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Debt Management

Planned borrowings in medium term

Created : 18.07.2017. Updated: 14.05.2018.

The total medium-term financing requirement is affected by the amount of borrowing and the level of government debt, and it is constituted by the amount of financing required for the execution of the state budget and refinancing the state debt.

Planned borrowing operations for covering the financing requreiment and the choice of most suitable financial instruments is set within the annually revised medium-term Funding plan, which is elaborated by the Treasury and approved by the Minister of Finance. The annual Law on the State Budget prescribes the maximum permissible amount of debt outstanding at the end of the year.

The planning aspects for medium-term borrowing planning takes on-board the strategic context in relation to the choice of borrowing conditions (borrowing time, currency, amount, maturity), which allows maintaining the flexibility, and positive effects towards the prospective diversification and further expansion of investor base.

As a largest share of debt consists from eurobond issuances, the financing should be secured well in advance thus reducing the risk of government debt refinancing. In the medium term, external borrowing instruments will continue to represent the most significant share of the overall borrowing volume. It is expected that borrowing in international financial markets will take place with benchmark size eurobonds in the main global capital markets. Simultaneously, in order to diversify investor base in the government debt portfolio, and provided that financial terms are adequate, the Treasury reviews the possibility to raise the funds partly also in niche capital markets.

Domestic securities are being continued to be issued due to strategic aspects for maintaining a regular supply to local investors. Supply volume is adjusted to the market capacity and tendencies of borrowing rates.

The main objective of the Primary dealer from its beginning in 2013 has been the development of domestic securities market, including the introduction of new borrowing instruments, expansion of investor base, ensuring the supply of liquid government securities in the market, as well as reducing risks associated with the servicing of the government debt.

In order to ensure alternative investment opportunities in low risk financial instruments, the residents of Latvia (natural persons), since the June 19, 2013 are offered an investment opportunity in government issued savings bonds with different maturities, of which the longest is 10 years. The availability of savings bonds enhances residents’ investment experience and confidence in the financial market, as well as, in general, contribute to the development of domestic financial market.

Central Government Debt Redemption (nominal value), mio euro

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Table “Central Government financing estimation 2018-2020 (million, EUR)”

as on 30 APRIL 2018 2018 2019 2020

total (MAY 2018-

Dec 2020)

Jan-APR MAY-dec total
Central government budget financial balance, net lending and other flows at the Treasury`s accounts
175 -816 -641 -510 -461 -1 787
Outstanding central government debt redemption (as on 30 April 2018)
-658

-218

-876 -982 -1 266 -2 466
of which domestic debt repayment
-221 -144 -365 -383 -114 -641
external debt repayment
-437 -74 -511 -599 -1 152 -1 825
Total
-483 -1 034 -1 517 -1 492 -1 727 -4 253
 
Gross borrowing in corresponding period
110 1 260 1 370 1 390 2 120 4 770
PRE-FUNDING RESERVE
0 737 737 534 1000  
info: syndicated international issuance (nominal value, indicative)
0 1 000 1 000 1 000 2 000