The State has paid out more than €60 billion in interest on the national debt over the past decade, the head of the National Treasury Management Agency (NTMA) has revealed.
That is three times the amount paid in the previous decade and reflects the challenge of servicing the Republic’s €200 billion debt pile, most of which was drummed up in the wake of the crash.
“Debt is still elevated and remains a very signficant burden on the State,” said NTMA chief executive Conor O’Kelly at the launch of the agency’s annual report on Monday.
“It is worth pointing out that this year’s interest bill will still be three times the annual average over the period from 2003 to 2008 despite the cost of borrowing being four times lower,” he said.
Mr O’Kelly noted, however, the ultra-low interest rate environment was contributing to significant reductions in the amount of interest that the State was obliged to pay.
The cost of servicing the debt has fallen to €5 billion this year, he said, and would be in the region of €4.5 billion next year, some €3 billion less than it was in 2014.
Mr O’Kelly also said the elimination of so-called debt refinancing “chimneys” over the course of 2018, 2019 and 2020 had also put the State’s debt refinancing requirements on a more even keel.
He was referring to the successful refinancing through a concentrated programme of early buybacks, the switching of near-term bonds and the early repayment of outstanding IMF debt of most of the €60 billion in debt that had fallen due for repayment in these years.
Low-rate policies
Mr O’Kelly said the refinancing had fallen due at a fortunate time for the State, with European Central Bank president Mario Draghi’s policies driving borrowing rates to record lows.
“Taking a medium term view, once the last of the chimneys is eliminated in 2020, the annual redemption profile will be as smooth as any time in our history,” he said.
Nonetheless the ECB’s low-rate policies would not last forever and Ireland remained exposed in the medium term to a cycle of rate rises. That is not now expected to start until at least next year.
On Apple’s disputed €14 billion Irish tax bill, Mr O’Kelly said the NTMA had invested the money in low risk, highly rated euro-dominated fixed income securities, which were designed “to return the capital rather than make a return on the capital”.
Mr O’Kelly said the escrow account which held the money was probably the biggest in the world. He also said the value of the fund was very likely to fall unless the interest rate environment changes.
In its report, the NTMA said the Ireland Strategic Investment Fund had, since the start of 2019, recouped the investment losses of last year and had now generated investment gains of €850 million to date.
