Finishing quantitative easing: impact on Belgium’s government debt

The Eurosystem has spent 73.4 billion euros on Belgian Public Sector Securities between March 2015 and December 2018. It is believed that these purchases concerned mainly, if not entirely, Belgian OLOs issued by the federal government. Together with other non-standard measures taken by the ECB, this quantitative easing has exerted downward pressure on Belgian bond yields. Now that net buying of public sector securities has come to an end, it is worth looking at interest rate developments. Interest rates did not increase until now, and the federal government debt servicing costs which were for the first time lower than 2.0% of GDP in 2018, would further decline in 2019. Projections by the Belgian Debt Agency show that debt servicing costs would not materially rise, not even in the long term, when scenarios of rising rates are combined with very conservative debt management strategies.