Ministry of Finance updates the government debt management strategy

The aim of updating the strategy is to reduce debt management risks and simplify operations.

The Ministry of Finance has updated the government debt management strategy due to changes in the operating environment of debt management. The central government’s risk-bearing capacity has declined as its liabilities have increased and economic growth has been weak. The regulatory environment has changed after the financial crisis, and general economic uncertainty is high. 

The central government will reduce interest rate risk

The updates to the strategy are aimed at reducing debt management risks and simplifying operations. The key change is to gradually reduce the interest rate risk associated with debt.

The change will: 

• provide protection against fluctuations in interest rates
• increase the predictability of interest expenditure
• support the planning of economic policy.

Lengthening the average fixing of the central government debt will be achieved under the existing borrowing strategy by no longer entering into new interest rate derivatives.

The Ministry of Finance will also revise the debt management guidelines with regard to the management of the central government’s liquidity risk and the credit risk of cash investments. The changes support the central government’s liquidity management. 

The changes in the debt management guidelines are based on background reports prepared by various working groups during the period 2021–2023. 

The Ministry of Finance sets out the strategy and the State Treasury carries out the operations

Government debt management refers to managing central government borrowing, the investment of central government cash funds and the associated risks. In the debt management guidelines for central government on-budget finances, the Ministry of Finance sets out the debt management strategy according to which the State Treasury carries out operational debt management tasks.

The Ministry of Finance developed the debt management strategy in its current form in the early 2000s. The Ministry has updated the government debt management guidelines on several occasions over the years, but the key risk choices have remained substantially unchanged. The operating environment continues to change, making it necessary to reassess the risk choices.

Inquiries:
Pauli Kariniemi, Director-General, tel. +358 2955 30210, pauli.kariniemi(at)gov.fi