Frequently Asked Questions

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In addition to the difference between budget revenue and expenditure, there are other components that cause financing needs to vary and that result in an increase or reduction in debt issuance.

Therefore, in addition to the budget deficit, the following variables should be considered:

 

  • Net change in financial assets: difference between the flows recorded in expenditure and revenue, resulting from financial rights held. These include financial rights resulting from the acquisition/sale of credit securities (bonds, shares, quotas) or the granting/repayment of loans.
  • Privatisation revenues to be applied to reducing public debt: the Privatisation Framework Law establishes that one of the objectives of privatisation operations is to promote the reduction of public debt in the economy. Thus, by Resolution of the Council of Ministers of the 12th Government, a minimum percentage of 40 percent of privatisation revenues must be channelled towards reducing public debt. The existence of this financial revenue, without impacting the budget deficit, makes it possible to reduce the volume of new debt issues required to meet financing needs.

 

Other factors, of lesser importance, that may justify differences between the budget deficit and the variation in public debt:

  • capital gains and losses on debt issuances and amortizations,
  • the issuance of promissory notes in favor of international organizations,
  • exchange rate variations associated with debt denominated in foreign currency.

Concerns about the liquidity of public debt have led to the progressive concentration of financing activity in Treasury Bonds (OT) and Treasury Bills (BT). In accordance with the long-term strategy defined by IGCP, E.P.E., the main financing instrument is OT, which are medium and long-term fixed-rate debt securities (OT may be issued for up to 50 years).

 

To meet specific treasury needs, the Portuguese State may issue commercial paper for terms between 1 and 364 days, carry out repurchase agreements or contract other short-term loans, such as credit lines. Repurchase transactions consist of the sale of securities with a simultaneous agreement to repurchase these same securities on a pre-agreed future date, with the repurchase price being equivalent to the initial transaction price, plus a remuneration corresponding to the agreed interest rate.

 

In addition to the instruments already mentioned, the State may also issue Euro Medium Term-Notes (medium/long-term debt securities), take out loans from supranational and multilateral institutions (such as the European Union, the European Investment Bank or the European Development Council Bank), issue CEDIC (Special Public Debt Certificates) and CEDIM (Special Medium and Long-term Debt Certificates), which are debt instruments intended for the public sector, or issue Saving certificates and Treasury certificates, which are debt instruments intended for households.

As enshrined in the Public Debt Framework Law, Law No. 7/98 of 3 February, "recourse to direct public debt must be in line with the financing needs generated by the execution of the State's priority tasks, as defined in the Constitution of the Portuguese Republic, and to safeguard, in the medium term, the tendential balance of public accounts".

 

In other words, public debt is issued when budget revenues are not sufficient to ensure the financing of fundamental tasks for the country. In turn, the budget deficit is the excess of expenditure in relation to budget revenue in a given year. Thus, the budget deficit tends to be equal to the new debt issued in the year and the difference between the public debt values ​​in two consecutive years (two stocks).

IGCP is responsible for managing the public debt and treasury of the Portuguese State. Its main function is to ensure the financing of the State under the best possible market conditions, which includes the issuance and management of public debt securities such as treasury bonds.

The Agency also promotes stability and efficiency in the administration of government financial resources, ensuring sufficient liquidity to meet the financial needs of the State, as well as managing risks associated with public debt.

The framework law on public debt (Law No. 7/98) establishes that the use of direct public debt by the State must conform to the financing needs generated by the implementation of the State's priority tasks, as defined in the Constitution of the Portuguese Republic, and ensure, in the medium-term, the tendency towards balance in public accounts.

 

Furthermore, the management of direct public debt of the State should be guided by principles of prudence and efficiency, ensuring the availability of the required financing for each budget exercise and pursuing the following objectives:

 

a) Minimization of direct and indirect costs from a long-term perspective; 

b) Guaranteeing a balanced distribution of costs among different annual budgets; 

c) Preventing excessive concentration of debt repayments in a short period; 

d) Avoiding exposure to excessive risks; e) Promoting a balanced and efficient functioning of financial markets.

Subscriptions for Savings Certificates and Treasury Certificates can be made directly at the counters of the entities contracted by IGCP for this purpose:
 



As for Treasury Bonds (OT) and Treasury Bills (BT), considering that the transaction of small lots is conducted in the retail segment of the capital market (i.e., in the market managed by Euronext Lisbon), their acquisition, either directly or indirectly through investment funds, can be made through specialized financial institutions.