The Swedish National Debt Office lends 100 billion to the Riksbank

Press release 22 January 2013

The Swedish National Debt Office will lend SEK 100 billion to the Riksbank in order to strengthen foreign exchange reserves. The Swedish economy is so strong that this will not conflict with the government’s regular borrowing. However, the Swedish National Debt Office questions the Riksbank’s analysis.

- The entire amount will be borrowed using bonds and short-term securities in foreign currencies. The National Debt Office's borrowing in Swedish kronor will thus not be affected by the Riksbank's lending, says the Debt Office Director General, Bo Lundgren.

Borrowing will focus on benchmark bonds in the capital market with maturities of up to five years and initially also commercial paper. The currencies will likely be dollar and euro. The pace of bond issuance and choice of maturities and currencies will be based on market conditions.

The total on-lending to the Riksbank, including this new lending to the Riksbank, will be SEK 200 billion, which is equivalent to approximately 5 per cent of the GDP. The budget deficit in 2013 will be adjusted from SEK 56 to 156 billion. The reported central government debt will also increase by the same amount, while the re-lending entails a strengthening of the foreign exchange reserve. Hence, the new borrowing does not entail a weakening of government finances.

A new regulatory framework is needed

The National Debt Office's opinion, however, is that it is wrong that a decision by a public authority can increase the government debt by three digit billion amounts without a clear framework. This decision-making undermines the parliament's control over the government finances. Current rules provide that the National Debt Office shall approve requests by the Riksbank as long as new lending to the Riksbank does not affect Sweden's ability to finance other central government expenditures. Strong government finances means that no such conflict exists.

- However, strong government finances also entail that the National Debt Office does not share the Riksbank's concerns that our ability to fund may deteriorate, says Bo Lundgren. We expect to be able to complete our assignment to finance government activities also in the future, including if needed to funding for the foreign exchange reserve.

A regime where the National Debt Office borrows foreign exchange only once the Riksbank has needed to use the foreign exchange reserve is a more secure and cheaper solution to the government on the whole, than one where funds are locked in the foreign exchange reserve in advance. The National Debt Office therefore looks forward to the review of rules which a government investigation will submit at the end of January.

Borrowing to satisfy the Riksbank's need for foreign exchange reserves

For further information, please contact:
Press contact, Linda Rudberg + 46 8 613 45 38
Market issues Thomas Olofsson, Head of Debt Management + 46 8 613 47 82