The central government issues loans in foreign currency in order to maintain the foreign-exchange reserve, but issuances can – in extraordinary circumstances – also be used to finance the central government's domestic expenditures. Issuances in commercial papers are part of the central government's liquidity reserve.
Since 2020, the central government has issued short-term foreign loans in euros and U.S. dollars through the government's two commercial paper (CP) programmes in order to help finance the increased borrowing needs caused by covid-19. The outstanding volume in commercial papers was approx. kr. 10 billion at the end of 2021. The strategy is that the commercial paper programmes are kept active,
but are expected to account for a smaller share of
total short-term borrowing.
In October 2020, the government issued a government bond in foreign currency for the first time since 2014. The bond was issued in U.S. dollars as a bullet bond maturing on October 27, 2022. The bond has a nominal outstanding amount of U.S. dollars 2 billion. Proceeds from the issuance are swapped to euro with a fixed rate. The issuance followed a full update of the government's EMTN programme and helps to ensure that everything in the issuance process works as it should and that the government has market access in foreign currency funding. The strategy is that the central government will
issue bonds in foreign currency under the EMTN
programme during 2022. The issuance will ensure
that the central government maintains strong and
diversified market access in foreign currency funding.
In addition, the central government has obligations on currency swaps entered to hedge exchange rate risk on on-lending in dollars to Danmarks Skibskredit A/S.