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Ministry of Finance and Economic Affairs

Medium-Term Debt Management Strategy 2015-2018

The Ministry of Finance and Economic Affairs has released the Medium-Term Debt Management Strategy (MTDS) for 2015-2018. This is the fifth time the MTDS has been published. The principal changes since the last issue of the MTDS centre on the ratio of debt to GDP. The current objective is to reduce it to below 60% by year-end 2018, and the long-term objective is to maintain a maximum debt-to-GDP ratio of 45%. The targeted average time to maturity has been increased to a minimum of five years, and the ratio of Treasury redemptions to GDP in any calendar year may not exceed 15%. The guidelines for Treasury loan portfolio structure have been tightened to 70-90% for nominal debt and 15-30% for indexed debt.

The Government's overall main debt management objectives are as follows:

·       To ensure that the Treasury's financing need and payment obligations are met at the lowest possible long-term cost that is consistent with a prudent risk policy;

  • To ensure that the debt repayment profile accords with the Treasury's long-term debt service capacity and minimises refinancing risk;  
  •  To maintain and encourage further development of efficient primary and secondary markets for domestic Treasury securities;
  • To broaden the investor base and diversify funding sources.

Benchmark issues of Treasury bonds are structured so that each series is large enough to ensure effective price formation in the secondary market. Each year, two-, five-, and ten-year benchmark series will be issued. In order to reduce refinancing risk, the aim is to keep the repayment profile of Treasury securities as even as possible. The average time to maturity should be at least five years.

The Treasury borrows in foreign currencies primarily in order to expand the Central Bank's foreign exchange reserves. The Treasury foreign borrowing strategy is aimed at securing regular access to international capital markets and attracting a diversified investor base.

The Ministry of Finance and Economic Affairs is responsible for the central government's debt management, formulates its debt management strategy, and makes decisions regarding securities issuance. Government Debt Management, a special section within the Central Bank, is responsible for the executing the Treasury's debt management policies in accordance with an agreement between the Bank and the Ministry.

Further information can be obtained from Esther Finnbogadóttir at the Ministry of Finance, at tel: +354 545 9200, or by e-mail at esther.finnbogadottir@fjr.is.

 

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