1. GOVERNMENT DEBT MANAGEMENT IN LITHUANIA
Presented by Audrius Želionis,
Director of the State Treasury Department of the Ministry of Finance
Vilnius, June 2011

2. ORGANISATIONAL STRUCTURE AND LEGAL FRAMEWORK
The organizational structure of the Government debt management :
The Ministry of Finance borrows on behalf of the Government and manages its debt
The State Treasury department of the Ministry of Finance is the responsible unit within the Ministry
Borrowing, risk management and accounting procedures are strictly separated by establishing front office, middle office and back office in the State Treasury Department
Legal environment and control:
Law on State Debt – set of borrowing purposes, borrowing procedures, etc.
Law on State Budget of appropriate year – set of limits related to the net change in debt liabilities and guarantees
Government’s Medium Term Debt and Borrowing Strategy – set of debt risk limits, medium-term borrowing and debt management goals
Accountability – report submitted to the Parliament 2

3. CURRENT DEBT MANAGEMENT STRATEGY
Debt management objectives
Maintaining acceptable interest rate, refinancing and exchange rate risks
Increasing liquidity of the Government securities
Effectively managing the public financial resources
Developing measures to reduce refinancing risk by accumulating resources for significant outstanding debt repayments or using other techniques
Eliminating foreign exchange risk by fully hedging the US$-denominated bond issuances into EUR
Risk limits
Limit name
Limit
As at 31 March 2011
Residual short-term debt of total debt
< 25%
5.5%
Weighted average term to maturity
>4 years
5.7 years
Macaulay duration
2,5-5 years
3.8 years
Floating rate debt of total debt
< 15%
2.6%
Guaranteed debt of GDP 7%
1.2%
Debt level control
The set of limits for municipalities debt and borrowing (total debt, net borrowing, guaranteed debt limits)
Borrowing of Social funds (Sodra) – only with the permission of the Ministry of Finance 3

4. LITHUANIA WAS, REMAINS AND WILL BE VISIBLE IN CAPITAL MARKETS
Lithuania’s benchmark bond issuance history
First bond issue in foreign capital markets was in 1995
Since 2002 the Government regularly issued Eurobonds that resulted in three euro denominated benchmark Eurobonds (EUR 1 bn each) maturing in 2012, 2013 and 2016
After the market crash in 2008 and the financial turmoil in 2009, the Government broadened its investor base by issuing US dollar denominated Eurobonds
The Government is an active participant in the domestic market issuing bonds and Treasury bills on regular basis, as well as organizing retail sale of savings notes
Market crash after Lehman collapse 4

5. GOVERNMENT’S BORROWING INSTRUMENTS USED IN VARIOUS TIMES (LTL mill)
Market crash after Lehman Brothers default
Market turmoil
Sovereigns debt crisis
Relatively stable market environment 5

6. DEBT LEVEL AND KEY BORROWING REQUIREMENT DRIVERS
General Government debt (% of GDP)
General government deficit, ESA’95 (% of GDP)
Government borrowing requirements
Central Government debt repayment schedule, LTL mill
Source: MoF, Convergence Programme 2011 6

7. LITHUANIA’S DEBT LEVEL IN THE EU CONTEXT
General Government debt in 2010 (% of GDP)
Lithuania’s General Government debt level is the 6th lowest among EU countries
Source: MoF, Eurostat, Convergence Programme 2011 7

8. CENTRAL GOVERNMENT DEBT STUCTURE (31 March 2011)
Debt by instruments
Debt by creditors
Domestic securities by residual maturity
Share of foreign vs. domestic debt 8

9. SIGNS OF MARKET CONFIDENCE
Sources: Bloomberg, Ministry of Finance, The Depository Trust & Clearing Corporation 9

10. DOMESTIC MARKET DEVELOPMENTS
Vilibor
Vilibor 10

11. MAIN DEBT MANAGEMENT OBJECTIVES IN 2011-2014
Focus on increasing the residual maturity of the domestic debt to more than 2 years
Retaining domestic debt share not lower than 20% of the total Central Government debt and aiming to increase it to 25%
Reducing the refinancing risk of the Eurobond redemptions in 2012 and 2013
Further developing the domestic Government’s securities market 11

12. LONG TERM CREDIT RATINGS
Country
Moody’s
Standard & Poor’s
Fitch
Lithuania
Baa1
BBB
BBB*
Latvia
Baa3
BB+*
BBB-*
Estonia A1 A* A
Hungary
Baa3**
BBB-**
Czech Republic
A+*
Slovakia A+
Poland A2 A-
* - positive outlook, ** - negative outlook 12

13. Thank you!