Riksgälden; Larger Budget Deficit And Increased Borrowing

Swedish central government borrowing will increase more than anticipated in the coming two years since the budget deficit will be larger than the Swedish National Debt Office expected in its previous forecast of 4 November 2008. We now expect a budget deficit in the range of SEK 90 billion in 2009 and SEK 65 billion in 2010.

Borrowing in T-bills, nominal bonds and foreign currency will accordingly increase. Part of the increased borrowing will take place by means of a new long government bond. Before we know how great the interest for a new bond will be, we cannot say how much borrowing in the outstanding nominal bonds and in T-bills will increase. There is a lot to indicate that the amounts involved will be limited. Borrowing in foreign currency bonds may be around SEK 30 billion during 2009.

The Debt Office does not normally revise its forecasts between ordinary forecast occasions. However, we consider that developments in the recent period have been so exceptional that we should now give an indication of our assessment of the borrowing requirement for 2009 and 2010. We will publish a new forecast of the budget balance and borrowing on 4 March 2009.

Larger budget deficit Since we published Central Government Borrowing - Forecast and Analysis 2008:3, the Government has announced new fiscal policy measures focused on the labour market and various measures to assist the corporate sector. The Swedish state will also contribute with loans to other states and to Swedish Export Credit Corporation (AB Svensk Exportkredit). Moreover, the downturn has been swifter and can be expected to be rather deeper than we reckoned with then. Our macroeconomic forecast is in line with the forecast presented by the National Institute of Economic Research on 19 December 2008.

We are accordingly preliminarily revising our forecast of the budget deficit (the net borrowing requirement) by a total of around SEK 65 billion for 2009 and SEK 30 billion for 2010. We have not included lending to Swedish Export Credit Corporation here. The enclosed table shows the various effects.

The Riksdag, Sweden's Parliament, has authorised the Government to provide Swedish Export Credit Corporation with a credit facility at the Debt Office of SEK 100 billion. The Government has not yet made a decision on how this facility is to be used. The Riksdag has also authorised the Government to provide Swedish Export Credit Corporation with a credit guarantee facility from the Debt Office. It is therefore difficult to assess the extent to which Swedish Export Credit Corporation's credit facility will be used. If the facility is used, it will entail a further increase in the central government borrowing requirement.

Increased borrowing Part of the increased borrowing requirement will be covered with the aid of a new nominal government bond with a longer maturity, which we are planning to introduce during the first quarter of 2009 provided that this can take place on reasonable terms. This was announced in a press release of 12 December. The new government bond could be sold alongside the ordinary auctions every other week if there is sufficient interest.

The remaining part of the increased borrowing requirement will be covered by outstanding nominal bonds, T-bills and foreign currency bonds. If there is great interest in the new long bond, this will mean that there is a limited need to increase borrowing in outstanding central government bonds and T-bills.

Loans to other states will be funded by foreign currency bonds as well as part of the increased borrowing requirement, totalling together just over SEK 20 billion. Since we previously expected to borrow SEK 10 billion in foreign currency, the total extent would be in the range of SEK 30 billion.

If foreign currency lending to Swedish Export Credit Corporation does take place, it will probably be funded by borrowing in foreign currency bonds in addition to the above assessment.

Borrowing in inflation-linked bonds will not be affected since the share of inflation-linked bonds of the entire central government debt is too great in relation to the target of 25 per cent.

It should be emphasised that the forecasts that we have presented here are preliminary. A more thorough forecast of the budget balance and our borrowing will be presented on 4 March 2009.

For more information, please contact: Thomas Olofsson, Head of Debt Management, +46 8 613 47 82

This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.



LINK: http://hugin.info/133745/R/1282336/286927.pdf

Riksgälden

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