Republic of Portugal
June 2007
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IGCP – Public Debt and Cash Management
IGCP’s mission is to manage, in an integrated way, the cash balances
and the direct debt of the Republic of Portugal, such a way as:
• To fulfil the borrowing requirements of the Republic in a stable
manner;
• To minimize the cost of the government debt on a long-term
perspective, subject to the risk strategies defined by the
Government;
• To optimize public sector cash management.
While providing a service of public interest, the IGCP develops its
activities based on principles of efficiency, transparency and
accountability.
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2
IGCP – Institutional Framework


Public Debt Law
Budget (net borrowing limits)
Parliament
Government



Direct
information on
demand
Audit
Court
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Guidelines approved
Annual financing
strategy approved

Annual financing
programme proposal
Guidelines proposal

Quarterly report

IGCP
The debt management
agency
Advisory
Board
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IGCP – Public Debt and Cash Management
The IGCP is subject to the authority and supervision of the Minister of
Finance.
Statutory bodies:
•Chairman of the Board of Directors
•Board of Directors
•Advisory Board
•Audit Committee
The Board of Directors comprises the chairman and two executive
directors, all of them appointed by the Council of Ministers for a
mandate of three years. The Board is empowered to discharge all duties
and to take all actions committed to the IGCP under the terms of the
Law.
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IGCP – Public Debt and Cash Management
Advisory Board:
• Chairman of the Board of Directors
• A member of the Board of Directors of the Bank of Portugal
• Four experts in economic and financial matters, appointed by the
Council of Ministers
Its duties include expressing opinion on the annual financing program
for the central government and on the annual report on public financing
and public debt management.
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IGCP – Public Debt and Cash Management
The Audit Committee is composed of a chairman and two permanent
members, appointed by the Minister of Finance, with the Chairman
being nominated by the Inspectorate-General of Finances, while one of
the permanent members should be an official chartered accountant.
The Audit Committee is responsible for following up and controlling the
financial management of the IGCP and the Stabilisation Fund of the
Public Debt, as well as supervising the respective accounting
procedures.
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IGCP – Public Debt and Cash Management
The activity of IGCP is subject to supervision by the Audit Court.
The annual auditing by the Portuguese Audit Court focuses on
public debt accounting
debt management procedures, and
management model
There can also be exceptional auditing procedures, whenever justified.
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IGCP – Public Debt and Cash Management
IGCP also reports directly to the Parliament:
 Whenever requested by the Budget and Finance Committee
(usually once a year)
 Information on outstanding debt, risk profile, borrowing
programme, secondary market organisation and performance
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IGCP – Public Debt and Cash Management
However being part of the public administration, the IGCP employees are not
under the civil servants regime (labour contracts are established under the
general labour law) and a corporate model has been adopted for its internal
organization.
There is a Markets’ Committee, composed by the Directors, the heads of the Debt
and Operations Departments and of the Financial Control, Research, Tradingroom and Markets units, that meets once a week to analyse market developments,
treasury forecasts, the position of the real debt portfolio against the benchmark
and to define guidelines for the activity during the next week.
The Financial Control unit is responsible for all aspects related with risk and
performance evaluation, internal control, procedures definition and internal
auditing.
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IGCP – Public Debt and Cash Management
A flexible, entrepreneurial-like organisation
Audit Committee
Board of Directors
Advisory Board
Market Committee
Legal Affairs
Debt Management Department
Operations Department
Issuing and Markets Unit
Settlements Documentation
Trading Room
Accounting
Financial Control
Research and Reporting
IT Systems
Retail Debt
Administrative
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Annual Borrowing Programme
Debt Management Guidelines

Reflect Government’s strategic guidance on debt
management, through:
Risk management model
Reviewed regularly (ca. 3 years)
Absolute and indicative limits on risks
Benchmark portfolio

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Set limits, rules, methods and reporting requirements
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Annual Borrowing Programme
Borrowing Needs
Arising from

Budget deficit

Debt servicing
Financing Strategy
 Main objective
• Minimizing the debt cost in a longterm perspective and non-exposure
to excessive risks
 Achieved through
• Issuance strategy
• Reduction of debt outstanding
• Management of cash balances
• Limitation and control of risks
(including
refinancing,
credit
and
interest-rate risks)
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Portugal: A European sovereign issuer
 A founder of the Euro
 A small sovereign issuer in a large domestic market

Increased competition

Elimination of currency risk
 Decreasing financing needs expected
 Active debt management
 A market driven approach
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
Portugal has a lower debt burden than euro area average and
better than “core” Europe and other rating peers
General government gross debt - 2006
120
(As a % of GDP)
100
Euro area average = 69.0%
80
60
40
20
0
Italy
Greece Belgium Germany Portugal France
AustriaNetherlands Spain
Finland
Ireland
Source: Eurostat (latest figures according to Excessive Deficit Procedures)
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A Euro sovereign issuer with low borrowing needs
 channelling them to the Euro
government market
Debt structure per instrument
End of 2006
Others
7%
Retail (CA)
16%
Gov. Bonds (gross) and T.Bills (net)
issuance
20
BT - Treasury
Bills
9%
EUR billion
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10
OT - Standard
Long Term
Government
Bonds
68%
5
0
-5
1998
1999
2000
2001
2002
Fixed-rate Gov. Bonds
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2003
2004
2005
2006 2007F
Treasury Bills
15
A market driven borrowing strategy
 Aiming at consolidating an efficient and transparent market
The most important
driving factor:
Liquidity
•
•
•
Predictability
•
Transparency
•
Accountability
Size
Tradability – Efficient and standard market conditions
 Priority to the development of a
government benchmark yield
curve
 Interest rate and refinancing risk
management
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The strategic pillars:
A market oriented borrowing
strategy
Active debt management derivatives and buy-backs
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Following best practices
The role of Financial Intermediaries
Advisors
To fulfil the liquidity
criteria
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Partners
To overcome market
inefficiencies
 Concentration of
 Development of primary
the annual borrowing
needs in the OT
market
market techniques
 Fostering an efficient and
liquid secondary market
Main Actors
To widen the investor
base
 Consolidation of an
international and
diversified base of
investors
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An internationalised and diversified investor base

Around 82% of the turnover* in the OT secondary market is generated by non-domestic
investors
*Turnover with final investors reported by Primary Dealer (excluding intra-Primary Dealer trading) - 2006
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Tel: +351 21 7923300
Fax: +351 21 7993795
E-mail:info@igcp.pt
Further information on the Portuguese
economy can be obtained from:
Economic Research and
Forecasting Department at the
Ministry of Finance
www.dgep.pt
Budget Department
www.dgo.pt
National Statistics Office
www.ine.pt
Web site: igcp.pt
Reuters pages: IGCP01
Bloomberg pages: IGCP
Further information on the Portuguese
secondary market can be obtained from:
MTS Portugal:
www.mtsportugal.com
Reuters pages: PT/MTS1
Banco de Portugal (Central bank) www.bportugal.pt
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DISCLAIMER
The information and opinions contained in this document have been compiled or arrived at from sources believed to be
reliable and in good faith, but no representation or warranty, express or implied, is made as to their accuracy, completeness
or correctness. All opinions and estimates contained in this document are published for the assistance of recipients, but is
not to be relied upon as authoritative or taken in substitution for the exercise or judgment by a recipient and, therefore, does
not form the basis of any contract or commitment whatsoever. IGCP does not accept any liability whatsoever for any direct
or consequential loss arising from any use of this document or its contents.
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