Govt debt programme to ease as interest costs blow out by 2014

Tuesday 15th December 2009

The government will cut its debt programme over the next four years as it looks to limit the impact of rising interest costs that are set to blow out by 2014.

The New Zealand Debt Management Office (NZDMO) has increased its forecast government bond programme in the coming year and cut back on its expected issuances further out as the government looks to damp rising interest costs that are forecast to quadruple to $64 billion in 2014.

“There’s a challenge of debt rising rapidly,” Finance Minster Bill English told media conference in Wellington. The finance costs “will use around half of the operating allowance ($1.1 billion) – that’s the complete spending on defence and police.”

The government was forced to raise about $250 million a week to meet its spending programme amid weaker tax revenues and a forecast of ten years of deficits.

The NZDMO will boost its 2009/10 government bond programme to $10.5 billion from $8.5 billion, $12.5 billion in 2011/12 and 2012/13 and $7.5 billion in $2013/14. That amounts to an $8 billion reduction in total net borrowing requirements over the next four years, though bond maturities are expected to be $4 billion higher than previous forecasts.

The total gross borrowing requirement for the four years ended June 2013 is expected to be $46 billion, down from $50 billion in the 2009 Budget.

Businesswire.co.nz

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