Proposal to let government borrowing exceed requirement

News 4 June 2014

The Swedish National Debt Office supports a proposal to let the central government borrow even when there is no immediate need for the money. Allowing the Debt Office to keep issuing government bonds even when central government debt is small and the budget shows a surplus could be seen as an insurance against higher borrowing costs in the future.

The Inquiry SOU 2014:8 proposes the introduction of a new borrowing purpose in the Budget Act, allowing the Debt Office to raise loans for the purpose of ensuring good borrowing preparedness after special authorisation from the Riksdag. The Debt Office, which is responsible for central government borrowing and debt management, welcomes the Inquiry and backs the proposal.

The Debt Office's mandate, as it is currently written in the Budget Act, is to not borrow more than necessary. However, there are sometimes good reasons to let borrowing exceed requirements:

• to manage short-term variations in central government payments
• in a situation where it is difficult to maintain a functioning market for government securities because of a small central government debt and low borrowing requirement
• when there is a budget surplus because of one-time items such as sales of government assets. 

The common factor in these three cases is that the cost of borrowing can be reduced by keeping the actual borrowing larger than the borrowing requirement, the Debt Office writes in a response to the Inquiry.

The Debt Office also backs the Inquiry's proposals to codify central government cash management, clarify certain parts of the Budget Act and rationalize the process for the government guidelines for debt management.

The Debt Office's response to the Inquiry (only in Swedish)

The Inquiry SOU 2014:8 on the Riksdag's website (summary in English)

For more information, please contact:
Unni Jerndal, Head of Communication, +46 8 613 45 96