Head of Public Debt Management Office: Mr. Phaedon KALOZOIS, Director of Finance, Ministry of Finance.
A. ESTABLISHMENT OF THE PUBLIC DEBT MANAGEMENT OFFICE (PDMO)
With the Public Debt Μanagement Law 2012 the Public Debt Management Office was established within the Ministry of Finance.
B. LEGAL FRAMEWORK
(i) The Public Debt Management Laws of 2012 and 2013
(ii) The Public Debt Management Regulations
(iii) Terms of issue of government securities
(Continues to apply until the final settlement of all loan agreements entered into or securities issued prior to the coming into force of the new law - See also Article 32 of the Public Debt Μanagement Law 2012)
Until the enactment of the new legislation, the debt management of the Republic of Cyprus was based, mainly, on the following legislation:
(i) The Loan (Development) Laws and Regulations;
(ii) The Cyprus Treasury Bills Laws;
(iii) The Loan (Savings) Law and Regulations;
(iv) Terms of Issue of domestic Government Bonds and Treasury Bills;
(v) The EMTN & ECP Programmes;
(vi) The Central Bank of Cyprus Laws;
(vii) The Council of Ministers Decision No. 45.382, dated 08/01/1997;
(viii) The Council of Ministers Decision No. 45.727, dated 19/03/1997; and
(ix) The Council of Ministers Decision No. 67.443, dated 9/7/2008.
Both new and old legislation is found in the section Legislative Framework of this webpage.
C. OBJECTIVE OF PUBLIC DEBT MANAGEMENT
The ultimate objective of public debt management is to ensure that the financing needs of the Republic are always met in time and that the cost of the debt is the lowest possible over the medium term, within the framework of an acceptable level of risk.
D. POWERS OF THE MINISTER OF FINANCE
The Minister has the exclusive power to borrow funds on behalf of the Republic of Cyprus by entering into loan agreements or by issuing securities, in the domestic market and abroad, in local or foreign currency, and to sign loan agreements and agreements that regulate the sale of securities of the Republic of Cyprus.
Any borrowing is executed within the framework of the Annual Financing Programme which is drafted by the PDMO and approved by the Minister of Finance. The Annual Financing Programme is based on the Medium Term Debt Strategy which is approved by the Council of Ministers (see also section F “Policy frameworks in public debt management”).
Moreover, the borrowing purposes are explicitly referred to in the Law and any deviation from the specific borrowing purposes is possible only after informing the House of Representatives.
E. RESPONSIBILITIES OF THE PUBLIC DEBT MANAGEMENT OFFICE
The PDMO under the general supervision of the Permanent Secretary and in accordance with the Law, is responsible, for:
- handling the debt management operations and executing transactions
- the management of the cash surplus of the government
- the assessment of the risk of government guarantees
- the preparation of any legislation with regard to regulating the debt management operations
- forms the link between the Ministry of Finance and the credit rating agencies
The Council of Ministers may, by virtue of Regulations, delegate further duties to the Public Debt Management Office
F. POLICY FRAMEWORKS IN PUBLIC DEBT MANAGEMENT
The policy frameworks in the management of public debt comprise of the medium term debt strategy and the annual financing programme
Medium Term Debt Strategy
The medium term debt strategy, which is updated at least once yearly, is prepared and executed by the PDMO. The Strategy is approved by the Minister of Finance and the Council of Ministers.
All debt management operations are executed within the framework of the medium term debt strategy which is prepared taking into account
(a) the borrowing needs of the Republic of Cyprus;
(b) macro-economic conditions;
(c) conditions of the market and
(d) any other relevant factors
The public debt management strategy includes the range of acceptable risks in the debt portfolio.
Annual Financing Programme
The medium term debt strategy is implemented via the annual financing programme for each fiscal year. The Programme is prepared by the PDMO and approved by the Minister of Finance.
The annual financing programme includes scheduled borrowing transactions for the year, the borrowing tools to be used and the indicative date or indicative period of such borrowing
G. POLICY FRAMEWORKS IN CASH MANAGEMENT
The management of cash of the state includes two main aspects: the liquidity buffer stock and the liquidity surplus
Liquidity buffer stock
For every fiscal year, the Public Debt Management Office prepares a proposal with regard to the desired size of the liquidity buffer stock of the Republic of Cyprus in the form of the minimum and maximum liquidity levels
Management of the liquidity surplus
Where liquidity exceeds the maximum level, and a liquidity surplus is available, the PDMO may invest the surplus or proceed with debt buybacks/early loan redemptions. The investment of liquidity surplus funds is carried out according to a written cash investment policy framework which is prepared by the PDMO and approved by the Minister of Finance.
H. ACCOUNTABILITY AND CONTROL OF THE MANAGEMENT OF PUBLIC DEBT
The PDMO prepares an annual public debt management report which is submitted to the Council of Ministers and the House of Representatives. Furthermore, the independent audit control for the public debt and its management falls under the responsibility of the Auditor General of the Republic.