History

Central government debt 1863-2013

The Finnish government has been issuing bonds since the mid-19th century. It has borrowed in order to finance infrastructure investments important to economic development, supported central bank currency reserves and enabled an active fiscal policy.

The Finnish Senate used its first domestic bonds to fund the construction of the Saimaa canal, and foreign bonds for the creation of Finland's rail network.  The network was essential for the economic development of Finland. Through railway bonds, Finland became a frequent borrower in international financial centres, such as Frankfurt, Paris and London.

In 1923, the Finnish government issued its first dollar bond. The 1923 bonds were followed by later dollar bonds, with which Finland financed initiatives such as the construction of a hydroelectric power plant at the Imatrankoski Rapids.

Via borrowing, the Finnish government did business with some of the most notable international banks – some of these business relationships have lasted until the present day.

Aside from during wartime, Finland has traditionally avoided high levels of indebtedness. An exception is the economic recession of the early 1990s, when the government debt rose rapidly. The government debt began to grow again following the financial crisis which began in 2008.

Current borrowing practices were inherited from the 1980s, when the government began to issue Treasury bills and serial bonds. In 1992, the government established its primary dealer system in order to improve the liquidity of its bonds. After Finland's accession to the Economic and Monetary Union in 1999, the government debt was denominated almost entirely in euros. At the same time, responsibility for operative debt management was transferred from the Ministry of Finance to the State Treasury.

Exhibition at the Bank of Finland Museum: Our mutual debt – Finnish government borrowing 1859–2015 >>

Read more:

Sovereign borrowing in Finland in historical perspective >
From the periphery to the core >
Finland in the American Financial market >

Published 2013-03-26 at  8:25 , updated 2016-03-02 at  15:26
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