A mere 183 years in the making...
Denmark may have officially been replaced as "the world's happiest country" by Nordic neighbour Norway on Monday, but there was reason to celebrate in the state as it announced a historic economic milestone.
Paying off its final foreign currency loan of €1.4 billion, it completely rid itself of foreign debt for the first time since at least 1834.
The Danmarks Nationalbank said of wiping the slate clean:
"On 20 March 2017, the Danish central government will repay its last loan in foreign currency, totalling 1.5 billion dollars. Thus – for the first time in at least 183 years – the Danish central government has no foreign currency loans."
Massive central bank interventions to keep the Danish krone pegged to the euro had been depleting FX reserves – the undertaking of foreign loans kept these reserves at adequate levels. The fact no more loans were required allowed for the repayment of existing ones.
As the Danmarks Nationalbank puts it:
"The sole reason why the Danish central government raises loans in foreign currency is to ensure that the foreign exchange reserve is sufficient. In recent years, the central government has not needed to raise any loans in foreign currency, and the loans have been gradually repaid."
Record-keeping was not accurate enough prior to 1834 to determine the levels of its foreign currency debt obligations. Its first foreign debt came in 1757 when it issued a loan worth half a million rigsdaler from Germany and the Netherlands.
Only once before has Denmark come close to wiping the slate clean, and that was over a century ago:
"The central government was close to repaying all foreign currency loans back in 1894 when the central government’s debt was as low as kr. 168 million, equivalent to just under 1 per cent of GDP."
Not that Denmark is now totally debt-free – the government issues Danish kroner bonds to cover its deficits and redemptions of domestic bonds.These are purchased by a "broad investor base" including both Danish and foreign investors.
The Danish insurance and pension sector holds about 50% of the bonds, while non-resident investors hold approximately 40%.