Forecast for 2002
The Debt Office monitors the central government’s incoming and outgoing payments on a daily basis, so that it can fund the government’s borrowing requirement or invest surpluses each day. This also provides continuous material for the Debt Office’s forecast.
The Debt Office monitors the central government’s incoming and outgoing payments on a daily basis, so that it can fund the government’s borrowing requirement or invest surpluses each day. This also provides continuous material for the Debt Office’s forecast.
In 2002, tax revenues will be SEK 10 billion larger than in the previous forecast, which was published in February. However, the Debt Office is no longer expecting the central government to divest any assets during the year. Net lending to government agencies will be unchanged at about SEK 2 billion. Interest payments on the central government debt are estimated at SEK 59 billion. This is SEK 5 billion lower than in the last forecast. The surplus is thus projected to reach SEK 25 billion (see table).
Forecast for 2003
For the first time since 1997, the central government budget is expected to show a deficit in 2003. This deficit is estimated at SEK 12 billion. Even though the growth in the Swedish economy is expected to be higher, the budget balance will thus deteriorate by SEK 37 billion compared to 2002. Adjusted for nonrecurring payments, the 2003 budget will show a deficit of SEK 17 billion.
For the first time since 1997, the central government budget is expected to show a deficit in 2003. This deficit is estimated at SEK 12 billion. Even though the growth in the Swedish economy is expected to be higher, the budget balance will thus deteriorate by SEK 37 billion compared to 2002. Adjusted for nonrecurring payments, the 2003 budget will show a deficit of SEK 17 billion.
Local governments will receive larger disbursements from the central government, since their tax revenues will increase. The cost of sickness benefit and higher unemployment benefits will lead to larger disbursements. Interest payments on the central government debt are projected to be as large as this year, SEK 59 billion.
Funding
The central government’s funding requirement in the form of bonds and foreign currency debt is assumed to reach SEK 72 billion in 2002. Next year it will climb to about SEK 104 billion. Issue volumes of nominal Treasury bonds need to increase to SEK 3 billion per auction starting in October 2002 and perhaps be raised to SEK 4 billion per auction at the turn of the year.
The central government’s funding requirement in the form of bonds and foreign currency debt is assumed to reach SEK 72 billion in 2002. Next year it will climb to about SEK 104 billion. Issue volumes of nominal Treasury bonds need to increase to SEK 3 billion per auction starting in October 2002 and perhaps be raised to SEK 4 billion per auction at the turn of the year.
The demand for inflation-linked bonds rose during the spring. In the judgement of the Debt Office, it is possible to issue inflation-linked bonds at an annual pace of SEK 10 billion.
At present, the Debt Office is not amortising foreign currency debt, since the Swedish krona is perceived as too weak. The government’s preliminary guidelines for 2003 say that the pace of amortisation should be SEK 25 billion. Thus only SEK 22 billion worth of foreign currency loans will need to be refinanced. This means that no direct foreign currency loans will need to be raised during 2003 and that the Debt Office will decrease the volume of currency swaps.
The central government debt
During 2002, the central government debt will increase by SEK 18 billion to SEK 1,175 billion, despite a forecasted budget surplus of SEK 25 billion. The reason is that the account balances of the Swedish Nuclear Waste Fund, the Deposit Guarantee Board and the Premium Pension Authority at the Debt Office will be transformed into Treasury bonds on July 1, 2002. This will increase reported government debt. The transaction will not affect the budget balance, nor will it affect the consolidated government debt. It signifies one type of debt being exchanged for another. The central government debt is expected to be SEK 1,187 billion at the end of 2003. This increase corresponds to the expected budget deficit.
During 2002, the central government debt will increase by SEK 18 billion to SEK 1,175 billion, despite a forecasted budget surplus of SEK 25 billion. The reason is that the account balances of the Swedish Nuclear Waste Fund, the Deposit Guarantee Board and the Premium Pension Authority at the Debt Office will be transformed into Treasury bonds on July 1, 2002. This will increase reported government debt. The transaction will not affect the budget balance, nor will it affect the consolidated government debt. It signifies one type of debt being exchanged for another. The central government debt is expected to be SEK 1,187 billion at the end of 2003. This increase corresponds to the expected budget deficit.
Central Government Borrowing: Forecast and Analysis, issue 2002:2
The report also contains a summary of a survey on inflation-linked bonds, conducted by an external financial consultant, Malin Björkmo. Starting on July 1, 2002, the Riksbank (Swedish central bank) will no longer perform currency exchanges for the Debt Office. The consequences of this change are described in an article in the new report. Issue 2002:2 also contains a comparative description of various organisations’ forecasts of the central government borrowing requirement. The Market Information section provides current information and graphics on Swedish government debt, financial markets and the Swedish economy.
For more information, please contact:
Borrowing requirement and government debt: Lars Hörngren, Chief Economist, tel: +46-8-613 47 36
Funding: Thomas Olofsson, tel: +46-8-613 47 82
Erik Thedéen, Head of Debt Management, tel: +46-8-613 46 46
Funding: Thomas Olofsson, tel: +46-8-613 47 82
Erik Thedéen, Head of Debt Management, tel: +46-8-613 46 46
Central Government Borrowing – Forecast and Analysis and the study on inflation-linked bonds are available at www.rgk.se