In 2006, the central government borrowing requirement is estimated at SEK 5 billion. We estimate that the borrowing requirement for 2007 will be SEK - 8 billion, i.e. a budget surplus. Our basic view of the development of central government finances in the coming period has not changed since the previous forecast. The issue volume in nominal government bonds is being retained unchanged at SEK 3 billion per auction. We estimate an increase to SEK 3.5 billion from the turn of the year. On 21 June, the Debt Office is resuming an annual amortisation pace of SEK 25 billion of the foreign currency debt.
Forecast for 2006
The borrowing requirement forecast for 2006 entails an increase of SEK 21 billion compared with our forecast in March. This is a result of the Premium Pension Authority (PPM) bringing forward payment of premium pension funds of SEK 25 billion from January 2007 to December 2006. This increase is of little importance for funding of the central government debt since it is only a matter of moving a payment from one month to another. Adjusted for the PPM payment, our new forecast for the borrowing requirement for 2006 would have entailed a reduction from SEK - 16 billion to SEK - 20 billion (i.e. a larger budget surplus), despite interest payments on central government debt increasing by SEK 5 billion. This is primarily due to tax revenue and dividends on state-owned shares being slightly higher than expected.
The central government debt is expected to total SEK 1,288 billion at the end of 2006.
Forecast for 2007
The forecast for 2007 is in principle unchanged. Increasing tax and dividend income compensates for some new expenditure in the Spring Fiscal Policy Bill. The basic assumptions on the development of central government finances, which we made in March, are thus maintained. The level of economic activity continues to be strong with rising employment and consumption. Corporate taxes are expected to be slightly higher than in the previous forecast, although the strong rate of increase which we have seen in recent years is slackening.
The central government debt is expected to total SEK 1,279 billion at the end of 2007.
Unchanged bond borrowing and higher pace of amortisation on foreign currency debt
The issue volume of nominal government bonds is being kept unchanged at SEK 3 billion per auction. We expect an increase to SEK 3.5 billion from the turn of the year. In all, borrowing in nominal government bonds is thus expected to be SEK 64 and SEK 81 billion respectively in 2006 and 2007.
Bond borrowing will continue to be distributed in such a way that half will be made in the ten-year maturity. A new ten-year bond will be issued on 13 September. In addition, we expect to make individual issues in the two- and fifteen-year segments, and the remaining issues in the five-year maturity.
Borrowing in T-bills is expected to decrease by SEK 18 billion in 2006 compared with the previous year. The reduction is lower compared with the previous forecast. In 2006, we also expect to continue to make swaps corresponding to SEK 30 billion.
Inflation-linked bond borrowing is expected to correspond to an annual pace of SEK 5-10 billion.
The Debt Office is resuming an amortisation pace of the foreign currency debt of SEK 25 billion on 21 June. From 11 November 2005 until now, the annual amortisation pace has been SEK 10 billion due to the weak krona exchange rate. If the higher amortisation pace is maintained for the rest of the year, SEK 18 billion of the foreign currency debt will be amortised during the 2006 calendar year. Foreign currency borrowing is expected to amount to SEK 44 billion in 2006 and SEK 28 billion in 2007.
Further information about the borrowing requirement can be obtained from:
Håkan Carlsson, Analyst, tel: +46-8 613 47 33
Tord Arvidsson, Analyst, tel: +46-8 613 47 53
Håkan Carlsson, Analyst, tel: +46-8 613 47 33
Tord Arvidsson, Analyst, tel: +46-8 613 47 53
Further information about funding can be obtained from:
Thomas Olofsson, Head of Funding, tel: +46-8 613 47 82
Thomas Olofsson, Head of Funding, tel: +46-8 613 47 82
