• 16.11.2021 at 10.10
• Financial audit, Performance audit

Central government debt management

Follow-up completed: 09.12.2025

The interest expenses paid by the state on central government debt in 2020 amounted to approximately EUR 900 million. It is crucial to further develop and assess the interest rate risk strategy. In order for crisis resilience to be improved, it is important to strengthen risk management and to invest in ICT and human resources.

Photo: Getty Images

The NAOF has audited central government debt management. Debt management refers to the borrowing of on-budget central government entities, central government cash management, and the associated risk management. The audit assessed the arrangements and risk management of central government debt management and the prerequisites for effective operations.

Debt management is a critical function for the funding of central government operations. By means of borrowing, the central government repays overdue central government debt and covers any deficit in the state budget. At the end of 2020, central government debt amounted to EUR 124.8 billion. Due to the costs caused by the Covid-19 crisis and the economic stimulus measures, the amount of debt increased exceptionally in 2020: by EUR 19.0 billion.

Finland’s debt management strategy has proved to be effective, even in challenging economic conditions. The most important objective of debt management, i.e. safeguarding liquidity, was achieved even during the Covid-19 crisis. The State Treasury resorted partly to exceptional measures by issuing private placement taps on benchmark bonds. More funding was thus raised through bilateral negotiations with several primary dealer banks. The additional debt raised in this way totalled EUR 7.35 billion. Although the activities were successful, private placement taps should only be resorted to in exceptional circumstances in the future.

The changes that have taken place in debt management practices over the past few years have not been fully reflected in the budget, and the costs of operations have partly remained difficult to interpret. The Ministry of Finance and the State Treasury should develop budgeting in order to further increase its transparency. Furthermore, central government structures do not provide the best support for risk management in the case of cross-organizational overall processes, such as debt management. From the perspective of risk management, it is essential that internal audit reports are submitted to the appropriate governing authority overseeing and steering the activities, instead of the executive director.

Follow-up

The follow-up has been completed. The report is available in Finnish only.