Govt borrowing requirement in 2021 lower than estimated

The State Treasury has decided not to withdraw about EUR 8 billion of the net borrowing requirement of EUR 11.7 billion entered in the budget proposal for 2021.

The decision is based on the strong liquidity position of the central government. In 2021, the central government’s new borrowing amounts to EUR 3.7 billion, said the Ministry of Finance in a press release.

Reduced borrowing requirement does not change the overall economic situation or the longer-term challenges in public finances.

Neither will the change have a direct impact on achieving the goal of reversing the upward trend of the general government debt ratio in the mid-2020s. Both the central and the general government debt ratio will continue to grow in the medium term.

There are several reasons for the borrowing requirement being smaller than budgeted. Firstly, the central government cash funds had decreased by approximately EUR 2.5 billion from the end of 2020 to the end of 2021, which means the borrowing requirement will be covered by the debt accumulated in the funds in the previous year.

The State Treasury prepared for unexpected expenditure arising from the COVID-19 crisis by increasing central government cash funds in 2020.

Secondly, the estimate of the difference between actual revenue and expenditure in 2021 differs from the budgeted by approximately EUR 5.5 billion. This can be attributed to the so-called deferrable appropriations in the Budget that can be used over a period of several years. For example, multiannual investments and COVID-19 related deferrable appropriations were budgeted for 2021 that are likely to be used, in part, in the coming years.