To finance the state budget, the Lower Saxony Ministry of Finance is active in the money and capital markets. The main focus is on ensuring the state’s solvency.
Money market / liquidity management
The country’s financial status is determined daily and liquidity is invested or covered on the money market accordingly.
In the event of a surplus, it will be invested in the country’s Federal Bank account and in fail-safe public addresses.
If liquidity is required, short-term cash loans are taken out on the money market. Cash loans are limited to a maximum of 12 percent of the budget volume, which is currently around 5.1 billion euros.
Using the nationwide cash system, all payments are pooled in one account (cash pooling) and managed centrally. The liquidity requirement can be estimated very early in the day by pooling all known data. In the afternoon, only the remaining liquidity peaks may need to be processed.
Capital market
Borrowing is done on the capital market to cover the state budget. This usually involves follow-up financing. The budget law sets the maximum amount for this for each year. In the 2024 financial year, the gross credit authorization is EUR 7.06 billion. The net authorization is EUR -118.3 million. This means that loans of this size will be repaid in total.
The actual demand for credit on the market depends on the liquidity requirement, the budget coverage needs and market factors. The timing, term and type of interest are negotiated in each case. The country has various instruments at its disposal:
- The promissory note backed by a debt certificate is a standardized product that has proven itself in the capital market. It can be designed flexibly according to the respective needs (volume, value date, term, type of interest, special agreements). Contracts with fixed and variable interest rates are available as contract templates.
- Securities are other instruments available to the country. Bonds or state treasury bills are securities that can be traded on the stock exchange at any time. They are particularly suitable for larger volumes and always represent market prices. These securities are legally created by being entered in the country’s debt register and are sold by domestic and foreign banks to investors and private individuals.
