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.
In 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 kr. 70 billion at the end of 2020. The strategy is to reduce the outstanding amount of commercial papers as the temporary covid-19 measures are phased out.
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.
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.