Fiscal Policy and Debt Management Breakout Session 3. Coordination - - PowerPoint PPT Presentation

▶
fiscal policy and debt management
SMART_READER_LITE
LIVE PREVIEW

Fiscal Policy and Debt Management Breakout Session 3. Coordination - - PowerPoint PPT Presentation

Apr 30, 2023 169 likes •270 views

Fiscal Policy and Debt Management Breakout Session 3. Coordination between fiscal and debt management policies emerging issues. Sovereign Debt Management Forum December 2014 Deficit Dynamics Deficit and Debt Dynamics Main Determinants of

slide-1
SLIDE 1

Fiscal Policy and Debt Management

Breakout Session 3. Coordination between fiscal and debt management policies – emerging issues. Sovereign Debt Management Forum December 2014

slide-2
SLIDE 2

 2014 deficit target revised down to 5.5% of GDP in April  Emphasis on expenditure reduction (4pp of GDP between 2014 and 2017), mainly driven by efficiency gains in the Public Administrations

Main Determinants of Debt Dynamics (% of GDP) Total Revenue as a % of GDP and Interest as a % of Total Revenue Deficit and Debt Dynamics (% of GDP)

2014 2015 2016 2017

Central Government

  • 4.2
  • 3.5
  • 2.9
  • 2.2
  • 1.1

Autonomous Regions

  • 1.5
  • 1.0
  • 0.7
  • 0.3

0.0 Local Governments 0.5 0.0 0.0 0.0 0.0 Social Security Administrations

  • 1.1
  • 1.0
  • 0.6
  • 0.3

0.0

General Government

  • 6.33 -5.5
  • 4.2
  • 2.8
  • 1.1

Primary Balance

  • 3.1
  • 2.2
  • 0.8

0.6 2.3 Structural Primary Balance 2.2 2.7 2.9 2.8 3.0 Nominal Adjustment 0.3 0.8 1.4 1.3 1.7 Financial Sector one-offs 0.5 0.1

  • Net Lending(+)/Borrowing(-) of the General Government.
  • Excl. Financial Sector One-Offs

Forecast

2013

Deficit Dynamics

Sovereign Debt Management Forum

1

slide-3
SLIDE 3

Recent evolution of Government Debt

Sovereign Debt Management Forum

2

 Debt to GDP ratio to peak above 100% of GDP in 2015. Primary surplus to be reached in 2016, reversing the Debt to GDP trajectory  Lower structural deficit in 2017, ensures the decline in the ratio and reinforces the downward trend

Debt to GDP Ratio (% of GDP) Debt to GDP Ratio. Central and Regional Administrations (Year-on-year Growth Rates) Deficit and Debt Dynamics

92.1 97.6 100.3 100.2 97.9

  • 5%

0% 5% 10% 15% 20% 25% 55 65 75 85 95 105 2011 2012 2013 2014(f) 2015(f) 2016(f) 2017(f) Y-o-y growth rate % of GDP Growth rate (RHS) Debt to GDP ratio (LHS)

Forecast of General Government Debt (% of GDP)

slide-4
SLIDE 4

 In 2012 a new budgetary framework was developed, considering the high degree of decentralisation of its political system AIMS OF THE REFORM  Implements Article 135 of the Spanish Constitution  Spain's commitment to the EU by incorporating EU regulation requirements and allowing these to be continuously & automatically adapted  Budgetary and financial sustainability are the guiding principles

  • f

all public administrations

Budgetary Framework

Sovereign Debt Management Forum

3

Financing Framework for the Public Administrations

Spain Austria Germany Italy France Italy Belgium Education

     

Health

     

Transport

     

Economy

     

Justice

  

Universities

 

Police

 

Infrastructures

   

Environment

   

Housing

   

Local Entities

  

Culture

  

Tourism

 

Employment

 

Social Services

26 Regions 16 Bundesländer 17 Autonomous Communities 9 Bundesländer 3 Regions 2

  • Com. Ling

15 Regions Ordinary Statute 5 Special Statute Regions

slide-5
SLIDE 5

Auxiliary Funding Mechanisms

Sovereign Debt Management Forum

4

 Together with the implementation of the budgetary framework two support mechanisms were establish in order to elliminate the negative spillovers/feed-back loops emanating from loss of access to affordable funding by sub-sovereign administrations  These new support mechanisms involve a stricter conditionality for the Regions/Local governments

Financing Framework for the Public Administrations

“Fund to Finance Supplier Payments” aimed at paying the territorial administrations (both regions and municipalities) for

  • utstanding invoices and regularising

the arrears “Regional Liquidity Fund” created to provide to Spanish Regions the needed liquidity to cover redemptions in capital markets as well as the authorized deficit.

Impact of Support Mechanisms (€ bn)

slide-6
SLIDE 6

Aug 2012 33.5% (€191.8 bn) Aug 2014 45,6% (€326,2 bn)

30% 35% 40% 45% 50% 2012 2013 2014

+134.4 bn

45 46 60 76 92 48 97 74 55 47 50 100 150 200 250 300 20 40 60 80 100 120 2011 2012 2013 2014(f) 2015(f) Gross Issuance and Redemptions Net Issuance Medium- & Long-Term Redemptions Net Issuance Total Gross Funding

Holdings

  • f Unstripped Government Debt

Non-Resident (%)

Bank 20.9% Fund manager 38.9% Insurance/Pension 19.0% Official Institution 11.4% Hedge fund 9.6% Other 0.1% Spain 25.6% UK/Ireland 17.6% France 15.9% Asia 11.3% USA 9.6% BeNeLux 6.3% DE/AT/CH 5.8% Italy 3.3% Nordics 3.2% Other 1.4%

OCTOBER - NEW 5 YEAR BOND LINKED TO EA HICP EX. TOBACCO. NOVEMBER 2019

Geographic Distribution (%) by Type of Investor (%)

Net Funding, Gross Funding and Medium- & Long-Term Redemptions (€ bn)

Funding of the Spanish Treasury Sovereign Debt Management Forum

5

Implications for the Funding Programme of the Treasury (I)

slide-7
SLIDE 7

9.6 7.6 5.1 7.6 8.6

4 5 6 7 8 9 10 2010 2011 2012 2013 2014*

0% 20% 40% 60% 80% 100% 2010 2011 2012 2013 2014* <3 3-5 5-9 9-15 >15

6.20 6.28 6.0 6.2 6.4 6.6 6.8 7.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

Marginal Life at Issuance of Bonos and Obligaciones

(*As of September 30th 2014, in years)

Cost of Debt Outstanding and Cost at Issuance

(*As of September 30th 2014, in percent)

Average Life of Debt Outstanding

(*As of September 30th 2014, in years) Source: Secretaría General del Tesoro y Política Financiera.

Average Life at Issuance of Bonos and Obligaciones

(*As of September 30th 2014, in years)

3.53 1.61 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* Cost of Debt Outstanding Cost at Issuance

Sovereign Debt Management Forum

6

Funding of the Spanish Treasury

Implications for the Funding Programme of the Treasury (II)

slide-8
SLIDE 8

7

Thank you for your attention

Leandro Navarro – Chief Economist, Deputy Head. Funding and Debt Management Department

lnavarro@tesoro.mineco.es

slide-9
SLIDE 9

The reform of the public administrations

  • ANNEX. REFORM OF THE PUBLIC ADMINISTRATIONS

 The reform of the public sector builds on the structural reform process initiated in 2012

Sovereign Debt Management Forum

8

Reform of the Local Authorities Budgetary Sustainability Law, Fiscal supervisory rules

FLA  Enabling the centralisation of public debt issuance in Spain  Providing liquidity to Autonomous Regions  Ensuring fiscal and financial sustainability  Strict additional fiscal compliance FFPP  Provision of liquidity to suppliers

  • f Local & Regional

Governments  2012: €27.4 bn  2013: €6.8 bn  2014: €8.0 bn  The Programme has been ended by July 2014 Embedded into the Treasury’s Funding Programme  2012: €16.6 bn  2013: €23.0 bn  2014: €23.0 bn Stricter fiscal conditionality & issuance caps

Fiscal discipline at all levels of the Administration Early-warning system, enforcement and sanction procedures Transparency: monthly and quarterly execution Assurance of compliance: coercive measures and enforced compliance Law for Transparency in the Public Administrations: accountability & governance Undue expenditures Transfer of competences Mergers & integrated management Changes at minor local entities Resizing of the local public sector Temporary and exclusive staff

  • f local governments

Liquidity Measures for Regions & Local Governments New Regulatory Framework Commission for the reform of the public administration Electronic Billing Law

General measures Sub-commission on administrative overlap Sub-commission for administrative simplification Sub-commission for management of common services and resources Sub-commission for institutional administration

De-indexation Law