07 January 1997: French government indicative financing programme for 1997

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Mr Jean Arthuis, Minister of the Economy and Finance, has approved the outline of the government funding programme for 1997

1. Following the repurchases on the Secondary Market, the medium- and long-term funding programme for 1996 was fully completed (103.5%). Obligations Assimilables du Trésor (OATs) accounted for FRF 284 billion while Bons du Trésor à Intérêts Annuels (BTANs) accounted for FRF 254 billion. FRF 23 billion of securities with maturity in 1997 were repurchased on the Secondary Market.
The general decrease in interest rates made it possible to obtain more favorable borrowing terms than in 1995. Thus, the average borrowing rate came to 5.33% for BTANs (against 6.99% in 1995) and 6.36% for 10-year OATs (against 7.63% in 1995). On 31st December 1996, the average maturity of French Treasury negotiable debt stood at 6 years and 47 days, against 6 years and 95 days on 31st December 1995.

2. In 1997, the volume of medium- and long-term issues necessary to cover the government borrowing requirement will be approximately FRF 600 billion. This volume should be covered by about FRF 320 billion worth of OAT issues and about FRF 280 billion worth of BTAN issues.
For each type of security, these targets correspond to cash revenue net of the value of securities, if any, exchanged for new issues or repurchased during the same year.

Borrowing requirement (FRF bn) 1996 1997
Budget deficit (*) 288 284.8
Government commitment 16.6 37
Long-term debt amortization 51.5 (1) 185.6 (3)
Medium-term debt amortization 201.9 (2) 167.5 (3)
TOTAL 558.0 674.9
Funding sources (FRF bn) 1996 1997
OAT 300.8 320
BTAN 261.1 280
Net change in BTF - 21 19.1
Miscellaneous (**) - 37.5
Change in Treasury account 17.1 18.3
TOTAL 558.0 674.9

* Budget Act forecasts (provisional data)
** Figure not available for 1996; including France Telecom contribution (FRF 37.5 bn) for 1997
(1) including FRF 16 bn in securities with maturity 1997 cancelled after repurchase on the Secondary Market
(2) including FRF 7 bn in securities with maturity 1997 cancelled after repurchase on the Secondary Market
(3) after impact of repurchase of securities with maturity 1997 on the Secondary Market

3. Thus, the negotiable debt is expected to follow in 1997 the trend detailed below:

  outstandings on 12/31/1996 issues in 1997 reimbursements in 1997 net change projected outstandings for 12/31/1997
BTF 270.6 n.s. n.s. 19.1 289.7
BTAN 819.3 280 167.5 112.5 931.8
OAT 2 021.5 320 185.6 134.4 2 155.9
Total 3 111.4 600 353.1 266 3 377.4

(nominal amounts in FRF billions, provisional data)

OATs and BTANs outstanding should rise 6.6% and 13.7% respectively. The increase in the negotiable debt (8.5%) should correspond to the net borrowing requirement for 1997, less the contribution made by France Télécom and the surplus on the 1996 funding programme.

4. OAT sales to retail investors will continue throughout the year. This standard savings product is part of the range of instruments available to individuals.The OATs thus placed in 1997 will contribute to the total objective funding of FRF 320 billion.

5. Treasury issuing policy must be situated in the light of the changeover to the third stage of the Economic and Monetary Union. For more than a year, France has indicated that its outstanding debt will be converted into Euro as of January 1999 and that new debt issues will be denominated in Euro from this date.
The objective is clear: to create, from the inception of the Economic and Monetary Union, a liquid and transparent market for Euro-denominated government securities which is the European benchmark market for government securities. Several working groups on the financial markets are currently finalizing debt conversion methods.
In 1997, the Treasury will organize a symposium for resident and non-resident intermediaries and investors. Arranged in conjunction with the Association des Spécialistes en Valeurs du Trésor, this symposium will analyze the impact of the Economic and Monetary Union on issuing policy and explain debt conversion methods.
In preparation for the Economic and Monetary Union, the Treasury will notably keep reflecting on ways to continue modernizing the market for floating-rate instruments and the possible interest of issues linked to macro-economic indices, in order to assess potential investor demand and potential savings on debt service.