Planned borrowings in medium term

Created : 18.07.2017. Updated: 14.11.2023.

The total medium-term financing requirement is affected by the amount of borrowing needs 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 medium-term Funding plan, which is elaborated by the Treasury and approved by the Minister of Finance. The annual Law on the State Budget and Medium Term Budget Framework 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 markets and 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 Eurobonds, the financing should be secured well in advance thus reducing the risk of government debt refinancing. 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.

Due to strategic aspects for maintaining a regular supply, the Treasury organises regular auctions in domestic markets. Supply volume and offered instruments are adjusted to the actual situation in the financial markets and domestic market capacity. Starting from autumn 2020, the Treasury re-opens outstanding Eurobonds (initially issued in international markets ) in domestic market via Primary dealers. Such an approach ensures increase of liquidity of outstanding Eurobonds.

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 (private individuals), since the June 19, 2013 are offered an investment 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