in foreign currency.
Tord Arvidsson, Analyst, tel: +46 (0)8-613 47 53
Håkan Carlsson, Analyst, tel: +46 (0)8-613 47 33
For information on funding, please contact:
Thomas Olofsson, Head of Funding,tel: +46 (0)8-613 47 82
