According to a recent assessment, Finland’s current debt management model has worked well overall. Key development areas include the management of interest and financial risks.

The Ministry of Finance’s working group on the assessment of the government debt management model published a memorandum in December 2021. It contains several development guidelines and recommendations for the central government debt management.

The operational environment for central government debt management has changed since the early 2000s when the current debt management operating model was created. There has been a considerable increase in central government debt and in contingent liabilities. Monetary policy has also changed.

The working group examined the functioning of the current debt management model in the new environment. The group concluded that the current model has worked well overall and, on the whole, it continues to work well. Similarly, the central concepts used are largely unproblematic. The assessment horizon of costs and risks remains appropriate.

In general, the working group considers the government borrowing strategy and risk management policy appropriate.

Room for development: interest and financial risk management

The key development areas identified by the working group include the management of interest and financial risks.

The group recommends that the assessment of the strategic interest rate risk position should be expanded to consider the long-term economic growth prospects and the central government debt sustainability. To ensure long-term borrowing capacity, the working group recommends that a target structure should be determined for the amortisation of central government debt, and the necessary steering procedures should be outlined for implementation purposes. To create the amortisation structure, a target average maturity should be defined for the debt as well as permitted deviations, taking into account the bond liquidity considerations.

State Treasury was represented in the working group by Finance Director Teppo Koivisto. Several other members of State Treasury’s senior management participated in the working group in expert roles.

Memorandum of the working group (December, 2021)