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GOVERNMENT DEBT MANAGEMENT IN LITHUANIA

GOVERNMENT DEBT MANAGEMENT IN LITHUANIA. Presented by Audrius Želionis, Director of the State Treasury Department of the Ministry of Finance. Vilnius, June 2011. ORGAN I SATIONAL STRUCTURE AND LEGAL FRAM E WORK. The o rganizational structure of the Government debt management :

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GOVERNMENT DEBT MANAGEMENT IN LITHUANIA

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  1. GOVERNMENT DEBT MANAGEMENT IN LITHUANIA Presented by Audrius Želionis, Director of the State Treasury Department of the Ministry of Finance Vilnius, June 2011

  2. ORGANISATIONAL STRUCTURE AND LEGAL FRAMEWORK • The organizational structureof theGovernment debt management : • The Ministry of Finance borrows on behalf of the Government and manages its debt • The State Treasury department of the Ministry of Finance is the responsible unit within the Ministry • Borrowing, risk management and accounting procedures are strictly separated by establishing front office, middle office and back office in the State Treasury Department • Legal environment and control: • Law on State Debt – set of borrowing purposes, borrowing procedures, etc. • Law on State Budget of appropriate year – set of limits related to the net change in debt liabilities and guarantees • Government’s Medium Term Debt and Borrowing Strategy – set of debt risk limits, medium-termborrowing and debt management goals • Accountability – report submitted to the Parliament 2

  3. CURRENT DEBT MANAGEMENT STRATEGY Debt management objectives • Maintaining acceptable interest rate, refinancing and exchange rate risks • Increasing liquidity of the Government securities • Effectively managing the public financial resources • Developing measures to reduce refinancing risk by accumulating resources for significant outstanding debt repayments or using other techniques • Eliminating foreign exchange risk by fully hedging the US$-denominated bond issuances into EUR Risk limits Debt level control • The set of limits for municipalities debt and borrowing (total debt, net borrowing, guaranteed debt limits) • Borrowing of Social funds (Sodra) – only with the permission of the Ministry of Finance 3

  4. LITHUANIA WAS, REMAINS AND WILL BE VISIBLE IN CAPITAL MARKETS Lithuania’s benchmark bond issuance history 2002-2011 • First bond issue in foreign capital markets was in 1995 • Since 2002 the Government regularly issued Eurobonds that resulted in three euro denominated benchmark Eurobonds (EUR 1 bn each) maturing in 2012, 2013 and 2016 • After the market crash in 2008 and the financial turmoil in 2009, the Government broadenedits investor base by issuing US dollar denominated Eurobonds • The Government is an active participant in the domestic market issuing bonds and Treasury bills on regular basis, as well as organizing retail sale of savings notes Market crash after Lehman collapse 4

  5. GOVERNMENT’S BORROWING INSTRUMENTS USED IN VARIOUS TIMES(LTL mill) Market crash after Lehman Brothers default Market turmoil Sovereigns debt crisis Relatively stable market environment 5

  6. DEBT LEVEL AND KEY BORROWING REQUIREMENT DRIVERS General Government debt (% of GDP) General government deficit, ESA’95 (%of GDP) Government borrowing requirements Central Government debt repayment schedule, LTL mill Source: MoF, Convergence Programme 2011 6

  7. LITHUANIA’S DEBT LEVEL IN THE EU CONTEXT General Government debt in 2010 (% of GDP) Lithuania’s General Government debt level is the 6th lowest among EU countries Source: MoF, Eurostat, Convergence Programme 2011 7

  8. CENTRAL GOVERNMENT DEBT STUCTURE(31 March 2011) Debt by instruments Debt by creditors Share of foreign vs. domestic debt Domestic securities by residual maturity 8

  9. SIGNS OF MARKET CONFIDENCE Sources: Bloomberg, Ministry of Finance, The Depository Trust & Clearing Corporation 9

  10. DOMESTIC MARKET DEVELOPMENTS Vilibor Vilibor 10

  11. MAIN DEBT MANAGEMENTOBJECTIVES IN 2011-2014 • Focus on increasing the residual maturity of the domestic debt to more than 2 years • Retaining domestic debt share not lower than 20% of the total Central Government debt and aiming to increase it to 25% • Reducing the refinancing risk of the Eurobond redemptions in 2012 and 2013 • Further developing the domestic Government’s securities market 11

  12. LONG TERM CREDIT RATINGS 12

  13. Thank you!

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