The (net) borrowing requirement of general government reflects the amount a government needs to borrow in order to finance its activities. 

General government financing includes all funds borrowed by the general government sector through different financial instruments over a given period. 

Net general government financing is a key statistical indicator for analysing government financing. It measures the difference between a government’s net transactions in financial liabilities and assets, also referred to as net borrowing/lending.

Components of general government borrowing requirements

General government borrowing requirements essentially comprise three components:

  • savings certificates and treasury certificates (for statistical purposes, these are treated as deposits and classified as “currency and deposits”);
  • debt securities issued by general government, including bonds and treasury bills;
  • loans that entities in the general government sector obtain, for example, from the financial sector or from the EU budget.

On the financial assets side, transactions in financial assets comprise the financial investments by general government, including:

  • bank deposits made by entities in the general government sector;
  • government purchases of debt securities issued by entities from other sectors (non-financial corporations, banks, etc.);
  • loans granted by general government to entities from other sectors of the economy.
  • equity and investment fund shares acquired by general government.

Note that financial investments by general government sub-sectors in debt securities issued by the treasury (central government), such as treasury bills held by social security funds, are consolidated and are not included in this indicator.

What can this indicator tell us?

A net borrowing requirement means that general government has to finance itself from other sectors, i.e. there is a deficit in the general government accounts. Conversely, a net lending position means that the government has a fiscal surplus.

What is the difference between the general government net borrowing requirement and general government debt?

General government (net) borrowing requirements are calculated based on cumulative flows from the beginning of a year. For example, the figure for the month of April reflects net borrowing by the sector between January and April of the year in question.

General government debt is a stock variable, i.e. it refers to the value of general government liabilities at a given time. Moreover, general government debt is valued in gross terms (without deducting investments in financial assets).

 

Related explainers

What is government debt?

What is the general government balance?