Credit measures – financing and authorisation to borrow

To ease access for funding of business and households the Government has proposed two new credit measures, the State Finance Fund and the State Bond Fund. The Government will provide up to NOK 50 billion to strengthen the banks core capital, and invest up to NOK 50 billion in corporate bonds. In line with the fiscal guidelines, these transactions will be covered by borrowing in the market and/or drawing on the Treasury’s cash reserves. The transactions will not have any consequences for the allocation to the Government Pension Fund – Global, nor the need for Norges Bank (Central Bank) to purchase foreign exchange to the Pension Fund - Global.

To ease access for funding of business and households the Government has proposed two new credit measures, the State Finance Fund and the State Bond Fund. The Government will provide up to NOK 50 billion to strengthen the banks core capital, and invest up to NOK 50 billion in corporate bonds. In line with the fiscal guidelines, these transactions will be covered by borrowing in the market and/or drawing on the Treasury’s cash reserves. The transactions will not have any consequences for the allocation to the Government Pension Fund – Global, nor the need for Norges Bank (Central Bank) to purchase foreign exchange to the Pension Fund - Global.

The government’s borrowing requirement will increase in step with the investments made by the two funds. The extra borrowing can be made within the prevailing borrowing limits, which was authorised by the Storting (Parliament) in October 2008.

Financing
According to the fiscal framework, the fiscal budget surplus shall be transferred to the Government Pension Fund – Global. Capital transactions, including debt amortisation, net lending to state entities and net equity investments, shall be covered by borrowing in the market and/or drawing on the cash reserves. 

The proposed measures imply that two new accounts with the Treasury, with a total of NOK 50 billion each, will be at the disposal of the State Finance Fund and the State Bond Fund. The government’s borrowing requirement will, however, only be affected when the Funds start to draw on these accounts.

The Treasury’s cash reserves are at the moment quite large, and the announced bond auctions in the first half of this year are deemed to be adequate to meet the increased borrowing requirements stemming from the establishment of the two new Funds. However, in order to smooth out the extra borrowing over the year, the Government will propose a new auction calendar following the approval by the Storting on the establishment of the State Finance Fund and the State Bond Fund.

Authorisation to borrow
The Storting has authorized the Ministry of Finance to borrow up to NOK 450 billion in new long-term loans in 2008 and 2009, and to have up to NOK 430 billion in outstanding short-term market loans. The new credit measures can be financed within these borrowing limits, and it will therefore not be necessary to ask the Storting for increased authorisations.