The National Treasury Management Agency (NTMA) is responsible for the strategic management of the national debt, which stood at £30.7 billion at the end of 1997, an increase of £777 million over the previous year. Because some of the funds are borrowed in foreign currencies there are interest rate and exchange rate risks which have to be managed.
To manage this risk the NTMA engages in foreign exchange contracts and swaps - entering into contracts to exchange cash flows or currencies or to buy/sell currencies. At the end of 1997 the NTMA had a liability of £154 million arising out of this activity, according to the Comptroller and Auditor General's annual report.
This was attributed to sterling swaps and foreign exchange contracts. It was part of a strategy agreed with the Department of Finance and aimed at reducing the amount of the national debt denominated in sterling. A breakdown of the national debt shows that £22.4 billion was in domestic funds with the balance of £8.3 billion comprising foreign loans.