The goal of central government debt management is to ensure the availability of financial resources for the refinancing of central government debt, budget deficit financing and maintenance of the financial resources reserve at the lowest possible costs while hedging financial risks and taking the developments of the Latvian economy, the Latvian capital market and the entire financial system into account, which is directed toward the medium term introduction of the euro in Latvia.
The Central Government Debt Management Strategy has been prepared on the basis of the following assumptions:
- as planned, Latvia will join the Eurozone on 1st January 2014 resulting in the integration of the Latvian financial market into the single financial market of the euro area;
- Latvia will continue to implement sustainable fiscal policy in the medium term to ensure the implementation of the fiscal policy principles in the budget planning as stated in the Fiscal discipline law;
- the Eurozone will continue its existence and the measures aimed to strengthen the economic and fiscal integration of the Eurozone countries will be implemented in the medium term;
- the long term credit rating of Latvia will not be downgraded;
- the institutional investors base in the Latvian domestic financial market will be maintained and broadened in the medium term;
counterparties will offer borrowing and financial risk hedging tools at acceptable terms;
- the Bank of Latvia will ensure the stability of the national currency (LVL) and in the case of transition to the euro it will be introduced in Latvia at the current adjusted LVL/EUR rate of 0.702804;
- borrowing commitments of local governments will be monitored and over the following years the local governments will continue to borrow mostly through the Treasury;
- operation of the fiscal risk management framework will be ensured and the contingent liabilities’ supervision framework will be enhanced.
In order to comply with best international practice, a distinction has been made within the framework of central government debt management between central government debt portfolio management and central government borrowing management.
Debt Portfolio Management
Debt portfolio management activities and measurements are performed on a daily basis. Analysis of the accumulated information on debt management activities and their efficiency is done on a monthly and an annual basis. Data on fulfilment of the stretegy can be found in Quarterly Bulletin on Debt Management as well as in Annual Report on Government Debt Management.