The local government sector


  • The average annual increase of local government debt 2010-2019 was 7 percent.
  • The growth rate in 2019 was 10 percent.
  • Borrowing through Kommuninvest and their own market programmes are the two dominant funding options for Sweden’s municipalities and regions.

Trend & analysis

In the funding operations of the local government sector. borrowing from banks continues to decrease. At the end of 2020, the market share of Kommuninvest was estimated at 58 percent, of market programmes at 29 percent and of banks at 13 percent.

Local government sector funding

Kommuninvest Market programmes Banks
Local government sector funding 58 29 13

Maturity profile

  • The average maturity was 2.88 years.
  • 25 percent of the debt matures within 12 months
  • 13 percent of the debt has a remaining term to maturity of more than 5 years

Trend & analysis

The average maturity in the local government sector is relatively short. This means that investments are funded with borrowing that needs to be renewed several times during the economic life of the investments.

25 percent of the loan portfolio matures within one year, of which 28 percent is made up by short term funding, such as commercial papers, which are extended three to four times per year.

Maturity profile

0-1 years 1-2 years 2-3 years 3-4 years 4-5 years 5-7 years 7-10 years >10 years
Maturity 25 20 16 12 13 9 3 2

Financial derivatives

  • 51 percent of the debt is linked to a variable interest base, primarily 3M Stibor
  • Through the use of derivatives, the fixed-interest period is extended from 1.66 to 2.94 years

Trend & analysis

Many municipalities, regions and municipal companies fund their investments with loans of a short maturity. Some of them then use interest rate swaps to extend the fixed-interest period. This means that the period of fixed interest exceeds the maturity of the underlying funding.

Fixed-interest period excluding and including derivatives

0-1 years 1-2 years 2-3 years 3-4 years 4-5 years 5-7 years 7-10 years >10 years
Fixed-interest period excluding derivatives 63 8 7 6 7 5 2 1
Fixed-interest period including derivatives 36 13 11 10 11 10 6 2

Interest rate level

  • Average interest rate excluding derivatives was 0.50 percent
  • Average interest rate including derivatives was 0.94 percent

Trend & analysis

Even though market interest rates increased during the first quarter of 2021, the funding cost for the municipal sector remains low in a long-term perspective. The average interest rate decreased by 4 basis points in comparison with the previous quarter to 0,94 percent.

Interest excluding and including derivatives

Interest excluding derivatives Interest including derivatives
Interest rate level 0.5 0.94