The General government borrowing requirement is a cash-based indicator for the overall trend of the public accounts. It is calculated as the balance of current, capital and financial entries. It may also be identified with the balance between incurrence and redemptions of liabilities (thus reflecting third-party financing in the form of securities, bank loans and other financial instruments). Unlike those used for General government debt, the criteria for the calculation of the borrowing requirement are not harmonized at the European level.
The borrowing requirement does not coincide with the change in the debt mainly owing to the different way in which Treasury’s liquid balances (general government deposits held with the Bank of Italy, the sinking fund for the redemption of government securities and Treasury’s investments of liquidity) are treated; the borrowing requirement is obtained as the change in the debt net of Treasury’s liquid balances.
The borrowing requirement and the change in the debt also differ as a consequence of the different accounting standards applied in calculating the two aggregates. In particular:
in the borrowing requirement issues of securities include premiums and discounts, (apart from BOTs, valued at face value) while redemptions are at face value (except for CTZs, valued net of issue discounts). For debt, face value is the rule for both issues and redemptions
in the borrowing requirement liabilities denominated in foreign currencies are converted using the exchange rate recorded at the transaction settlement date, whereas in the debt they are converted using the end-of-period exchange rate
- in the borrowing requirement indexed securities are revalued at redemption, whereas for debt the revaluation is imputed periodically.