Market risks comprise interest rate risk and foreign exchange risk. The key target variable for the interest rate risk management is the Weighted Average Maturity at Issuance (WAMI). Under the Ministry’s directive, WAMI should average seven years over the medium term, with a maximum deviation of six months. For short-term borrowing, the calculation uses the year-end debt stock and the average maturity during the year.
The central government does not take on exchange rate risk. While a portion of government borrowing is denominated in foreign currencies, all related exchange rate exposure is fully hedged through currency swaps.
Currency hedging involves collateral movements. Posted cash collateral does not increase the central government deficit, but as it needs to financed, the posted collateral does increase the annual borrowing requirement. Interest rate swaps, which were used until February 2024 to adjust interest rate risk, may also involve collateral flows.
Collateral posted to counterparties is recorded as a receivable in the central government’s financial statements, as it is returned when market values change or contracts expire. Conversely, collateral received from counterparties is recorded as a short‑term liability.