Sunday 4 December 2016

Bonds: Bid to cut our heavy reliance on foreign borrowing

Published 25/11/2010 | 12:21

IRELAND will cut its unusually high dependence on foreign borrowing under proposals outlined in the four-year plan.

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Under the plans, the Government will raid the €24bn National Pension Reserve Fund (NPRF) and encourage domestic financial institutions to buy Irish bonds.

The NPRF, private pensions and savers will all be encouraged to lend to the Government.

Just 15pc of government debt is held by Irish lenders, meaning foreign banks and institutions are holding the bulk of the country’s debt.

This left the country adrift when international bond investors sold Irish debt due to the crisis earlier this month. Panic

Countries like Italy and Japan, where high proportions of national debt are owed to domestic lenders, have proved far more resilient to that type of panic selling.

The NPRF is currently not allowed to cash in on its investments until 2025.

The Government said it would change the law to allow it to use some of the NPRF's €17.8bn to buy Irish bonds.

The NPRF already holds €150m of debt owed by other European governments.

The four-year plan also encourages Irish private pension funds to buy government bonds. The industry has already lobbied for such changes.

Experience from abroad shows domestic pension managers tend to have greater confidence in their own economies, so are far less likely to sell bonds in a panic.

A four-year version of the 10- year national solidarity bond launched in 2009 is also to be introduced.

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