Sweden's Riksbank to cap central government's spending

ESV, the Swedish National Finance Management Authority expects that despite the large increase in expenditure, the expenditure bill will be met.

The budget margins would be small and there would be no scope for any unfinanced expenditure rises over coming few years. Revenues will be re-inforced in 2016-2017 by the stronger growth and tax hikes in the economy.

The deficit finances in the economy, as meant by large increases in the expenditure will rise from SEK 42 bn to SEK 57 bn in 2017.

Public finance would be strengthened thereafter. Asylum seekers explain half of the increase in the expenditure.

A deficit would be shown in coming years by the central government's net lending. Local government's net lending will be strengthened in 2015 by repayment from AFA Försäkring and of almost SEK 10 bns temporary transfer on account of political agreement on migration.

"Onwards local government net lending will gradually worsen when municipal consumption increases, primarily on account of the large number of asylum seekers", says Nordea Bank in a research note.

ESV has revised its forecast for the number of asylum seekers by 190 000 during the forecast period, but not used the Statistics Sweden's latest updated population forecast. 

Riksbank's work with central government's budget means a limit is set for the government expenditure for the coming 3 years, by an expenditure ceiling, which is the maximum level that the government can spend during the year.