The Debt Management Office (DMO) today announced a $2.35 billion borrowing programme for 2004/5 as part of the Government's Budget.
The money raised is used to roll over maturing debt and cover new borrowing. Despite the Government's planned $5.7 billion operating surplus for 2004/5, it expects to run a cash deficitof $808 million against a surplus of $135m in 2003/4.
The Government said it would have to borrow an additional $1.9b over four years as part of its agreement to give the Reserve Bank additional capacity to intervene in the foreign exchange market. Some $500m is allowed for 2004/5.
The overall borrowing will be raised over 12 tenders and a new bond maturity is expected to be announced in the coming months.
The DMO said it was also investigating the introduction of a new bond to assist in the direct funding of infrastructure projects.
It said the fiscal impact of this was unclear as the timing and size had not yet been decided. The DMO said it would consult with institutional investors about the new type of bond.
Finance Minister Michael Cullen said that a key objective of the Government when it took office in 1999 was to keep government gross debt below 30 per cent of Gross Domestic Product. By June 30, the ratio is expected to have dropped to 24.7 per cent against 33.7 per cent when the Government came to power.
He said the new objective was that gross sovereign debt should fall through 20 per cent of GDP by 2015.
Dr Cullen said that because of the $2.9b "Working for Families" package announced as the centrepiece of today's budget, debt would fall more slowly than in previous year.
In nominal terms, debt will rise by $2.3b from 2004 to 2008 although it will decline as a percentage of GDP because of the expanding economy.
"This emphasises there is very little room, on the basis of these forecasts, for any further substantial fiscal loosening," Dr Cullen said.
