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Debt Management Annual Review published: Year 2021 marked a return to normal

In Finland’s central government debt management, year 2021 marked a return to normal operations and cash buffer size. Major themes in 2022 include inflation uncertainties, monetary policy tapering as well as sustainability, which increasingly drives a change also in the government bond market.

Have a look: the Debt Management Annual Review 2021 is now online. 

In 2021, the Republic of Finland successfully carried out an issuance programme totalling EUR 27.8 billion.* Net borrowing amounted to EUR 3.7 billion.

At the end of 2021, central government debt totalled EUR 128.7 billion (51.8% of GDP). Public debt in relation to GDP was 67.7%.

As Finland’s economy grew relatively rapidly in 2021 (3.4% according to the Ministry of Finance’s December forecast*), the public debt ratio declined last year. The impact of the prolonged COVID-19 pandemic spilled over to 2021, however much less than expected.

“Confidence grew that the pandemic won’t cause major economic shocks”, says Teppo Koivisto, Head of the Finance Division.

New signs are now in the air. Inflation is surging, accelerated by the rapid recovery of the global economy in 2021. According to Koivisto, the uncertainty around inflation will affect everything in 2022.

Central banks have responded to the new inflationary environment by gearing up for monetary policy tapering. The European Central Bank will start reducing its bond purchases, possibly already during the current year. A change in monetary policy would be unlikely to have major impacts on the Republic of Finland’s bond issuance or demand, Koivisto believes.

“Government borrowing will go ahead in any event. From our perspective, tapering would mean a gradual shift back to normal market conditions and investor behaviour. Therefore, we have never taken our investor base granted”, he says.

“Finland has a good credit rating, and ultimately this is what everything comes back to.”

A global forerunner in sustainability

Investors are increasingly interested in investing their money not just for financial return, but also for positive social and environmental impact. Therefore, as part of their investment decisions, institutional investors are paying growing attention to environmental, social and governance (ESG) criteria.

To offer this information to its investors, the State Treasury has launched a new section on its site titled Finland and ESG. The site describes the Finnish Government’s key sustainability targets as well as means set for achieving them.

In the Debt Management Annual Review 2021 published today, the ESG theme is discussed in two articles. Anna Hyrske, Principal Responsible Investment Specialist at the Bank of Finland, writes about the leaps and bounds central banks are currently making to address social responsibility in their investment activities. Sivi Palmén and Tiina Heinilä from the State Treasury approach sustainability from the issuer’s point of view.

According to Koivisto, the ESG factors are particularly well suited for assessing the sustainability of government bonds because of the social nature of budgetary borrowing. Sovereign governments have broader policy objectives than just narrow economic goals or individual schemes the project bond funding is typically used for.

“Sovereign bond issuance reflects broad government policy initiatives which have a wider and more far-reaching scope and perspective”, he explains.

While the ESG factors are not yet particularly visible in the conventional sovereign credit ratings, apart from the governance indicators, Teppo Koivisto believes that this will change. Once the data and methods develop to a point where long-term impact, including climate risks, can be incorporated in credit risk analyses, sustainability will become a key macroeconomic variable.

“It has to, as sustainability is increasingly driving investor behaviour”, he says.

The Debt Management Annual Review summarises the funding and liquidity management operations of Finland’s central government and provides an outlook on the Finnish economy in 2021.

The review is online at:
Debt Management Annual Review 2021 (

* Excluding funding for intra-government funds, unincorporated state enterprises and intra-year T-bill issuance.


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