It is over a decade since the general public were focused on the Irish national debt and the cost of borrowing. But the issue remains important, with the debt exceeding €200 billion and significant refinancing of existing borrowings due in 2026.
The National Treasury Management Agency (NTMA) has announced that it plans to raise between €10 billion and €14 billion in new borrowing next year, up from €8.25 billion this year. There is unlikely to be any problem doing so – and the interest rate investors demand to lend to Ireland remains relatively modest. Also, clever management by the NTMA has ensured that the burden of annual repayments is low.
Nonetheless, as the NTMA chief executive Frank O’Connor made clear, Ireland cannot be complacent. The State’s national debt remains high in cash terms, even if it has shrunk significantly in relation to the size of the economy. It is vital that Ireland retains its existing strong reputation in the markets to allow borrowing to continue to be refinanced at favourable rates.
The large cash pile held by the NTMA provides some reassurance both to the State and to investors. This currently stands at over €40 billion, though it may reduce next year as the redemptions of debt kick in. The Government is also putting cash into two funds for the future. And, unusually in European terms, Ireland’s public finances are in surplus.
RM Block
The Government is expected to publish a medium-term strategy for the public finances in the near future, outlining its plans for spending and taxation and its attitude to borrowing and the debt. The State clearly needs major investment in housing and other infrastructure and spending here must continue. But the Government cannot afford this while also continuing to increase day-to-day spending at the rate of recent years.
There is no need to adjust policy drastically, but a sensible outlook needs to be provided. Ireland’s public finances are in a virtuous cycle and have won international confidence. Holding on to this is vital.
